How Much Money Will You Pay For Green Energy?

[Saipan]

you would realize that only BigOil has received the tax break related to the Foreign Tax Credit.

Nothing for SmallOil and Arabs?

That's not fair!

[TimG]

characterize royalty payments to foreign governments as corporate income taxes

So? Royalty payments are taxes.

[waldo]

So? Royalty payments are taxes.

so says the TimG 'double-dipping' BigOil shillMan!

as I said, as you ignore, that U.S. Foreign Tax Credit proviso was uniquely crafted for BigOil and only BigOil... it is a double-dip at the Foreign Tax Credit... it is a specialized, unique tax break only available to BigOil, not to renewables. It is, most certainly, a subsidy!

Edited August 13, 2011 by waldo

[waldo]

I think I read something about subsidies subsiding (heh heh) over time for mature technologies.

you may be referring to what started through the 2009 Pittsburgh G20 Summit... where the G20 signatories agreed to, "rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption"... consumption, not production focused. Similarly, in 2009, leaders from the Asia Pacific Economic Cooperation (APEC), agreed to this same G20 commitment. From the G20 communique:

29. Enhancing our energy efficiency can play an important, positive role in promoting energy security and fighting climate change. Inefficient fossil fuel subsidies encourage wasteful consumption, distort markets, impede investment in clean energy sources and undermine efforts to deal with climate change. The Organization for Economic Cooperation and Development (OECD) and the IEA have found that eliminating fossil fuel subsidies by 2020 would reduce global greenhouse gas emissions in 2050 by ten percent. Many countries are reducing fossil fuel subsidies while preventing adverse impact on the poorest. Building on these efforts and recognizing the challenges of populations suffering from energy poverty, we commit to:

Rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption.

As we do that, we recognize the importance of providing those in need with essential energy services, including through the use of targeted cash transfers and other appropriate mechanisms. This reform will not apply to our support for clean energy, renewables, and technologies that dramatically reduce greenhouse gas emissions. We will have our Energy and Finance Ministers, based on their national circumstances, develop implementation strategies and timeframes, and report back to Leaders at the next Summit. We ask the international financial institutions to offer support to countries in this process. We call on all nations to adopt policies that will phase out such subsidies worldwide.

of course, other than the IEA fulfilling it's mandate and providing the G20 with a roadmap on how to realize the phase out... I'm not aware of any G20/APEC member countries bringing forward actual initiatives to begin the phase out.

[bush_cheney2004]

...You would realize that special... unique... provisions within the U.S. IRC Foreign Tax Credit were put in place to allow BigOil to characterize royalty payments to foreign governments as corporate income taxes.

That didn't take long...I knew America would get sucked in sooner or later!

[TimG]

it is a specialized, unique tax break only available to BigOil, not to renewables.

If governments started collecting royalties for the use of wind/solar resources in a country then it would be available to renewables too. That is obviously not going to happen because renewables are money losing operations but the break is not, in principal, limited to big oil. Edited August 13, 2011 by TimG

[TimG]

That didn't take long...I knew America would get sucked in sooner or later!

Mainly because US data is a lot easier to find.

[waldo]

so says the TimG 'double-dipping' BigOil shillMan!

as I said, as you ignore, that U.S. Foreign Tax Credit proviso was uniquely crafted for BigOil and only BigOil... it is a double-dip at the Foreign Tax Credit... it is a specialized, unique tax break only available to BigOil, not to renewables. It is, most certainly, a subsidy!

If governments started collecting royalties for the use of wind/solar resources in a country then it would be available to renewables too. That is obviously not going to happen because renewables are money losing operations but the break is not, in principal, limited to big oil.

no - not in it's current form... amendments to the existing IRC code would be needed. As it stands today, the ability to "roll royalties into the corporate tax umbrella", is only available to BigOil. That tax break... is a subsidy... no matter how much you, what was the term you used... oh ya, no matter how much you whine!

