A 2004 study by leading American scientists found that by the year 2050 we will need at least three times the current primary energy and it will have to be three times as clean to avoid destroying the climate. It concludes that there are no earthly technologies capable of providing that power.
One of the leading scientists, Dr. Martin Hoffert, has called for an emergency crash program to replace fossil fuel; an effort similar to the Manhattan Project, which created the nuclear industry (and bombs) in three years, and the Marshall Plan which rebuilt Europe. This Earth Energy Project would cost $30 Billion a year.
Where could that come from?
Fossil fuel provides 81% of primary power. Over the two years 2010 and 2011, ExxonMobil reported $9,910 million in pretax U.S. profits. But it enjoyed so many tax subsidies that its federal income tax bill was only $39 million — a tax rate of only 0.4 percent.
US Fossil fuel companies reported $271 billion in profits in 2012. Why are we giving tax breaks to the very industries that are costing us hundreds of billions in damages and destroying the climate of the planet?
The Revenue Act of 1913 allowed oil companies to write off 5 percent of the costs from oil and gas wells. A century later, oil companies can now deduct three times this rate. At 15 percent the depletion subsidy increases when prices are high, when oil companies enjoy greater profit. It can even eliminate all federal taxes for independent producers.
A Center for American Progress report estimated that closing this tax break would save $11.2 billion over 10 years. President Obama has called on Congress to eliminate the percentage depletion allowance, along with a series of other tax breaks totaling $4 billion annually. Even Ronald Reagan once asked for the same in a 1985 speech on tax reform:
“Under our new tax proposal the oil and gas industry will be asked to pick up a larger share of the national tax burden. By eliminating this special preference, we’ll go a long way toward ensuring that those that earn their wealth in the oil industry will be subject to the same taxes as the rest of us.”
“Oil companies get to use a special method for calculating their deductions called “percentage depletion.” Instead of deducting the costs of an oil or gas well as its value declines, oil companies are allowed to deduct a flat percentage of the income they derive from it. Because the deductions are based on revenues, not costs, the subsidy actually increases at times when prices are high, when oil companies enjoy their greatest profits. American consumers have been waiting for the benefits of these tax subsidies to trickle down in lower gas prices. It hasn’t happened. In fact, these subsidies existed during the 2008 oil shock when prices hit a record $147 per barrel, yet did nothing to lower oil prices or increase production. And repealing them won’t increase prices at the pump. “Gasoline prices are a function of world oil prices and refining margins,” explains Severin Borenstein, co-director of UC-Berkeley’s Center for the Study of Energy Markets. Any incremental impact on production “will have no impact on world oil prices, and therefore no impact on gasoline prices.”
Oil tax subsidies are simply a waste of taxpayer dollars. Oil and gas companies make investment decisions based on the profit potential. Those decisions are driven primarily by market conditions, including the price of oil on world markets, not marginal tax incentives. “With $55 oil we don’t need incentives to the oil and gas companies to explore,” said President George W. Bush in 2005.
“There are plenty of incentives.” According to research by GigaOm analyst Adam Lesser, in a 2011 report from the International Energy Agency fossil fuels currently receive subsidies via “at least 250 mechanisms.”
In 2010, the U.S. Energy Information Administration (EIA) said $557 billion was spent to subsidize fossil fuels globally in 2008, compared to $43 billion in support of renewable energy.
The study U.S. Government Subsidies for Energy Sources 2002-2008 calculated lost government revenues by each fossil fuel sector: The vast majority of federal subsidies for fossil fuels and renewable energy supported energy sources that emit high levels of greenhouse gases when used as fuel. The federal government provided substantially larger subsidies to fossil fuels than to renewables. Subsidies to fossil fuels—a mature, developed industry that has enjoyed government support for many years—totaled approximately $72 billion over the study period, representing a direct cost to taxpayers.”
We subsidize $18-21 billion a year in the U.S. alone. The US share of world GNP is approximately 27%. The European Union’s “Total energy subsidies in 2011 amount to €26 billion for fossil fuels (+ €40 billion for related health costs), €35 billion for nuclear power, and €30 billion for renewables. Out of a total of €131 billion, renewables which are still in need of support to enter the market get a 23% share – whilst mature, unsustainable and old-fashioned energies get a huge 77% slice of the energy subsidy cake. Equal to $137 billion, US.
A report from the National Research Council estimates “hidden” costs of energy production and use — such as the damage air pollution imposes on human health — that are not reflected in market prices of coal, oil, other energy sources, or the electricity and gasoline produced from them. The damages the committee was able to quantify were an estimated $120 billion in the U.S. in 2005, a number that reflects primarily health damages from air pollution associated with electricity generation and motor vehicle transportation. The figure does not include damages from climate change, harm to ecosystems, effects of some air pollutants such as mercury, and risks to national security, which the report examines but does not monetize.
One technology capable of replacing fossil fuel is Space Solar Power: collecting the constant flux of energy from the sun, and beaming it down to earth, on time, on target, without need for storage or transmission lines. Pure, clean power beamed directly where needed, a constant source of energy and wealth.
The US could fund nearly two thirds of Dr. Hoffert’s estimate by merely eliminating tax breaks for atmo-polluters and directing that revenue to fund new jobs in high-tech aerospace and energy manufacturing. Additional jobs would be created in transitioning the transportation industry from fossil to clean electric propulsion. More jobs could be created in reforesting the earth to capture carbon and repair the damage.
With the addition of the EU de-funding the yearly amount for a Manhattan Project type crash course in renewable energy would be one and a half times as much as Hoffert’s estimate.
The world spends over half a trillion dollars giving tax breaks and subsidies to the richest companies and individuals in the world. They spend that money lobbying and propagandizing to deny they are polluting and changing the climate of the planet.
The problem is, it’s profitable to destroy the climate. Once it’s more profitable to produce clean energy, things will change…