Rhein on Energy and Climate

In a letter addressed to the four Congressional party leaders, April 26th, President Obama has urged them to adopt legislation abolishing the $ 4 billion worth of annual subsidies to the US oil and gas industry.

This initiative is overdue. The US oil and gas industry has traditionally enjoyed a privileged status in the US political system, in particular during the eight years of the Bush Administration, which the US tax payer had to pay for and which has prevented the USA from taking the necessary reforms of its outdated wasteful energy system. At present and foreseeable world market prices these subsidies are even less warranted.

President Obama is therefore right in appealing to the Congressional leadership for putting an end to these subsidies at the very moment when the Congress is addressing the budget conundrum and when consumers suffer from the high gasoline prices. He suggests that the $4 billion be better used for making the USA less dependent on oil imports through more investment in energy efficiency, renewable energies and domestic shale gas. It will be interesting to see the follow-up to his appeal in the 2011 and 2012 budgets.

By any standards, subsidies for fossil energies or the oil and gas industry must be banned at short notice. Some progress has been achieved in that direction. Even Iran has done away with its lavish petrol subsidies at the beginning of the year. The IEA has repeatedly called for the abolition of all subsidies on fossil energy, the total volume of which is estimated at some $ 400 billion in 2010! A US gesture would therefore be most welcome!

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  1. Will be interesting to see the response to this. Seems like Republican opposition to subsidies often comes unstuck when it comes to defense or energy.

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