We never thought we’d see the day when revenue from a carbon Cap and Trade program would be seen as a key way for the US government to generate revenue, but here we are!
Although he will face an uphill battle to get the plan passed, President Obama estimates $646 billion in revenue coming from the initial years of the program designed to curb climate change. Analysts say the revenue numbers are realistic or even on the low side.
He plans to use the revenue to fund his $150 billion commitment to clean energy investments as well as a tax credit to help Americans transition to a less carbon-intensive economy.
The $646 billion would be acrued over eight years. It works only if we have a U.S. law that limits GHG emissions by 2012. It would generate about $80 billion a year if carbon emissions are priced at $15 a ton when the program starts. Obama plans to return some of the revenue directly to citizens, known as cap-and-dividend.
A First: Oil Asked to Pay its Fare Share
For the first time in history, Obama’s budget favors clean energy over Big Oil and Big Farming in its tax policy. Clean energy gets tax breaks while the big conventional industries FINALLY see their subsidies cut. Those cuts will add about $12.7 billion in revenue for the US government between 2010-2014.
It also targets the LIFO loophole which allows oil companies value inventories at prices different than what they paid, which can lower their income and taxes. And it would levy a 13% excise tax on oil and gas production in the Gulf of Mexico, raising $5.3 billion in revenue from 2011 to 2019. The tax would only affect companies that operate there, but currently don’t pay any royalities because of another loophole.
The proposal would also levy a $4 per acre annual fee on energy leases in the Gulf that are designated as non-producing, for another $1.2 billion in revenue from 2010 to 2019.
That has oil companies hopping mad, says the Wall Street Journal. The American Petroleum Institute predictably cautioned that higher taxes would stifle investment and job creation.
Loading...
The “cap and trade” could be considered one more tax to pay, and one more step towards “bigger government”. We should seek to simplify and create a level playing field, rather than pile elaborate scheme upon elaborate scheme as a technique to shape company and individual consumption patterns. We’ve already seen what government intervention has done to the financial industry (and our retirement accounts). Just wait to see what happens by time the Federal Government gets it’s hands on renewable energy – look out!