[bush_cheney2004]

Mainly because US data is a lot easier to find.

OK....fine...now why is that? And how is it relevant to how much Canadians are willing to pay to go "green"?

Don't "Big Oil" subsidies include Paul Martin having tea in a Libyan tent?

[Saipan]

I'm first standing in line for my refund for heating with renewable energy only

[TimG]

As it stands today, the ability to "roll royalties into the corporate tax umbrella", is only available to BigOil.

Wrong. The tax code applies to all royalities. What they did is place special limits on BigOil because of people complaining about "evil oil companies". IOW. Other industries like renewables would get a bigger break than BigOil if royalities were actually charged on wind/sun and water. Edited August 13, 2011 by TimG

[waldo]

Wrong. The tax code applies to all royalities. What they did is place special limits on BigOil because of people complaining about "evil oil companies". IOW. Other industries like renewables would get a bigger break than BigOil if royalities were actually charged on wind/sun and water.

after your own previous acknowledgement that within the U.S. IRS Foreign Tax Credit section code, related "royalties" aren't (currently) associated with renewables, you still persist in refusing to accept that BigOil has leveraged the U.S. tax code to it's advantage... as a foregone revenue, the U.S. government is subsidizing (there's that word again), BigOil - BigTime!

as your own linked reference states, tax code changes were implemented to allow BigOil to classify royalty payments as credits, rather than deductions... the net impact being a 65% gain over the general 35% deduction level on reduced income. As your own linked reference also states, the subsequent special tax code limit put on BigOil brought this back to the level of a 35% deduction... apparently, the U.S. Government had a (much delayed) problem with BigOil, effectively, transferring its profits (ala royalty payments improperly deemed credits, rather than deductions), from the U.S. Treasury to foreign governments - go figure! So ya... those, as you say, "people complaining about evil oil companies"... those "people" were the U.S. government.

[bush_cheney2004]

Firefox > Edit > Find > "U.S." = 6

[TimG]

after your own previous acknowledgement that within the U.S. IRS Foreign Tax Credit section code, related "royalties" aren't (currently) associated with renewables, you still persist in refusing to accept that BigOil has leveraged the U.S. tax code to it's advantage... as a foregone revenue

Because there is nothing in the tax code that specify targets big oil. It is general exemption that they take advantage of. Next you will be claiming that deductions for labour costs are 'subsidy' to big oil.

as your own linked reference states, tax code changes were implemented to allow BigOil to classify royalty payments as credits, rather than deductions... the net impact being a 65% gain over the general 35% deduction level on reduced income.

The argument that royalties are not taxes is nothing but the opinion of the report's authors. An opinion which is IRS disagrees with because they allow companies to treat royalties as taxes. Edited August 13, 2011 by TimG

[Sandy MacNab]

...IOW - you only get 'Foreign Tax Credits' if you have paid taxes to a foreign government. There is no extra money for oil companies. It is a rule designed to avoid double taxation. If there are special provisions for fossil fuels it is because there are many special taxes on fossil fuels. It is NOT a subsidy and by claiming it is a subsidy you simply demonstrate that you don't know what you are talking about.

Indeed! This is not rocket science. His "apparent" inability to comprehend these straight-forward concepts means he doesn't truly understand anything else you're explaining or he's being deliberately obtuse.

[waldo]

The argument that royalties are not taxes is nothing but the opinion of the report's authors. An opinion which is IRS disagrees with because they allow companies to treat royalties as taxes.

no - foregone revenue in the form of tax credits... to the tune of some $70 billion subsidized to BigOil during the period of your linked reference study.

[waldo]

Indeed! This is not rocket science. His "apparent" inability to comprehend these straight-forward concepts means he doesn't truly understand anything else you're explaining or he's being deliberately obtuse.

another wunderkid, hey? If you actually bothered to read TimG's supplied reference study you would realize no/little income tax is actually being paid by BigOil to foreign countries... when it is, it's a double-dip at the trough for BigOil... when its not, it's simply allowing BigOil to prop-up it's profits (further) ala the royalty-to-(Foreign)tax credit dodge.

