SACRAMENTO — Faced with a $38 billion budget deficit, Governor Newsom today announced additional proposed cuts to California’s climate and energy investments. If approved by the legislature, these cuts would bring California’s multi-year climate budget down to $48.3 billion from the $54 billion approved in 2022, an 11 percent reduction. Some of these cuts may be backfilled by federal funds, which will become clearer in the coming weeks, but some funding will also be deferred to later years.
The governor and the legislature now have until June 15 to work together to pass a final 2024-25 budget.
In response, The Climate Center Chief Operating Officer Barry Vesser said:
“We’re coming off the hottest year globally in recorded history — this is no time for California to stop investing in climate solutions. While he must be pragmatic in a deficit year, there is much more Governor Newsom can do to protect funding for life-saving climate programs. We strongly urge the governor to eliminate all tax breaks and subsidies for fossil fuel corporations like Chevron, which continue to rake in massive profits while polluting our climate and communities.”
The governor’s budget proposal wisely recommends eliminating the following subsidies that benefit oil and gas corporations (see page 147 of the budget summary here):
- Immediate Deduction for Intangible Drilling Costs, which allows oil and gas producers to deduct intangible costs such as survey work, ground clearing, drainage, and repairs.
- Percentage Depletion Rules for Fossil Fuels, which allows businesses to deduct a fixed percentage of gross income that is higher than the normal cost-depletion method when it comes to resource depletion of mineral and other natural resources.
- Enhanced Oil Recovery Costs Credit, which provides certain independent oil producers a nonrefundable credit equal to 5 percent of the qualified enhanced oil recovery costs for projects located in the state if the reference price of domestic crude oil falls above a specified threshold for the preceding year.
Eliminating these subsidies is projected to increase General Fund revenues by $22 million in budget year 2024-25 and by $17 million per year thereafter. However, it’s estimated that California makes more than $8 billion in tax breaks and subsidies available to fossil fuel corporations every year, meaning Governor Newsom has an opportunity to go further.
“While it won’t close the deficit entirely, ending all of Big Oil’s subsidies would free up billions to invest in growing the skilled and trained clean energy workforce, implement sustainable agricultural practices, deploy more clean energy and storage, and carry out other initiatives now on the chopping block,” continued Vesser. “Furthermore, as the governor and the legislature make difficult decisions regarding limited resources for climate programs, we encourage them to prioritize the needs of California’s working-class and frontline communities.”
Yesterday, The Climate Center and more than 60 other environmental organizations joined state lawmakers on a letter urging Governor Newsom to eliminate all state fossil fuel subsidies. The letter’s signatories point to billions of dollars in potential budget savings that could come from eliminating these subsidies and point out that companies like Chevron benefit particularly from a loophole enabling it to store assets in tax haven countries.
ENDS
Contact:
Ryan Schleeter, Communications Director, The Climate Center: ryan@theclimatecenter.org, (415) 342-2386
About The Climate Center:
The Climate Center is a climate and energy policy nonprofit working to rapidly reduce climate pollution at scale, starting in California. We are a think-tank, do-tank working to turn bold ideas into action for a climate-safe future. Our flagship Climate-Safe California campaign is a unique and comprehensive effort to make California the first state in the nation to reach carbon negative. www.theclimatecenter.org
