President Joe Biden’s plan to eliminate subsidies requested by oil and gas companies and raise taxes on corporate polluters would increase government revenues by $ 35 billion over the next decade.
The benefits of these subsidies are currently concentrated “in a handful of large companies,” the Treasury said in the Made In America Tax Plan. released on Wednesday. The report expands on the fiscal proposals in Biden’s $ 2.25 trillion economic package presented last week.
The plan will probably meet resistance from the oil and gas industry and its supporters on Capitol Hill. Biden has already surprised many executives in the first few months of his presidency by canceling the Keystone XL pipeline and restricting drilling on federal land.
“The main impact would be on the profits of oil and gas companies,” the Treasury said in the report. “Research suggests a small impact on gasoline or energy prices for US consumers and a low impact on our energy security.”
Offering taxes
Estimated benefit from fossil fuel subsidies for US production in 2018
Source: “Manufacturer receives implicit fossil fuel subsidies in the United States” by Matthew Kotchen, Yale University and the National Bureau of Economic Research.
Oil and gas producers benefit from elements of the tax code that allow them to deduct drilling costs at the beginning of a project’s life cycle and are able to carry forward losses for several years. Industry groups have said the measures are not specific to fossil fuels and are designed to encourage investment.
Even so, Biden’s fiscal plan was clear in its intention to identify the oil and gas industry, while providing a range of incentives for clean energy, climate change resilience and carbon storage.
“Tax preferences for oil, gas and coal producers today reduce tax debts to other companies,” the Treasury said. “Fossil fuel companies also benefit from substantial implicit subsidies because they sell products that create externalities but do not have to pay for the damage caused.”
The document cited academics research published by the Proceedings of the National Academy of Sciences which found EQT Corp., Exxon Mobil Corp., BP Plc, Chesapeake Energy Corp. and Chevron Corp. were the top five beneficiaries of “implicit subsidies” for fossil fuel producers in 2018.