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Fueling the Future: Redeploying Fossil Fuel Subsidies

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On Monday February 14th, President Obama announced the Administration's energy plan and budget for the FY 2012. The Administration's goal is to build a new clean energy economy based on energy resources in the United States and as they said “because the nation that harnesses the power of clean, renewable energy will be the nation that leads the 21st century”.

The administration proposes to partially pay for clean energy investments by eliminating 12 tax breaks to oil, gas, and coal, which would save over $4 billion per year in fossil fuel subsidies. The budget also seeks to implement new market-based clean energy incentives in the private and public sector.

Among other things, the political arguments will center on whether the government should invest in clean energy, and whether to remove subsidies from fossil fuels.

For this piece, I’ll focus on the question of removing subsidies from fossil fuels. These subsidies have been on the books for decades, and they were very helpful in developing and maturing the fossil fuel industry. That industry is now mature and profitable as well all know, and some of that was due to some of these well place subsidies. They helped encourage new technologies for drilling that made the industry more efficient, and created opportunities in places that may not have been able to take advantage of their resources.

But subsidies shouldn’t last forever, and removing these subsidies won’t impact the price of oil (they are not big enough) nor will they materially impact drilling in the U.S. (given the upheaval in other parts of the world – the U.S. is still the safest place to drill). It seems that the time is right to move these subsidies over to help develop and grow the next generation of technologies just like these subsidies did for oil, gas and coal. While I am not suggesting that I agree with all aspects of the plan – redeploying fossil fuel subsidies makes sense for continued economic growth and environmental health.

For more info on the administration’s plan see: http://www.whitehouse.gov/photos-and-video/video/2011/02/03/winning-futu...

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The budget also seeks to implement new market-based clean energy incentives in the private and public sector.Commercial Air Leakage Testing

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