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Study Finds Oil Can't Compete Without Tax Breaks

In the 2015-2016 election cycle, fossil fuel companies invested $354 million in campaign contributions and lobbying. (Pixabay)
In the 2015-2016 election cycle, fossil fuel companies invested $354 million in campaign contributions and lobbying. (Pixabay)
October 5, 2017

RICHMOND, Va. – As Washington considers changing the tax code and maybe subsidizing the burning of coal, a new report from the Stockholm Environment Institute and the environmental watchdog group Earth Track makes a compelling argument for eliminating tax breaks for a separate fossil fuel industry.

Peter Erickson, the study's lead author, says open market prices would prevent the oil industry from tapping about half of known oil reserves.

Erickson says scientists warn that oil needs to stay underground to curb climate change. But he says taxpayer-funded subsidies are tilting the scale towards drilling.

"Just these subsidies that we looked at would bring on about 6 (billion) or 7 billion tons of CO2,” he states. “That's about 20 percent of all the oil that we could produce between now and 2050."

Energy Secretary Rick Perry has proposed government support for coal-fired power plants, arguing they're needed to ensure a steady supply of electricity. Critics say that is unfounded.

The amount of coal burned for power has fallen dramatically in recent years. Meanwhile, the oil industry is considering what it needs to do as the number of electric cars increases.

Both industries argue they need subsidies to avoid more layoffs. But Erickson says much of the money from these kinds of subsidies flows directly into a company's overall profits.

"These dollars are not going to greater wages or to greater jobs,” he stresses. “Most of the value of these subsidies goes directly to corporate profits, over and above what they already need in order to employ people on the ground."

Erickson adds that tax breaks could be used to create jobs in industries with better long-term prospects. He points to this week's announcement by General Motors to switch to 100 percent electric vehicles, and China's decision to ban cars that use diesel.

"The way we structure our tax code really reflects our priorities as a country,” he stresses. “Are we going to subsidize things that give us a better future, or are we going to subsidize the old industries that are creating lots of pollution?"

The prospect for cutting subsidies remains uncertain. A separate report by Oil Change International found that in the 2015-2016 election cycle, oil, gas and coal companies invested $354 million in campaign contributions and lobbying.

Dan Heyman, Public News Service - VA