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More Theater: Will DC Raise Taxes on Renewables?

This was a funny week to be in Washington DC. I happened to be in town on Tuesday when the Senate was debating whether to repeal the numerous tax subsidies given to the oil and gas industry. To give you a sense of scale, the subsidies on the block add up to $21 billion over the next 10 years for the top five oil companies alone.

Of course this was Washington theater and the repeal was turned down by a majority made up of Democrats and Republicans. No big surprise there. I frankly didn’t expect the Senate to make a move that would effectively raise gasoline prices in the current environment. But it wasn’t a complete waste of time either. The debate provided several opportunities to compare how we talk about subsidies offered to the fossil industry vs. how we talk about renewable incentives.

First, this week’s debate makes plain that we’re subsidizing oil and gas in a pretty big way. How can we expect new technologies or renewables to ‘compete’ in the market when we’re handing out big subsidies to the incumbents? The answer is obvious: we can’t (I blogged about this issue back in July). If we’re going to continue subsidizing fossil fuels, then we need to recognize that new technologies and renewables need subsidies just to maintain a level playing field. That’s an idea even my second graders can understand.

Second, opponents of the repeal kept referring to it as a ‘tax increase’ rather than a repeal of tax subsidies to some of the most profitable companies on earth. It’s identical to the way last year that those who voted against extending ‘temporary’ Bush era tax breaks were characterized as ‘raising taxes.’ I think the renewables industry could learn a thing or two from this example. From now on I think we should characterize any proposal to decrease or drop the renewable tax credits/grants as ‘raising taxes’ on renewable electricity.

Finally, the main argument of the opponents rested on the notion that Americans are already suffering from high prices at the pump. They argued that eliminating tax subsidies now would simply increase gas prices and further hurt consumers. Again, I see an important lesson for renewables here. We should make it clear that raising taxes on renewable electricity will raise overall electricity prices and make it hard for Americans to afford the clean, reliable electricity they need to light and heat their homes. Let’s not hurt consumers by taking action that would increase the price of electricity!

I’m being a little tongue-in-cheek here to make a point. For the record, I don’t support any approach that singles out one or two tax incentives for elimination is missing the big picture. It’s clearly disingenuous to argue for one set of tax breaks on consumer grounds while arguing against another on the principle that government shouldn’t interfere in markets. If we’re against tax breaks, lets eliminate them all. Absent that course of action, the only fair answer is to provide similar breaks to new technologies and renewables to level the playing field.