Obama proposes $10 per barrel oil tax

Proceeds to the tune of $32.4bn would be used to bolster infrastructure and decarbonise power production.

US President Barack Obama has proposed a new $10 per barrel fee on oil to be paid by oil companies as part of a new “21st Century Clean Transportation System”.  

The $32.4 billion proposal is aimed at reducing carbon emissions in the transportation sector, which produces 30 percent of US greenhouse gas emissions annually. It would increase investments in transportation infrastructure assets by 50 percent and introduce reforms to investments already made to reduce pollution, cut oil consumption and create new jobs, according to a White House fact sheet. 

“The new fee on oil will also encourage American innovation and leadership in clean technologies to help reshape our transportation for decades ahead,” the fact sheet said. “It is a vision that builds on the success the country has seen as a result of the [$90 billion] American Recovery and Re-investment Act of 2009.” 

Every year traffic congestion costs American families $160 billion and businesses almost $30 billion, according to the White House statement, and while the US transportation used to be number one in the world, it is no longer even in the top 10 due to years of under-investment in asset maintenance and system modernisation. 

While the federal government signed a five-year transportation funding package into law at the very last moment in 2015, existing funding streams will not be enough to meet the massive need that has been building through a decade that saw more than 35 short-term funding patches. 

Investments to be made with the revenue generated by the new “fee” would be directed toward reducing traffic and finding new ways for Americans to commute to work and school ($20 billion); incentivising cleaner and more streamlined planning, development and implementation of infrastructure projects ($10 billion); launching a new generation of smart, clean self-driving vehicles and aircraft ($2 billion); and ensuring new technologies are integrated safely into the transportation system ($400 million). 

Investments would be made out of a “Climate Smart Fund” created as part of the proposal which would provide bonus funding to states that use existing formula to cut carbon pollution in the transportation sector. Three new grant programmes would be created through the plan as well, including a 21st Century Regions programme to implement regional-scale transportation and land-use strategies; a Clean Communities programme to support increasing livability in cities and towns; and a Resilient Transportation programme to spur climate impact resiliency projects.

The plan would also include a one-time business tax that was met with varying degrees of support and opposition last year.

The $10 fee paid by oil companies, if enacted according to the Obama administration proposal, would be phased out gradually over five years.