Democrats Call for Shifting Subsidies to Green Energy
But many consider these tax credits wasteful especially since higher prices are a far more important factor encouraging more domestic exploration and production.
“Domestic production is going up anyway because of higher oil prices – domestic oil rigs that weren’t profitable two years ago are now profitable – they would be profitable with or without that deduction,” says Gilbert Metcalf, an energy economist currently at the National Bureau of Economic Research. “So it is simply giving some additional cash to producers who are going to be producing anyway.”
The idea of shifting oil and gas subsidies – which have been around for decades, mostly in the form of accelerated depreciations worth about $9 billion over five years - to renewables has been kicking around for some time.
A similar measure passed the House in December but, after failing to pass the Senate by a single vote, it was stripped out of the final version of the Energy Independence and Security Act of 2007 that became law.
Eben Burnham-Synder, Markey’s spokesman said passage of the new draft bill was even more likely now as prices continued to soar and enjoyed strong support in the Senate including from majority leader Harry Reid.
But Metcalf, a Tufts University professor, was critical of Markey’ call for oil companies to boost their investment in renewables.
“Requests to do these sorts of things are noble gestures but we are better off – if we are concerned about global warming - let’s set a carbon tax,” argued Metcalf. “That will get the attention of these companies much more than a plea to shift 10 percent of their profits into renewables.”