[dre]

The argument that royalties are not taxes is nothing but the opinion of the report's authors.

No its based on the literal meaning of the word.

Royalties are usage fees. Not taxes. In this case they are purchase the right to use land and a license to extract resources. They are buying the raw materials required for their business.

Theres a lot of good articles on the diferent between user fees and taxes BTW. Google it up.

[TimG]

Royalties are usage fees. Not taxes. In this case they are purchase the right to use land and a license to extract resources. They are buying the raw materials required for their business.

Not if they are a percentage of the revenue earned by that resource.

If a royalty increases as the income from that resource increases then it is a tax.

Based on your logic then all corporate taxes are 'usage fees'.

Theres a lot of good articles on the diferent between user fees and taxes BTW. Google it up.

Nothing but opinion. In the end, it is tax if it goes to the government and the amount is not connected to the cost of providing a service.

[TimG]

no - foregone revenue in the form of tax credits... to the tune of some $70 billion subsidized to BigOil during the period of your linked reference study.

But why stop there? Why not include the revenue foregone because the US government does not have a 50% corporate tax rate. After all, renewables don't make money so there is no profit to take therefore the difference between 35% and 50% is a blatant subsidy to those big bad oil companies!

When I posted the link I said it was an alarmist study and that some of their claims were bogus. It is useful because it puts an upper bound on fossil fuel subsidies and a lower bound on renewable subsidies.

Edited August 13, 2011 by TimG

[waldo]

Michael... updated to reflect most recent G20 communique:

I think I read something about subsidies subsiding (heh heh) over time for mature technologies.

you may be referring to what started through the 2009 Pittsburgh G20 Summit... where the G20 signatories agreed to, "rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption"... consumption, not production focused. Similarly, in 2009, leaders from the Asia Pacific Economic Cooperation (APEC), agreed to this same G20 commitment. From the G20 communique:

29. Enhancing our energy efficiency can play an important, positive role in promoting energy security and fighting climate change. Inefficient fossil fuel subsidies encourage wasteful consumption, distort markets, impede investment in clean energy sources and undermine efforts to deal with climate change. The Organization for Economic Cooperation and Development (OECD) and the IEA have found that eliminating fossil fuel subsidies by 2020 would reduce global greenhouse gas emissions in 2050 by ten percent. Many countries are reducing fossil fuel subsidies while preventing adverse impact on the poorest. Building on these efforts and recognizing the challenges of populations suffering from energy poverty, we commit to:

Rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption.

As we do that, we recognize the importance of providing those in need with essential energy services, including through the use of targeted cash transfers and other appropriate mechanisms. This reform will not apply to our support for clean energy, renewables, and technologies that dramatically reduce greenhouse gas emissions. We will have our Energy and Finance Ministers, based on their national circumstances, develop implementation strategies and timeframes, and report back to Leaders at the next Summit. We ask the international financial institutions to offer support to countries in this process. We call on all nations to adopt policies that will phase out such subsidies worldwide.

of course, other than the IEA fulfilling it's mandate and providing the G20 with a roadmap on how to realize the phase out... I'm not aware of any G20/APEC member countries bringing forward actual initiatives to begin the phase out.

update: Report to Leaders on the G20 Commitment to Rationalize and Phase Out Inefficuent Fossil Fuel Subsidies

All G20 countries actively participated in the process of identifying subsidies and developing implementation strategies for subsidy reform. Most countries prepared a list of their own fossil fuel subsidies and other fossil-fuel related provisions and shared this with other countries. As of June 11 when this report was finalized, nineteen countries or G20 members submitted information on actions concerning government policies towards fossil fuel producers or consumers. Twelve countries submitted strategies and timetables to rationalize and phase out inefficient fossil fuel subsidies. Brazil and China provided submissions that described domestic actions that will be taken with respect to existing measures that affect the consumption or production of fossil fuels, although both submissions noted that the existing measures are not inefficient fossil fuel subsidies. Six countries reported that they have no inefficient fossil fuel subsidies to reform in context of G20 mandate. The European Union submitted a note describing the situation with regard to energy taxation and state aid in the EU as a complement to the submissions from individual EU countries.

