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  • Changing the Definition of "All of the Above" Energy Policy

    The Heritage Foundation has been making the case against energy subsidies for years. This research eventually led to a letter written in March 2011 by our sister organization, Heritage Action for America, and signed by numerous other organizations calling for the dismantling of energy subsidies.

    Up until then, both Republicans and Democrats used the ever popular “all-of-the-above” slogan to describe their energy policies, because they could make it mean pretty much anything they wanted. And more often than not, it meant to subsidize their politically preferred sources of energy.

    While that policy position continues to exist (as we’ve seen with bipartisan, albeit shrinking, support to expand the wind production tax credit), it is no longer the status quo for energy policy. The work of the Heritage Foundation and other organizations, along with the fiscal cliff and the government’s demonstrated failures in selecting market-viable technologies and companies, has helped reverse this alarming trend in energy policy. Though the work is clearly not done, The Heritage Foundation’s vision of needing less—not more—government involvement in the energy economy is taking hold.

    The latest example of the policy winds shifting was in a conversation on energy between Representative Fred Upton (R–MI) and businessman Mike O’Brien, where Upton said:

    We don’t need subsidies like this, particularly when the taxpayer loses every dime in their pocket. So I am for putting all of these on the table. Let’s look at the oil and gas subsidies, let’s take them away. Let’s let them compete just like everyone else. The wind and renewable industry…they received some $90 billion in subsidies. Let’s talk about taking those subsidies away.

    O’Brien replied, “We invest heavily in oil, gas, coal and nuclear to this day, and if the congressman is now saying publicly that he’d like to end all those subsidies, then I congratulate him and I look forward to that vote.”

    Earlier this year, Senators Jim DeMint (R–SC) and Mike Lee (R–UT) introduced legislation that would move the U.S. a giant step forward in making our country’s energy market more free by eliminating targeted tax credits for energy sources and technologies.

    Their legislation, a companion to Representative Mike Pompeo’s (R–KS) bill in the House, would force any tax policy that picks certain industries as winners and losers in the market to expire at the end of the year and expedite sunsets for tax credits extending multiple years. And it goes after all targeted tax credits: oil (the actual oil targeted tax credits), renewables, nuclear, alternative fuels and vehicles, and advanced coal and gasification.

    And since eliminating these economically unsound tax credits would raise revenue and thus be a tax increase, the bill would offset that increase by lowering the corporate tax rate permanently.

    Governor Romney echoed this sentiment of using the tax code to pick winners and losers by calling for the wind production tax credit (PTC) to expire at the end of this year, while President Obama wants to see the PTC extended. As Representative Pompeo says, “Wind companies and their lobbyists have, for the last year, been telling all who would listen that the expiration of the tax credit could spell doom for their industry. Obama repeats this claim regularly. But what does that say about the industry? If you need a tax credit to compete, you are probably not that competitive.”

    Those wind producers who do not depend on the tax credit will remain alive and well.

    A large challenge to return our energy economy to a more market-oriented one is preventing new subsidies, like those offered to natural gas vehicles. This year, the Senate introduced the bipartisan NATGAS Act that provides a host of subsidies for producing and buying natural gas vehicles and refueling infrastructure.

    Similar legislation was introduced in the House last year, but 22 members, recognizing this subsidy-laden approach as bad for both taxpayers and the economy, withdrew co-sponsorship and stopped any momentum the bill had. Natural gas vehicles can play a bigger role in the marketplace, but that’s a risk for venture capitalists to undertake, not the taxpayers.

    Even T. Boone Pickens, who led the charge for the NATGAS Act, admitted that the subsidies are unnecessary, saying, “You don’t have to have a tax credit; it’s going to happen.”

    Energy subsidies come in many forms, and they hurt the long-term viability of a company by establishing a dependence on government rather than allowing that company to recognize its true costs. Congress should prohibit any new energy subsidies and remove the ones currently in place. The private sector is far better equipped to allocate resources and develop commercially viable technologies.

    Posted in Energy, Featured [slideshow_deploy]

    7 Responses to Changing the Definition of "All of the Above" Energy Policy

    1. Lloyd Scallan says:

      Have so-called "conservatives" not yet learned what Democrats do. They lie and distort. Does HF actually believe that the left will ever give up subsidies for "green energy" ploys if the fossil fuels industries give up theirs. How many times must the Democratic left prove have no honor.

    2. Bill says:

      End all government subsidies and tax incentives for everything, not just energy. Let government just regulate (not over-regulate which also distorts the market) so everyone knows the rules and then let capitalism flourish on its own.

    3. Tejas Tom says:

      I would support the elimination of all energy related subsidies except for research & development and where the subsidy directly benefits national security.

    4. Paul Terry Stone says:

      I believe that Romney has said that " All of the above" refers to all that's above ground.

    5. Stirling says:

      The problem is that as with most liberal "green" initiatives, when faced with the reality of the free market (non-crony capitalist system) tend to implode on contact. It took a massive media push (brainwashing) and this administration throwing billions of dollars for PR, and regulations over the past 4+ years to force people into abandoning cheap energy and fundemental economics that worked in order to get to this point. Until the enviromentalists stop the propaganda and legal onslaught to keep America from using our natural resources I doubt if anything will be accomplished..

    6. Bobbie says:

      It's funny they thought hitting on oil and gas subsidies would be defended. But common sense and reason is what republicans are with dignity! People started the businesses with no reason to partner with government and their conflicting agendas! Just because a realm of people have no guts to compete they'd rather take it from the unconstitutional help of big brother Barack off the backs of everyone else uninvolved! NO! The man shows complete ignorance to what is REASONABLE, FAIR AND HONEST!

      The future must not be put in the hands of incivility, ignorance and bald face liars humiliating America daily!

    7. David Ward says:

      The Production Tax Credit (PTC) is tax relief – not a subsidy – it only rewards results, and it doesn’t cost taxpayers a dime.

      Unless you assume that all the money people and companies earn in the private sector belongs to the government, a tax reduction is different from government subsidies or loan guarantees. Tax credit simply leaves more money in private hands. In this case, anyone who makes renewable energy qualifies.

      As Republican operative Karl Rove recently said, this is a market mechanism that doesn't pick winners and losers, merely creates the incentive for private investment needed by a growing new American industry.

      Furthermore, America needs homegrown energy resources to power the nation, and with our economy struggling, we’re in dire need of American jobs. Wind energy delivers in both of these areas. The renewable energy production tax credit (PTC) is an effective tool to keep electricity prices low and encourage development of proven clean energy projects. Employing more than 75,000 Americans across the country, wind power represents one of the few American manufacturing success stories in recent history.

      Wind power manufacturing, construction and other related jobs are currently at risk nationwide due to the uncertainty surrounding the extension of the Production Tax Credit (PTC). If the PTC isn’t extended, an estimated 37,000 jobs could be lost. In fact, due to uncertainty about the PTC, hundreds of wind related job losses have already occurred in places like North Dakota, Colorado, and Arkansas. If the PTC is extended, employment in the wind industry is predicted to grow to 100,000 American wind jobs over the next four years, with the industry attracting $15-20 billion a year in private investment.

      David Ward, American Wind Energy Association

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