Former Treasury Secretary Hank Paulson’s endorsement last week has put the carbon tax in the spotlight. But don’t be fooled: even with increased visibility and the wide endorsement of economists – and with a proposal or two floating around on Capitol Hill – turning U.S. energy policy in a cleaner, more climate-friendly direction continues to be about piecemeal, industry-specific incentives.
That reality was highlighted last Thursday when a coalition of interests – from wind power, biofuels, energy efficiency and elsewhere – staged a media conference call to push for passage of the EXPIRE Act, a bundle of temporary tax breaks known as “extenders” that recently stalled in Congress. Participants generally acknowledged that putting a price on carbon made eminent good sense. Then there’s the real world.
“The EXPIRE act is what is on the table now and it has bipartisan support,” said Frances Beinecke, president of the Natural Resources Defense Council. “There are lots of energy policies that we need to invest in over time. But I don’t think there’s anybody on this call who would assume we are ready to pass the carbon tax – but we are ready to pass the EXPIRE Act.”
The call and an accompanying letter were organized by the American Wind Energy Association, which is fighting to retroactively extend the Production Tax Credit. It expired at the end of 2013, although projects under construction as of the end of the year can still qualify for the 10-year, 2.3-cents-per-kilowatt-hour credit. But when it comes to energy and climate, the EXPIRE Act isn’t all about wind.
For call participant Johnson Controls, for instance, the EXPIRE Act is about a $1.80 per square foot deduction for energy efficient buildings. And for ethanol producer POET, the act is about a $1.01/gallon production tax credit for cellulosic biofuels and a 50 percent depreciation tax deduction on the plants that produce those “second-generation” biofuels.
In an email interview, Steve Valk, communications director for the pro-carbon tax group Citizens’ Climate Lobby, didn’t begrudge the push for the renewable-energy incentives, which he said “we still need.”
“Until we get a carbon tax, we’re certainly not opposed to renewables incentives like the PTC,” Valk said. “Obviously, with an aggressive, steadily rising carbon tax, there would be little need for subsidies, and we could gradually phase them out.”
Still, Valk added that more aggressive support from renewables heavyweights wind and solar might boost the carbon tax cause.
“It would help get more Great Plains and Southwest Republicans on board,” he said. “With resistance to subsidies from Republicans getting stronger and stronger, the scales could be tipping toward the carbon tax being more politically viable.”
Even backers of the EXPIRE Act, cobbled together by Senate Finance Chairman Ron Wyden (D-Oregon), seem to realize that the subsidies won’t last forever. The legislation’s name – Expiring Provisions Improvement Reform and Efficiency Act – is based on Wyden’s promise that this would be the last time the tax breaks were extended. Wyden supports clean energy, but wants to see a leaner, more efficient tax code, and is pushing for comprehensive reform – although so far, he hasn’t come out for a carbon tax.