Annex:

per country Implementation Strategies & Timetables

[dre]

Not if they are a percentage of the revenue earned by that resource.

If a royalty increases as the income from that resource increases then it is a tax.

Based on your logic then all corporate taxes are 'usage fees'.

Nothing but opinion. In the end, it is tax if it goes to the government and the amount is not connected to the cost of providing a service.

Corporations that pay taxes are not given a license to extract large ammounts of raw materials. If they were, and those payments were made in exchange for access to a valuable commodity then they would be royalties.

Royalties and taxes are two diferent things. ANd no it isnt a matter of opinion, those words have literal definitions.

But in any case, Waldos point stands. By granting one industry relief from these costs you are giving that industry the upper hand on industries that have no such costs, and you are creating an externality that distorts the market.

Edited August 13, 2011 by dre

[waldo]

But why stop there? Why not include the revenue foregone because the US government does not have a 50% corporate tax rate. After all, renewables don't make money so there is no profit to take therefore the difference between 35% and 50% is a blatant subsidy to those big bad oil companies!

the biggest 5 within BigOil (BP, Chevron, ConocoPhillips, ExxonMobil, and Shell) made a total profit of nearly $1 trillion over the past decade... during these times when subsidy review is afoot, who will speak for the downtrodden... who will step up and fight to protect the right of these 5 to continue to feed from the subsidy trough? Anyone... anyone...

When I posted the link I said it was an alarmist study and that some of their claims were bogus. It is useful because it puts an upper bound on fossil fuel subsidies and a lower bound on renewable subsidies.

uhhh... I earlier dropped assorted references to IEA subsidy findings... are you (also) prepared to label IEA as "alarmist"?

[TimG]

Corporations that pay taxes are not given a license to extract large ammounts of raw materials. If they were, and those payments were made in exchange for access to a valuable commodity then they would be royalties.

The term royalty generally means a payment for a privilege. Authors get royalties from the sale of books. There is nothing special about oil extraction and if you are going to insist that royalties on oil are payments for benefits then I will argue that governments who fail to charge royalties for the use of the sun and wind and water are, in fact, providing a subsidy.

But in any case, Waldos point stands. By granting one industry relief from these costs you are giving that industry the upper hand on industries that have no such costs, and you are creating an externality that distorts the market.

Waldo's point is a red herring. He is arguing that anything in the tax code that can be construed to give an advantage to companies with businesses like oil companies is a "subsidy". That is nonsense. The only tax code "subsidies" for fossil fuels are those which are specifically restricted to fossil fuel extraction and even some of those are legitimate. It is not enough to claim that something is as subsidy simply because different businesses like renewables can't take advantage of them. Edited August 14, 2011 by TimG

[TimG]

the biggest 5 within BigOil (BP, Chevron, ConocoPhillips, ExxonMobil, and Shell) made a total profit of nearly $1 trillion over the past decade... during these times when subsidy review is afoot, who will speak for the downtrodden... who will step up and fight to protect the right of these 5 to continue to feed from the subsidy trough?

Whine. So what? Why don't you tax the bailed out banks or tax Apple's $100 billion dollars. Oil companies invest a lot of capital and make a lot of money. That does not mean that every aspect of the tax code that benefits them is a subsidy.

uhhh... I earlier dropped assorted references to IEA subsidy findings... are you (also) prepared to label IEA as "alarmist"?

Your quote said nothing particularily relevant. Edited August 13, 2011 by TimG