THE US
Senate Finance Committee (SFC) has mooted sweeping energy tax reforms that
envisage replacement of 42 tax incentives with two tax credits- one for clean
electricity production and another for clean fuel manufacture.
Releasing the 'Staff Discussion Draft: Energy Tax Reform' on 18th December, SFC Chairman Max Baucus stated: "Our
current set of energy tax incentives is overly complex and picks
winners and losers with no clear policy rationale. We need a system of
energy incentives that is more predictable, rational, and
technology-neutral to increase our energy security and ensure a clean
and healthy environment for future generations."
As put by a SFC release, "under current law, there are 42 different
energy tax incentives, including more than a dozen preferences for
fossil fuels, ten different incentives for renewable fuels and
alternative vehicles, and six different credits for clean electricity.
Of the 42 different energy incentives, 25 are temporary and expire every
year or two, and the credits for clean electricity alone have been
adjusted 14 times since 1978 - an average of every two and a half
years. If Congress continues to extend current incentives, they will
cost nearly $150 billion over 10 years."
The staff discussion draft focuses on developing two simple,
technology-neutral tax incentives for domestic production of clean
electricity and clean fuels. The draft does not include tax incentives
for other parts of the U.S. energy economy, such as energy efficiency,
clean vehicles, transmission, combined heat and power, and storage.
Staff made this choice in order to target tax incentives on areas that
appear to have the largest bang-for-the-buck in reducing air pollution
and enhancing energy security, given concerns about overlapping
regulations and spending programs, compliance costs, and the potential
for fraud or abuse.
It moots a streamlined, predictable, and technology-neutral set of
energy tax incentives that focuses on promoting domestic energy
production and reducing pollution. The proposed incentives are flexible
enough to accommodate advances among fuels and technologies of any
type - fossil or renewable.
The objectives of the Draft includes eliminating current law
incentives that are inefficient or no longer necessary, and replaces
the remaining provisions with a small number of incentives that are
simpler and more transparent. It also intends to stimulate domestic,
clean production of electricity and transportation fuels, which account
for 68 percent of energy consumed in the United States, in order to
promote energy security and a clean environment.
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