President Obama released his fiscal year 2011 budget this morning; his budget provides $28.4 billion for the Department of Energy (DOE) and $10 billion for Environmental Protection Agency (EPA). Both sections in the budget reflect the president’s message in the State of the Union address delivered last week: a government attempt to facilitate America’s transition to a clean energy economy.
Highlights of the DOE budget include:
$36 billion for Nuclear Loan Guarantees: Many are writing that nuclear is one of the big winners this year because of the $36 billion in new loan guarantees, but $18.5 billion in authorized loan guarantees already exists to provide predictability after years of erratic regulatory hurdles. Extending the loan guarantee program is not only unnecessary but will also crowd out technological development within and across the nuclear industry by artificially reducing the capital cost for large, lightwater reactors. In reality, a loan guarantee extention could prevent a dynamic, robust nuclear industry by reducing the need to innovate and creat private sector solutions to financing.
$4.7 billion for Clean Energy: Obama’s budget calls for a five percent increase for the energy efficiency and renewable energy section which includes funding for solar, biofuels, advanced vehicle technologies and energy efficiency improvements in buildings. Research and development may be a plausible role for the government, but much of this money is being spent on private sector responsibilities. The reason the private sector isn’t investing in these technologies (without help from the government) is a telling sign that these energy sources aren’t economical. One project that is still many years away from commercialization is carbon capture and sequestration (CCS). The clean energy section also includes $545 million for clean coal technologies, most notably carbon CCS. Even after the extraordinary technological and economic hurdles have been cleared, the political and environmental obstacles to storing tens or hundreds of millions of gallons of liquid CO2 each day must be overcome.
Elimination of Tax Credits for Coal, Oil and Natural Gas: The budget also plans to reduce the deficit by eliminating $36.5 billion in tax breaks to the oil and natural gas industry. Without removing tax breaks and subsidies to other sources of energy, this is essentially a tax increase on our proven sources of energy. Removing government support isn’t necessarily a bad thing, but it should be done across the board.
Highlights of the EPA budget include:
Revenue Neutral Cap and Trade: Last year, President Obama’s Budget said a cap and trade system would generate $646 billion in revenue from 2012 to 2019 from higher energy taxes. This year, a footnote in the President’s budget says that cap and trade will be deficit neutral since “proceeds from emissions allowances will be used to compensate vulnerable families, communities, and businesses during the transition to a clean-energy economy.Receipts will also be reserved for investments to reduce greenhouse gas emissions, including support of clean energy technologies, and in adapting to the impacts of climate change, both domestically and in developing countries.” The reason a cap and trade bill is revenue neutral is because most of the energy tax revenue was handed out to big businesses lobbying for a slice of the pie as well as other efforts outlined in the president’s budget. The Heritage Foundation’s analysis of the Boxer-Kerry Senate cap and trade bill found that the government will collect $4.6 trillion in higher energy taxes from 2012-2035. While all this would likely be given away, a cap and trade bill would actually increase a family’s share of the debt because an energy tax will lower Americans’ incomes. Lower incomes generate lower tax revenues and have a real impact on government expenditures and debt levels. Heritage analysis found a family of four’s share of the national debt would actually rise by an additional $27,000.
Mitigating Climate Change: The EPA’s section of the budget also includes $21 million to implement a Mandatory Greenhouse Gas Reporting Rule and “$56 million – including $43 million in new funding – for the EPA and states to address climate change effectively through regulatory initiatives to control greenhouse gas emissions.” With the EPA set to move forward with its backdoor global warming policy, beginning with new regulations for vehicle tailpipe emissions, it appears the administration is willing to provide the funding. Congress should amend the Clean Air Act in order to prevent unelected government bureaucrats from bankrupting the nation.
In his opening message in the budget President Obama said, “Because we know the nation that leads in clean energy will be the nation that leads the world.” There are a few countries that have gone down this road and would beg to differ.
Click here for more analysis on the 2011 Budget.