US President Barack Obama has underlined his desire to make the green economy a key election battleground, after yesterday unveiling a budget proposal for 2013 that includes a significant increase in support for clean energy and outlines plans to phase out fossil fuel subsidies.

The proposals, which are unlikely to pass through Congress in their present form, put the President on a collision course with Republicans who are opposed to many of the administration’s efforts to bolster the US green economy.

Most notably, the budget signals Obama’s intention to revive his long-standing plan to axe nearly $39bn worth of subsidies over the next 10 years for the oil and gas industry.

“Oil and gas subsidies are costly to the American taxpayer and do little to incentivize production or reduce energy prices,” the budget states. “Removing these lower-priority subsidies would reduce greenhouse gas emissions and generate $38.6bn of additional revenue over the next 10 years, an amount that represents only a small percentage of domestic oil and gas revenues –about one per cent over the coming decade.”

The budget also argues that ending fossil fuel subsidies would help “eliminate market distortions”, and strengthen incentives for “clean, renewable, and more energy efficient technologies”.

The proposals are complemented by an attempt to again push forward Obama’s plan for a Clean Energy Standard that would require the US to generate 80 per cent of its energy from clean sources, including natural gas, by 2035 – a target that the budget describes as the “centrepiece” of the administration’s energy strategy.

The proposed standard is expected to be incorporated in a new bill due to be tabled in the coming months by Democrat Senator Jeff Bingaman, but it remains unclear if it can secure the support it needs to pass through Congress.

The proposals immediately drew fierce opposition from carbon intensive business groups and GOP politicians, who are likely to attempt to block the budget in the Republican-controlled House of Representatives.

However, the Obama administration remains hopeful the ambitious proposals will both create a clear dividing line between the Democrats and Republicans during election year, and increase the likelihood of approval being granted to other elements of the budget proposal, which set out plans for a significant increase in spending on clean technologies.

The budget proposes a 3.2 per cent increase in funding for the Department of Energy in fiscal 2013 to $27.2bn, including significant increases in spending on clean tech research and a 50 per cent increase in an oil pipeline safety grant programme.

Most notably, $310m has been earmarked for a programme to reduce the cost of solar power, $95m is promised for wind energy research, and $350m is planned for the Advanced Research Projects Agency, which aims to accelerate the development of cutting-edge energy technologies.

In addition, $770m has been proposed to support research into modular nuclear reactors and a total of $2.3bn has been earmarked for research and development into energy efficiency, advanced vehicles and biofuels – a 30 per cent increase year-on-year.

Significantly, the budget also seeks the continuation of the administration’s controversial $34bn loan guarantee programme, which has come under fire from Republicans for its support of bankrupt solar firm Solyndra, and proposes extensions of various renewable energy tax credits.

Moreover, it proposes the reinstatement of the popular Section 1603 Treasury Program, which offers households and businesses the option of selecting grants or tax credits to support the installation of small scale renewables.

“America’s solar industry appreciates President Obama’s support for extending the 1603 Treasury Program,” said Rhone Resch, president and chief executive of the Solar Energy Industries Association in a statement. “The 1603 program has helped leverage over $24bn in private sector investment in for a wide range of clean energy projects, and extending the 1603 program will create an additional 37,000 jobs in the American solar industry in this year alone.”

The budget proposal was released as the on-going row over President Obama’s decision to block the controversial KeystoneXL oil pipeline rumbled on.

A group of Six Republican Senators, including Senate Minority leader Mitch McConnell, yesterday filed an amendment to a highway funding bill that would tie approval for the pipeline to the wider bill.

If the amendment makes it through the committee stage, the move would raise the prospect of Congressional Democrats or the President having to either approve the pipeline or veto a funding bill that they would otherwise wish to see passed.

The proposal sparked the launch of a fresh protest from green businesses and campaigners who set themselves the target of securing 500,000 signatures opposing the project in a single day.