Since 2008, investors have poured several hundred billion dollars into fossil fuel-related master limited partnerships that shield income from virtually all corporate taxation. The MLP tax loophole — a sort of reverse carbon tax — has heavily subsidized the nation’s ongoing oil and natural gas fracking boom.
Solar, wind and other renewable energy companies are not eligible for the MLP tax dodge. Although bipartisan support is building in Congress to extend the tax deductions to them, insiders say legislation to do so will most likely have to wait for and be a part of a comprehensive tax reform package, which has proven elusive.
Until then, existing incentives will serve as a drag on the U.S. economy’s transition from fossil fuels to renewable energy sources. As long as Congress fails to act, fossil fuels will continue to exploit their government-approved competitive advantage even as mounting evidence shows their use accelerates global warming and prompts calls to tax carbon.