For energy markets, tax and budget talks include good, bad and ugly proposals
R Street has a longstanding commitment to highlight wasteful government spending, programs and market restrictions. The end-of-year negotiations on the budget deal and tax extenders have highlighted some such policies in the energy world. Here’s a rundown of the good, the bad and the ugly.
The Good: Overturning the ban on crude oil exports
The crude-oil export ban is an artificial limit to trade that has restrained economic growth, innovation and job creation. An IHS Inc. report found this legislative fix would save consumers $265 billion over the next 15 years in lower fuel prices, spur $750 billion in additional investment, create 1 million jobs across the oil industry and its supply chains and dramatically shrink the trade imbalance. We can indeed reduce prices at the pump and put more people to work in our booming energy sector.
The Bad: Piecemeal tax extenders
Through our work with the Green Scissors coalition, we seek to eliminate policies that waste taxpayer resources and harm the environment. Unfortunately, the tax package extends a number of these provisions, including two-year extensions to credits for biodiesel, alternative fuels and cellulosic biofuel producers. Other extensions include credits for certain types of manufacturers, energy equipment and vehicles.
The Ugly: Extension and phase-out of the ITC and PTC
The controversial and wasteful investment tax credit and production tax credit will be extended by the budget package. The credits, which support wind and solar power, will phase out by 2022 and 2020, respectively. This extension and phase-out is designed to support renewable industries until the Clean Power Plan forces states to institute other policies that would prop up the industry. This reveals both that Congress does not consider the technologies market-ready and that supporting these industries is a higher priority than the balanced investments in storage and backup power necessary to make wind and solar viable over the long term. R Street remains committed to the elimination of these provisions and is cautiously heartened by the phase-out language.
The budget deal is littered with wasteful policies that have bogged down the energy sector and prevented the types of innovation and investment that will deliver cheap, reliable and secure energy into the future. As conservatives dedicated to free-market ideals, we find the package falls short of resolving and rolling back the most damaging policies and maintains generous subsidies for industry and special interests at the expense of the taxpayer.
