by ANDY KOENIG 2/10/2016
for Investors Business Daily
Washington politicians love giving preferential treatment to their friends, especially if they’re in the energy business. This was evident in the massive tax and spending package passed by Congress last month.
It contained a slew of large tax carve-outs for energy companies, especially those in the wind and solar industry. According to the Joint Committee on Taxation, wind and solar tax credits in the deal will cost taxpayers $26 billion over the next 10 years.
But these special-interest handouts were only the most recent. In November, the Environmental Protection Agency expanded another energy handout with even more harmful effects. It’s called the Renewable Fuel Standard, or RFS, and it requires gas and diesel fuel producers to blend a certain amount of biofuels into their product.
It’s time for Congress to end every such energy giveaway. Lawmakers should begin to systematically dismantle these tax credits, subsidies and mandates — including those for renewables and fossil fuels.
While we can’t end all these handouts without major tax reform, the RFS is a place we can start. Passed in 2005 and expanded in 2007, today it’s a solution in search of a problem.
At the time, prevailing wisdom was that we needed a reliable fuel alternative to expensive oil, which then was at an all-time high. Yet thanks to America’s own energy revolution, today’s low oil and gas prices have eliminated that concern.
In truth, the RFS is a blatant pander to the powerful corn lobby, which dominates Iowa politics. Unlike other industries that have to compete for their customers, the RFS forces Americans to buy increasingly more biofuels over time.
That’s a pretty sweet deal if you belong to the biofuels lobby — as the money it spends in Washington shows. From the 2008 through 2014 election cycles, the industry showered federal lawmakers with $10.9 million in campaign contributions.
Even that pales in comparison with the money the industry spent lobbying the federal government. From 2008 to 2014, it spent $188 million on an array of special-interest perks, including the RFS.
For the rest of Americans, however, the RFS is a raw deal. It amounts to a hidden tax that raises the cost of living on millions of families who can ill afford it.
This is primarily felt through higher gas prices. A 2014 study by the Congressional Budget Office found that as blended by many fuel refiners, complying with the full RFS mandate could increase gas prices 13 cents to 26 cents per gallon by 2017.
With the average vehicle consuming 524 gallons per year, that amounts to a $272 hidden tax each year for a family with two cars.
The impact on diesel is even worse. The CBO study found the RFS could increase the cost per gallon by between 30 cents and 51 cents by 2017. This will be especially difficult for rural communities to absorb, given that diesel is the fuel of choice for most farm equipment.
The list of harms goes on. The RFS mandate is structured in such a way that more ethanol has to be used every year. This happens regardless of whether overall fuel consumption drops — as it has since the RFS was passed in 2007 — meaning the percentage of biofuels blended into gas and diesel has continuously increased.
Now ethanol-blended fuel is pushing the upper limit of what most car engines are certified to use, according to AAA.
Yet as harmful as the RFS is, it’s but one of many energy handouts lobbyists have procured over the years.
There are special perks for other renewable-energy sources like wind and solar, as well as those for oil, coal and gas. While they each vary in their details, they have one fact in common: They benefit the well-connected few at the expense of the many.
Enough is enough. The ongoing brouhaha over the tax-extenders deal and the Renewable Fuel Standard shows energy tax credits and subsidies are little more than a battle between lobbyists and their special-interest clients. What actually makes good policy is merely an afterthought.
Ethanol and other biofuels may have legitimate benefits, but their use should be dictated by consumer choice, not because of another Washington mandate.
Congress should end this farce by eliminating all laws and regulations that benefit one energy producer over another. That’s the only way to ensure that American families — not special interests — come out on top.
Koenig is senior policy advisor at Freedom Partners Chamber of Commerce.