Biden Plan to End U.S. Fossil Fuel Subsidies Faces Big Challenges

by Timothy Gardner (Reuters) ... Biden has said axing fossil fuel subsidies will generate money to help pay for his broader $2 trillion climate plan. While Biden can take executive action to reverse President Donald Trump’s rollbacks of rules meant to reduce greenhouse gas emissions, reforming tax breaks that allow companies to produce oil, gas and coal more cheaply will require Congress to pass legislation.

Doing so could be hard, even though Biden spent 36 years in the Senate where he is known as a dealmaker.

“It’s dead on arrival in the Senate,” said Gilbert Metcalf, a former deputy assistant secretary for environment and energy at the Treasury Department under former President Barack Obama, referring to any standalone legislation ditching the tax breaks if Republicans maintain control of the chamber.

Even if two of Biden’s fellow Democrats win runoff votes in Georgia on Jan. 5, bringing the Senate to a 50-50 split with Vice President-elect Kamala Harris acting as tie breaker, chances of passing a tax package are slim, experts said.

That is because moderate Democrats from fossil fuel producing states, like Senators Martin Heinrich of New Mexico and Joe Manchin of West Virginia, the top Democrat on the Senate Energy Committee, could stymie the effort.

Obama also wanted to ditch tax breaks for fossil fuels to send a signal to the world that the United States was serious about speeding a transition away from fossil fuels to tackle climate change.

But even with a commanding Democratic majority in the Senate in Obama’s first six years in office, he was unable to kill the subsidies.

Leaders in the G20 resolved in 2009 to ditch the subsidies but have made little progress.

Estimates of the value of fossil fuel subsidies, which mainly take the form of tax breaks, vary.

Bob McNally, the president of the consultancy Rapidan Energy Group, estimates they run $15 billion a year. The nonprofit Environmental and Energy Study Institute puts them at $20 billion annually.

Estimates that consider the health care costs linked to pollution from fossil fuels put the subsidies even higher.

One U.S. tax break, called intangible drilling costs, allows producers to deduct a majority of their costs from drilling new wells. The Joint Committee on Taxation, a nonpartisan panel of Congress, has estimated that ditching it could generate $13 billion for the public coffers over 10 years.

Another, the percentage depletion tax break which allows independent producers to recover development costs of declining oil gas and coal reserves, could generate about $12.9 billion in revenue over 10 years, according to the panel.

API will push for “pro-development policies that sustain and grow the billions of dollars in government revenue our industry generates at the state and federal level,” he (Frank Macchiarola, API senior vice president) said. READ MORE