Tuesday, February 01, 2011

Obama to Propose Cutting Fossil Fuel Subsidies

The New York Times reports that President Obama plans to take another whack at federal subsidies for fossil fuels:
WASHINGTON — When he releases his new budget in two weeks, President Obama will propose doing away with roughly $4 billion a year in subsidies and tax breaks for oil companies, in his third effort to eliminate federal support for an industry that remains hugely profitable.
I have previously taken note of the unfortunate fact that our government has historically offered far more subsidies for fossil fuels than for renewable energy.

Any student of corporate strategy will tell you that these subsidies make no sense. The fossil fuel industry is more than a hundred years old, and enormously profitable. Just yesterday, Exxon announced that its profits soared 53 percent over a year ago.

There is a case for supporting the renewable energy business, with its large potential for growth and creating value for customers. But pouring more money into a commodity business with a limited supply will not increase the supply. There is simply no public purpose to be served by subsidizing the fossil fuel industry.

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