Having a reliable source of energy is important to the United States’ economy. Energy is required for more than just transportation; it is necessary to power homes and businesses. Currently, the main sources of energy in America are fossil fuels. Though these sources may seem cheaper and more efficient temporarily, in the long-term, they can neither sustain the American economy nor the environment. Renewable energy sources such as wind, solar, and geothermic power show promise in delivering abundant, safe, reliable energy. However, with the huge amount of subsidies given to fossil fuels, competition is difficult for these renewable resources. The purpose of this letter is to address the problem of how the financial inequality is not only handicapping the development and marketing of renewable resources, but also the American economy.
According to DuPont (2013), fossil fuels, such as oil, natural gas, and coal, are the primary energy sources in the United States. While investing in domestic oil will help the United States be less reliant on foreign energy, it will not remove it entirely from the global market. Oil, along with coal, pollutes the environment and contributes to greenhouse gas emissions. Natural gas is a highly embraced alternative to coal and oil, because it does not produce as much carbon emissions. However, there is much concern involving its extraction. Natural gas is collected by a process called hydraulic fracturing, or “fracking.” Millions of gallons of underground water and chemicals are pumped under high pressure into underground rock formations. The pressure causes the rocks to crack open and the gas to travel upwards. Fracking has been shown to pollute drinking water with chemicals and methane. Weeks (2011) reports a study by Duke University where it was found that water within one kilometer from fracking wells contained higher levels of dissolved methane than from wells farther away. Weinhold (2012) reports that even though the Environmental Protection Agency does have some authority over the water pollution under the Safe Drinking Water Act, he expresses concern that the fracking may be detrimental to the Earth’s geological structure and contribute to earthquakes due to fluid imbalances and temperature changes.
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One of the reasons for the success of oil and other fossil fuels is the high amount of subsidies given to these producers. Weeks (2011) reports that the federal government supplies the oil industry with $4 billion dollars in subsidies each year. Because of this financial assistance, oil companies have market dominion over renewable energy sources. From the period of 2002-2008, the federal government spent $70 billion on subsidies for fossil fuels, while only spending $29 billion on renewable energy sources.
When Jimmy Carter was president, he recognized the need for alternative energy sources, knowing that fossil fuels would not always be available. President Carter created a Cabinet-level Department of Energy, approved new energy efficiency standards and tax incentives for investments in renewable energy sources, and deregulated natural gas prices to encourage more domestic energy production and allow prices to rise to market level. His policies were successful, as the electricity produced from oil dropped to 20% to 3%, as utilities switched to natural gas and coal. In 1980, the Iraq-Iran war caused concern for oil supplies and then the Reagan administration cut subsidies for renewable energy, removed the solar panels Carter had installed on the White House roof, and increased the deregulation of oil. These factors contributed to the lack of success more than the policies implemented by President Carter.
Promoting the development of fossil fuels is not without merit. The United States relies on fossil fuels, especially oil. Increasing the prices of gasoline would make finances very difficult in this economy. Gasoline is necessary to get to work and to pay for utilities. The development of domestic drilling may help to temporarily reduce costs, establish independence from the global oil market, and help to boost the economy by creating jobs and allowing people affordable transportation. Increasing expenses could be detrimental to the economy and increase poverty and unemployment levels. However as other countries such as Europe and China make the transition to renewable energy sources, the United States would still be reliant on foreign imports. The short-term benefits would be negated, as jobs are lost due to the lack of demand.
There are many ways to promote the development of renewable energy sources. One method would be to implement policies which would force fossil fuel companies to pay extra for their pollution. A cap-and-trade program would create incentives to convert to greener energy sources by having fossil fuel companies pay to cover carbon dioxide emissions. Another potential solution would be to implement a clean energy standard that would require that companies which produce electricity to generate a set amount of their power from low-carbon sources. Another potential solution is for Washington to raise the taxes on gasoline and require that newly manufactured vehicles accept biofuels in addition to gas and diesel.
Another policy which may work is not so much to penalize fossil fuels, but to simply remove federal assistance. President Obama proposed the termination of eight programs which benefit oil companies. One program would terminate tax write-offs for drilling costs, including labor and drilling fluid expenses. Ending these write-offs would generate $1.9 billion federal tax revenues, and save the United States $125 billion from 2012-2021. The Obama administration also wanted to end the depletion allowances that permit producers to deduct 15% from their gross income. Oil companies would pay $607 million more in taxes per year and $11.2 billion from 2012-2021. The deductions for domestic manufacturing currently allows oil and natural gas companies to deduct 6% of their net income for production in the United States. This termination would reduce labor costs, increase employment, and generate $902 million in tax revenues and $18.3 billion from 2012-2021.
Supporting the Obama administration in reducing these subsidies and tax breaks to oil companies is one way to help even the competitive market. The excess funds can be used to promote the development of renewable energy sources. Already, major corporations such as General Electric are investing in the development of renewable resources. Renewable energy sources have problems and the extra finances may help to overcome them. Some sources such as solar and wind power can be expensive due to their specific locations and can require a lot of land. A study by Bunger, Krahl, Schroder, Schmidt, and Westphal (2013) found that even though the combination of biofuels and diesel fuels significantly reduced greenhouse gas, the potential for hazards to human health was increased due to the higher production of nitric oxide.
By transferring subsidies from fossil fuels and giving a significant portion to more renewable energy, it would give these green sources a better chance of development. Removing subsidies from fossil fuels will indirectly penalize these companies; however they will not have to pay extra, which will be more beneficial to the consumers in the United States. Consumers will still have options, and the United States can be gradually weaned from their dependence on fossil fuels while slowly acclimating to cleaner and more sustainable energy sources.
If you would like to discuss this matter further, please contact me at (999) 555-1212 or email me at johndoe@gmail.com. Thank you for your consideration.
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