Elon Musk went on a mini-tweetstorm between Friday and last night, following a report by The Huffington Post claiming that the Koch brothers and other energy magnates were planning on launching a $10 million lobbying effort to promote fossil fuels and defeat subsidies for electric vehicles. After linking to the report with a heavy “Sigh . . .”, Musk went on to argue that the traditional auto industry—and the oil and gas industry more generally—has itself been heavily subsidized for decades.
Worth noting that all gasoline cars are heavily subsidized via oil company tax credits & unpaid public health costs https://t.co/4li5E013Dj
— Elon Musk (@elonmusk) February 19, 2016
According to The Huffington Post, the still-unnamed Koch lobbying effort is being organized by James Mahoney, a member of the Koch Industries board. The report cited energy industry sources who believe the effort is likely to launch by the middle of the year.
The characterization of tax programs that benefit the oil and gas industry as ‘subsidies’ long predates Musk’s tweets. The industry predictably disputes that take, instead saying it is allowed to deduct operating expenses like most businesses. In its analysis of some of the contested programs, the Atlantic critiqued a deduction that treats depletion of oil levels in wells as a form of capital depreciation, and similar practices also apply to mining, logging, and other extractive industries. Another $11.6 billion provision is putatively intended to discourage drillers and refiners from moving operations overseas, which would be challenging even without the incentive.
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Musk went on to refer to IMF numbers putting global oil subsidies at more than $5 trillion:
Global economy of $100T is overwhelmingly fossil fuel based, so IMF estimate of $5T or 5% for carbon subsidy is def right order of magnitude
— Elon Musk (@elonmusk) February 21, 2016
On the other side of the ledger, various state and federal programs benefit both the emerging electric car industry as well as buyers of electric cars, including Musk’s Teslas. There’s a federal credit of up to $7,500 for buyers of both electric and hybrid vehicles. States including Tennessee, Missouri, Illinois, and California provide additional state income tax credits for EV buyers, averaging around $2,000. And there are also the substantial grant programs for battery and EV technology development, such as the $2.4 billion laid out by the Obama administration back in 2009.
Of course, there can be no apples-to-apples comparison of EV and oil subsidies, in part because one is a developing market, and the other is mature. National subsidies for electric cars are designed to guarantee future global dominance of the sector—a goal that, thanks to efforts like Tesla’s, seems increasingly achievable for the U.S.
Subsidies to the oil industry, on the other hand, tend to foster geopolitical objectives (such as U.S. energy independence) rather than business goals. And with bottoming crude oil prices threatening the profitability of domestic fracking operations, getting rid of U.S. oil subsidies is probably a political non-starter.
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A Koch campaign against electric cars would not be the first time Musk has gone head to head with a fellow billionaire over the future of America’s transportation and energy infrastructure. The Koch’s lobbying to defend fossil fuels has also been extensive, including fights against state-level gasoline taxes and even public transportation initiatives in cities like Nashville. And most recently, SolarCity, which Musk helped found, faced off against Warren Buffet over utility metering regulation.
What may be most amazing about all of this is that the Koch brothers and Elon Musk are even playing in the same ballpark. Musk, who just a few short years ago was famously nearly broke, now has an estimated personal net worth of $13 billion dollars, while the Kochs’ fortune is around $41 billion a piece. So while this may be the opening salvo of a money-driven David vs. Goliath battle over energy policy, David has certainly been hitting the gym.
