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The Fossil Fuel Industry Is Holding Up the Democratic Agenda

Party leaders are caving to corporate pressure and ceding ground on an already dangerously low budget proposal.

Aída Chávez

October 14, 2021

Emissions rise from a smokestack alongside an American flag in Ohio.(Dane Rhys / Bloomberg)

This will probably be the last chance Democrats get to pass meaningful climate action and stave off disaster. They have roughly one year to enact the White House’s agenda and save the country (and world) from the worst effects of climate change, before the midterm elections jeopardize their narrow control of Congress. Negotiations over the scope of Democrats’ climate and social safety net bill continue, but Democratic leaders are already preparing for crumbs.

“I’m very disappointed we’re not going with the original $3.5 trillion,” House Speaker Nancy Pelosi told reporters this week. “But whatever we do, we will make decisions that will continue to be transformative.”

To bring the $3.5 trillion reconciliation bill down, Pelosi said, their approach will be to reduce the number of years for programs, instead of leaving out key initiatives altogether. But Pelosi’s comments on Tuesday also undermined a letter she had sent to her colleagues the previous night, where she cited pressure from members to “do fewer things well.”

Still, progressive leaders remain committed to including all of the president’s priorities in the bill, from climate provisions to child care and health care expansions. “We’re not going to pit child care against climate change,” Representative Pramila Jayapal said on Tuesday. “We’re not going to pit seniors against young people.”

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“We would reduce the number of years because the universality of benefits and the immediacy of benefits are absolutely critical,” Jayapal added. “And that, frankly, is more important to us than having it for the entire 10 years.”

Months of horse-race political coverage of the negotiations, along with a convoluted legislative process, have moved the goalposts and warped the climate debate. At the start, progressives and environmental groups called for $10 trillion in climate spending over the next decade, an amount that’s closer to what experts say is needed to meet the scope of the crisis. Now, Democrats are looking at shrinking the $3.5 trillion reconciliation bill to around half. (The $3.5 trillion top line is smaller than it sounds, representing around 1.2 percent of US GDP over a decade.)

Democrats are also split on whether the government should continue to subsidize the very industry that has made investment in climate protections so urgent. Just this summer, we saw apocalyptic weather events driven by climate change ravage the US and expose the vulnerability of the country’s infrastructure, from deadly heat waves in the Pacific Northwest to the flooding of New York City’s subway system. Ending domestic fossil fuel subsidies, which increase the profitability of destroying the planet, should be low-hanging fruit.

A recent analysis by the International Monetary Fund found that the fossil fuel industry enjoys subsidies at a rate of $11 million every minute. The production and burning of coal, oil, and gas, the IMF estimates, was subsidized by $5.9 trillion in 2020, with explicit subsidies accounting for 8 percent of the total and tax breaks an additional 6 percent.

But Senator Joe Manchin and a handful of Big Oil Democrats in the House are fighting to preserve tax giveaways to the oil and gas industry. The West Virginia senator outlined his demands for the spending bill in a memo, dated July 28 and obtained by Politico, and explicitly listed the preservation of fossil fuel subsidies as part of his $1.5 trillion counter offer. Biden has pledged to end these tax breaks, and congressional progressives made their repeal a top priority in budget negotiations, but pressure from the fossil fuel industry and congressional allies like Manchin has been fierce.

Handouts to the fossil fuel industry were left nearly intact in the House Ways and Means Committee draft tax plan for the reconciliation bill after seven House Democrats from Texas wrote to leadership defending the subsidies. The draft plan did repeal a significant tax loophole for international extraction, but failed to address any of the domestic tax breaks, some of which have existed for more than a century. Industry groups and the US Chamber of Commerce also lobbied Democrats to preserve these tax breaks.

There is also a broader effort underway by a handful of House Democrats loyal to the oil and gas industry calling for the repeal of international subsidies to be removed from the final package. Three Texas Democrats, Representatives Vicente Gonzalez, Henry Cuellar, and Filemon Vela, recently wrote a letter to Democratic leadership calling on Congress to protect the international subsidies, specifically the multibillion-dollar loophole buried in Trump’s 2017 tax cut law. Closing the Trump-era loophole would raise up to $84.8 billion in revenue from oil giants like Exxon, Chevron, and ConocoPhillips, the Treasury Department estimates.

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Katrina vanden Heuvel
Editorial Director and Publisher, The Nation

Biden’s budget proposal, said Friends of the Earth Program Manager Lukas Ross, would provide as much as $121 billion dollars worth of revenue for the bill in repealing tax incentives for the fossil fuel industry. Environmental groups, Ross added, are counting on their allies in the Senate. In the upper chamber, Oregon Senator Ron Wyden, chair of the Finance Committee, has said he wants to take the tax breaks and “throw them in the dustbin of history.” Vermont Senator Bernie Sanders is similarly unequivocal.

“We are prepared to negotiate, we’re prepared to compromise, but we are not going to negotiate with ourselves,” Sanders said, adding that $3.5 trillion is “much too little,” given the scope of the climate crisis. 

Aída ChávezAída Chávez is communications director and policy adviser at Just Foreign Policy. She was previously The Nation’s D.C. correspondent and a reporter at The Intercept, More Perfect Union, and other outlets.


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