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Petroleum Industry Cashing In On Pandemic

Other than the short-term price decrease due to oversupply, the petroleum industry in the United States, and their symbiotic sister, the plastics industry, has been having a field day during the COVID-19 pandemic.  The industries have been given gift after gift by all levels of government.  For example, since March, the federal government has opened up protected lands to exploration and relieved the industry from pollution standards.  States have relaxed laws on single use plastics (products made mostly from fossil fuels) based on unproven claims of being more sanitary than other packaging materials.   

All of this runs counter to actions we need to take to address our changing climate.  Using and extracting fossil fuels, through their addition to carbon dioxide levels that are already well above anything the earth has seen in over 4.5 million years, is a leading cause of the warming we are experiencing this century.  We need a quick transition away from petroleum to maintain a livable climate.   The fastest way to do this is to make it more expensive than the alternatives, or at the least, make users of fossil fuels pay its true societal cost.  Here are three ways to help the market make this change without wrecking the economy.

By many accounts, direct and indirect subsidies cost the Federal Government as much as the budget of the military.

First, phase out the subsidies to the fossil fuel industry.  By many accounts, direct and indirect subsidies cost the Federal Government as much as the budget of the military.  A 2015 estimate by the International Monetary Fund (IMF) puts that number at $650 billion per year.  $90 billion of that total is in direct subsidies.  The indirect subsidies would be the societal costs for increased use for health care, maintenance of our transportation system, degradation of the environment, etc.  To give you an example of the scale of the direct subsidies number, that’s 1/3 of the cost of Medicare for All proposals (maybe half if you add in a healthier population with less pollution), twice as much needed for Public College for All proposals, and the same amount invested in 2017 by the federal government in the Home Investment Partnerships (HOME) program, which assists state and local governments in providing affordable housing opportunities for low-income families.  Or it would pay for a recent $90 billion tax cut for millionaires (snuck into the Senate version of the April Coronavirus relief legislation) every year.    Several proposals have been introduced in this session of Congress, including Sen. Ron Wyden’s (D-OR) Clean Energy for America Act (S.1288), which aims to redistribute tax credits away from fossil fuel production industries while creating additional incentive-based tax credits benefiting renewable clean energy sources.

Second, divest private and public pension funds from fossil fuel.  Last week, the University of California announced its complete divestment of fossil fuel investments.  This was not done because of its public benefit, but because the investments were not providing a good rate of return.  They were following the lead of The Rockefeller Brothers Fund, the philanthropy foundation of the Rockefeller family which has enjoyed higher investment yields since they divested in 2014, proving that an action which was derided as a “symbolic gesture” was, in fact, an act of financial acuity.  New York State should be doing the same, and the legislature is considering the Fossil Fuel Divestment Act (A1536/S2162A).   The State University of New York should also follow suit, especially considering the fact Chancellor Kristina Johnson is the former CEO of a clean energy company.  More so, to follow in the steps of Cornell University (believe it or not, the land grant portion of the school is connected to the SUNY system), as their Board of Trustees voted Friday to institute a moratorium on new fossil fuel investments.  Locally, there has been an ongoing campaign at the University at Buffalo with students asking the UB Foundation to divest, most recently as their February “UB Divest” phone banking drive.

The Federal Government is considering the Energy Innovation and Carbon Dividend Act.

Finally, assess a Carbon Fee on fossil fuels.  The Federal Government is considering the Energy Innovation and Carbon Dividend Act (EICDA – HR.763/S.3791).  This bi-partisan legislation would place a fee on fossil fuels at their source that will grow each year.  The legislation is designed to be revenue neutral.  Fees collected would be separate from the general fund (bypassing Congress) and revenues would be evenly distributed to every American in the form of a monthly Carbon Dividend check.   There is also the added benefit of less carbon emissions over time, with the EICDA estimated to account for a 40% reduction of carbon emissions by year 12.   And unlike many fees, this is expected to be good for the average citizen, with 80% of middle and low income households expected to benefit slightly from the EICDA.   The big benefit is the spending multiplier when the checks are spent.  For each $1 in dividends given to the public, it is equivalent to $4-$5 in the local economy.

Western New York is still dealing with the legacy of its petrochemical history of the early to mid 20th century.  The sooner we can move away from the carbon technology of the 19th and 20th century to renewable energy sources, the more likely our children will be able to experience a livable climate when they reach my ripe old age.

Lead image: photo by Patrick Hendry

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Written by John Szalasny

John Szalasny

John Szalasny is someone who cares about our planet. Born too late to join in on the first wave of organized environmental action in the 60’s, I’m making up for lost time as I get nearer to retirement on various environmental concerns including the plastic waste crisis. Check out my Facebook group Bring NYC’s Styrofoam Ban to My Hometown!

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