The Great Debate

Develop domestic oil reserves for energy independence

 Diana Furchtgott-Roth– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. —

President Obama is in favor of moving towards “energy independence,” but his new 2010 Budget specifically seeks to raise taxes on domestic oil exploration by $31 billion over 10 years, a larger tax increase than on any other industry. In addition, oil and gas producers would bear a disproportionately heavy share of other tax increases on business, more than $320 billion.

Surely a president who desires energy independence would leave oil companies alone so that America could develop greater domestic reserves.  But this is not the case.

The ostensible rationale for the tax increases is that the current tax system “distorts markets by encouraging more investment in the oil and gas industry than would occur under a neutral system. To the extent expensing encourages overproduction of oil and gas, it is detrimental to long-term energy security…” This wording, with reference to credits, lower tax rates, special treatment, and accelerated depreciation, is repeated eight times in the Treasury Department’s Green Book, a description of proposed spending and revenue changes in the budget.

President Obama believes that subsidies for renewable energy are acceptable, even though renewable energy is only responsible for 4 percent of America’s supply.  He does not consider expenditures of $60 billion on “clean energy investments” to be distortions.  But oil, which accounts for almost 40 percent of America’s energy usage, is a different matter, apparently deserving of higher taxes to limit overproduction. With fuel prices close to $5 a gallon last summer, we could have used a little overproduction.

Davos debate: What happens to development and sustainability amid crisis?

davos-delegatesDavos leaders have traditionally looked to the long term and have largely been keen on helping all nations of the world to benefit from economic development. But with politicians and businesses tied up with short term concerns about the economic crisis there’s a risk at least that efforts to spread development and to ward against the threat of climate change may go on hold, at least for a time. Reuters News asked delegates at the World Economic Forum’s annual meeting to share their thoughts on whether we should be concerned about development and sustainability slipping down the global agenda.

Recession spells cheap carbon credits

carbonemission1– Amanda Williams Palmer is the editor of Reuters’ European Venture Capital and Private Equity Journal (EVCJ). The opinions expressed are her own. —

Steel giant ArcelorMittal has shut down furnaces at a dozen sites across Europe for at least six months as its customers, mostly automakers, downsize because of the economic downturn. While environmentalists crack into the bubbly, serious polluters realize that carbon is about to get a whole lot cheaper. And cheap carbon is only bad for the environment.

ArcelorMittal and many other industrial manufacturers are busy selling surplus carbon credits in order to raise short-term cash, flooding the market where polluters trade EU Carbon Allocations (EUAs). Under the Kyoto agreement, companies need a certain number of EUAs in order to pollute. So ultra dirty European utilities, which face huge carbon shortfalls and have been slow to adopt cleaner methods, are buying those credits for a song.