Big Oil can afford to forgo tax breaks; renewable energy can’t
The U.S. House of Representatives voted to hold Big Oil accountable Wednesday when it passed H.R. 5351, the “Renewable Energy and Energy Conservation Tax Act of 2008,” which repeals nearly $18 billion in oil company subsidies over the next decade and dedicates the money to renewable energy and energy efficiency investments. Now the Senate must follow suit to help bring Americans relief at the pump and lay the groundwork for the type of clean energy investments we need to combat climate change.
Congress is right to shift subsidies away from Big Oil to clean, sustainable alternatives because the oil industry, fueled by $100-per-barrel oil, not only continues to enjoy record profits, but has been spending more money buying back stock than on reinvesting in our nation’s energy infrastructure. If Big Oil refuses to make the necessary investments that America needs to compete in a carbon-constrained future, then it is only fair for Congress to revoke recently awarded subsidies to the oil industry.
Indeed, since 2005 the largest five oil companies operating in America – ExxonMobil, Shell, BP, Chevron and ConocoPhillips – not only posted combined profits of $345 billion, but spent an additional $252 billion buying back their stock and paying dividends to shareholders. In addition, the five companies currently have $53 billion in cash. And companies such as ExxonMobil are spending 50 percent more buying back their stock ($31.8 billion in 2007 alone) than on capital and exploration expenditures for their entire global operations ($20.9 billion).
The primary Big Oil giveaway that H.R. 5351 targets for repeal was enacted into law in 2004. By freezing the domestic production deduction only for major integrated oil companies, Big Oil companies will rightly be denied $13.6 billion in tax breaks over the next decade. In addition, the legislation would close a loophole that allows some oil companies with foreign operations to pay less in U.S. taxes. Closing this loophole will force oil companies to pay $4 billion more to the U.S. Treasury over the next decade.
With this new revenue, the legislation provides critical funding for key renewable energy and energy efficiency investments, some of which can directly benefit families struggling with high energy costs.
Among its highlights, the bill will:
- extend the production tax credit for renewable energy, such as wind and solar, through 2011 at a cost of $6.6 billion over the next 10 years;
- extend and expand the solar energy and fuel cell investment tax credit through 2016 at a cost of $620 million over 10 years;
- extend the credit for residential solar property through 2014 and double the amount households can claim (from $2,000 to $4,000) at a cost of $630 million;
- extend the tax credit for making energy efficient improvements to existing homes through 2009 at a cost of $1.5 billion;
- create a new $4,000 credit for motorists purchasing qualified hybrid vehicles at a cost of $1.3 billion over the next decade;
- extend the deduction for energy-efficient commercial buildings and the credit for manufacturers to produce more energy-efficient appliances.
- authorize renewable energy bonds for public power and rural co-ops, which will cost $640 million;
- provide for new tax-exempt bonds for “green” community programs at a cost of $2 billion; and
- provide various incentives for bio-diesel and ethanol at a cost of $300 million.