Sheila McNulty President’s energy budget short-sighted

President Barack Obama’s 2011 energy budget, which was announced today, looks a little short sighted, despite all the talk about seeing through to the clean energy future. The problem is that it calls for the elimination of more than $2.7bn in tax subsidies for oil, coal and gas industries. This step, the government boasts, is estimated to generate more than $38.8bn in revenue for the federal government over the course of the next 10 years.

Hmm. So the US government is going to get more money from the fossil fuel industry on which the country remains dependent. And the hope is that it will do more to encourage growth in areas such as wind, solar and geothermal. While there is clearly an important role for start-ups and pure-play companies, the chances of getting truly scalable clean energy would be boosted by partnership with the fossil fuel industry.

This is the industry pulling in billions of dollars in profits. It is best placed to come up with ways to reduce the carbon intensity of fossil fuels and discover breakthrough technologies. Look at how the small oil and gas producers who drill most of the wells in the US have come up with new technology and expertise to unlock estimates of 100 years’ supply, at current usage rates, from 30 years’ supply just a few years ago.

Critics would point out that the oil and gas industry dedicates only a few percentage points, at best, of its massive overal capital spending budget toward clean energy. And it is true that without a price on carbon to send a clear signal, these investments will remain low. Unfortunately a cap or tax on carbon looks extremely unlikely with the current composition of Congress.

President Obama’s plan, announced last week, that the federal government – the US’ largest energy consumer – would use clean energy solutions to reduce global warming emissions by 28 percent by 2020, compared to 2008 levels, is a start. In the words of Representative Edward J Markey, chairman of the Select Committee on Energy Independence and Global Warming:

If we intend to embark on a national plan to create more clean energy and pollute less, than that plan must start with our national government. The federal government is the number one consumer of energy in the country, and will now be the number one leader in deploying clean energy technologies. To kick America’s foreign oil habit, we need participation and legislation, and this week President Obama has shown he has the dedication to follow through on these important efforts.

That all makes good sense. But while removing subsidies from the fossil fuel industry may be a popular move and help fill coffers in the short term, doing so without any attempt to boost the sector’s clean tech efforts does nothing to reduce emissions.

Related links:

Introducing the 2011 Budget (The Whitehouse Blog)