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Comment by dbrower | Hacker News Reader

A better argument than imputed carbon offset is the oil depletion allowance, which is a pretty explicit subsidy for extraction industries.

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Being able to amortize an investment over the productive life of an asset is a subsidy? Under what definition of the word?

Time value of money, if you can deduct something in 2020 vs 2021 you get 1 year of interest on that deduction. Even if you don’t directly invest it, inflation make paying 2020 debts in 2021 dollars a net win.

However, a larger issue is percentage depletion makes it possible to write off more than the cost of the asset. If I buy something for X, then the sum of all of my depression should be X or less.

What you're missing is, everyone gets to depreciate their investments. Large oil companies are some of the few who can't.

You are deducting that investment today against the revenue it is producing today, and when you deduct in 2021 you are deducting against 2021 revenue.

We could argue about the shape of the curve we want, but it would not make any sense to deduct at retirement of the asset.

Accelerated Depreciation is a net win for companies. So, the shape of the curve is very much an issue worth considering.

Consider, a company buys and new car and the car’s resale value may tank the day they buy it. Further, companies regularly use things they which have a book value of zero.

An easy way to favour an industry is to allow them to write off assets faster than they're actually used up.

So while the amortization itself seems fair, many oil companies have lobbied for these types of changes, which together amount to hidden subsidies worth billions every year.

Why does accelerated depreciation help a company? (It helps that they pay less tax initially, because they can offset more revenue, but then they are left with less expenses to offset revenue later, how does it help them? Or again the explanation is time value of money?)

Also oil wells' production curve should match the depreciation curve, no? (You can extract more initially and it drops off, especially as the pressure lowers, you then have to inject extraction fluids, CO2 or brine or whatever, crack the surrounding rocks, and eventually it gets abandoned as a production well.)

Yeah, it's time value of money. There are many kinds of subsidies, including direct to consumer. If you're interested, the IEA's old reports mentioned here would be the best place to start (many countries have since cut their subsidies, so there's progress):

https://en.wikipedia.org/wiki/Energy_subsidies#IEA_position_...

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