Follow me on Twitter: @JohnHQuigley

Thursday, March 14, 2013

ACEEE publishes must-read report on tax reform to encourage energy efficiency

The American Council for an Energy Efficient Economy (ACEEE) has published Tax Reforms to Advance Energy Efficiency, a report that suggests policies in six areas that could be used to encourage energy efficiency: existing energy efficiency tax incentives; depreciation; low-cost strategies for promoting investment in manufacturing; fees on emissions; treatment of expenses in business taxes; and ending or reducing subsidies for fossil fuels

As I wrote here, there are vast opportunities to be had in efficiency gains.  We must invest in and realize these gains.  ACEEE's report points the way to smart policies that could propel these investments as part of overall Federal tax reform. 


Tuesday, March 12, 2013

Does shale gas development impact PA rivers and streams? Study says yes.

A study published in the Proceedings of the National Academy of Sciences by Resources for the Future has found that shale gas development can adversely affect surface water quality by increasing the downstream concentrations of two pollutants - chloride and total suspended solids (TSS). 

Shale gas development impacts on surface water quality in Pennsylvania used over 20,000 surface water quality observations taken over 11 years in Pennsylvania and found:

  • The treatment and release of shale gas wastewater by treatment plants raised downstream chloride concentrations in surface water;
  • The presence of well pads upstream raised the concentration of TSS; and
  • No systematic statistical evidence of spills or leaks of flowback and produced water from shale gas wells into waterways.

In 2011 Pennsylvania placed a voluntary ban on the shipment of shale gas waste to municipal sewage treatment plants and some industrial wastewater treatment plants. RFF says that this “partially” addresses the chloride concentrations impacts estimated by their study. However, the “finding of measurable downstream impacts on TSS from shale gas infrastructure in only these first years of burgeoning shale gas development in Pennsylvania suggests that land management issues may be important as well.”

Clearly, shale gas development presents risks to rivers and streams, which can be avoided or minimized with strong regulations - including robust erosion and sedimentation measures - and industry embrace of best practices. It is essential that regulators and industry respond to the data presented by RFF.

Monday, March 11, 2013

Eliminate $4 billion in annual fossil fuel subsidies

As part of a series of papers on 15 Ways to Rethink the Federal Budget issued by The Hamilton Project, Joseph E. Aldy, Assistant Professor of Public Policy at Harvard University's John F. Kennedy School of Government has published a simple, direct, and provocative paper Eliminating Fossil Fuel Subsidies that is essential reading. 

Aldy writes that the federal government has subsidized the production of fossil fuels through the tax code for a century – originally to support investment in what was a very risky economic activity. But technology and global economic forces have radically changed that original calculus, and today, the U.S. government “effectively transfers by way of tax expenditures more than $4 billion annually from taxpayers to fossil fuel producers…with very little to show for it” in terms of benefitting U.S. energy consumers or national security.

Aldy targets for elimination twelve direct tax provisions that subsidize fossil fuel production.  He excludes other subsidies like Federal highway spending, limits on pollution damages, public health impacts - and, one could argue, aircraft carriers in the Persian Gulf, to say nothing of the catastrophic costs of climate disruption.  The twelve provisions effectively reduce the cost to drill or mine for fossil fuels by allowing firms to expense (i.e write off in the current year) various costs instead of depreciating them over the economic life of the project and to deduct costs and claim tax credits for specific additional activities.
Supporters of these tax provisions subsidizing fossil fuels claim that eliminating these provisions would cost jobs, reduce U.S. energy security, and hurt small businesses. Aldy matter-of-factly debunks these claims, asserting that eliminating these subsidies will “have a very small impact on production,” and will not materially increase retail fuel prices, reduce employment, or weaken U.S. energy security.  It will, he says, “promote efficiency in allocating capital across the U.S. economy.”

Removing U.S. fossil fuel subsidies, Aldy argues, “would enable the U.S. government to make the case more effectively that large developing countries (such as China, India, and energy exporters) should phase out their fossil fuel consumption subsidies (worth $500 billion per year) that contribute to higher oil prices in the United States.”  And higher global temperatures.

Aldy suggests that one way to achieve the elimination of fossil fuel subsidies is to pair it with corporate tax reform that lowers the marginal tax rate on corporate income.