Pitfalls of Subsidized Energy

, Alanna Hultz, Leave a comment

At the Heritage Foundation recently, Marlo Lewis, Senior Fellow, Competitive Enterprise Institute, Doug Koplow, Founder, Earth Track, Ben Lieberman, Senior Policy Analyst, Energy and Environment at the Heritage Foundation and Peter Bradford, Vermont Law School, discussed the role of subsidies in energy policy and answered the question, is subsidizing commercial energy projects the best way for America to achieve it’s energy goals?

Lewis was the first speaker and he said “the leading sales pitch to get government support on energy-subsidizing projects is, if we have a green new deal we will have millions of green jobs.” He also said the leading public claim on energy-subsidizing projects is that they will rescue the U.S. economy. He believes there are some red flags to the green New Deal and said, “sources such as solar energy and wind, provide only two percent of electricity and that was the case when the economy was booming.” He said that “it does not make sense to say these energy sources could be the source of recovery for the economy.” Lewis also stated some weaknesses on green jobs and said that “studies provide no clear definition of what a green job is.” He also said, “the green jobs literature is bias against productivity.” An example he gave of the literature being biased against productivity is wind being a better source of energy than coal. Lewis said that “wind employs more people, which means wind is less productive and the economy is less productive.” He continued, “coal frees the human capital and there are fewer workers because they are in medicine and other fields, they are not needed to produce electricity.”

Koplow discussed some limitations of energy projects. He said that “money, interactions, time. Failure rates and expertise are some constraints.” Koplow believes money is not unlimited and that we are not starting with a blank slate; he said that “we need interactions between policy goals.” He continued, “we need to pay attention to time and recognize ineffective solutions quickly and we need to understand failure rates and know not every promising solution will work.” Koplow also said bad policies can slow the transition. He said “the energy problem has multiple pathways to a solution, not one and the best pathways are not known in advance.” Some ideas Koplow suggested to increase the probability of success are “highlight price differentiation across energy solution and apply incremental changes to existing technology systems.”

Lieberman was the next panelist to speak and he said “government subsidies have a track record that shows disappointment.” He said, “We are making the same mistake with wind energy that we did with corn ethanol.” Corn ethanol is primarily used in the United States as an alternative to gasoline and petroleum. Lieberman also talked about how Congress wants to increase the ethanol mandate. He said that “by 2008 we were having second thoughts on ethanol and realized it doesn’t reduce the cost of driving.” He continued, “wind energy is too small to affect the electric bill.” He believes increasing the ethanol mandate would only exacerbate the problem caused by the current mandate and will not reduce oil imports or improve the environment. He said that “instead of Congress trying to pick alternative energy winners and losers, Congress and the Administration should seriously consider repealing the ethanol mandate instead of expanding it and eliminate tariff and regulatory barriers to ethanol imports.”

Bradford discussed energy subsidies and nuclear power plants. Bradford said that “nuclear power has unresolved proliferation and waste issues and the loan guarantees encourage the riskiest projects; but all subsidies distort and we can’t tell which distort the most.”

Alanna Hultz is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.

 

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