I recently wrote about some of the problems with renewable energy subsidies. I received several comments from readers, including one who wrote:
Thinking holistically: Looking at the bigger picture-Factoring economics with the environment and the future.
While I respectfully agree with most of what you have said in this article, I don't think that the viewpoint looks at the entire picture or is without bias. Don't the companies that drill for gas and oil also get tax breaks that could be considered unfair competition? The same is true for the building of nuclear power plants. Most of them were subsidized with tax dollars; not private funding. What is the long term cost to the environment and the public from the pollution created by fossil fuels, and what do we do when we run out of fossil fuels–even if it is 100 years in the future? Do we even know the answer to that question? Isn't that why clean sources of renewable energy are getting subsidies in the first place?
Your views are both short sighted and myopic if they don't look at these other factors as part of the entire picture I feel. The public needs energy to drive the economy and give us the comforts we desire, but the immediate cost of that energy and where it comes from are only parts of that equation.
You obviously have another agenda you are trying to promote. This is not about economic fairness.
In response, let me first say of course I am biased. Everyone is. For instance, while I believe that free markets are generally the best way to deal with many of our market problems, many other people believe that government intervention is the best way. In fact, I'd say just about everyone I know is biased one way or another on this. The key for people is to look at the big picture to try to understand the results of one's bias-I'd generally call this a worldview-to see if it is accurately represents what's going on in the world.
For instance, the fact than wind energy subsidies are causing reliability concerns in the Texas electricity market is undeniable. Yet many people who say that we need to be developing alternative fuels that they believe are better for the environment and that we can use when we run out of fossil fuels either don't know about or ignore the harm caused by their support of renewable energy subsidies. That is, they ignore the big picture.
People have been predicting we are going to run out of fossil fuels for as long as I can remember, yet today we have more reserves of fossil fuels than ever before. And whenever we need a new fuel, the market will bring it forth, just like it did when coal replaced wood, steam replaced wind, kerosene replaced whale blubber, etc. All of those transitions occurred without government subsidies. In fact, government subsidies today are getting in the way of that transition since they continue to pour money into energy sources, such as wind, biomass, and solar, that can never provide an economical supply of energy for our society. These fuels, which have been in use for much longer than fossil fuels and are thus more "mature," don't have the energy density to compete with fossil fuels-now or in the future.
People say that fossil fuels harm the environment, yet the environment where people actually work and live is cleaner in many ways than ever. I can't find any horse poop or coal soot anywhere in the streets of Austin. The air is cleaner today in the U.S. than it was 50 years ago, and I am sure it is also cleaner than it was in London centuries ago-air pollution was a problem in London as far back as 900 years ago when the nobility started trying to stop commoners from using coal to keep themselves warm. We have learned how to use fossil fuels with a minimal impact on our environment even as they have been responsible for the greatest boom in prosperity and health in human history. Renewable energy subsidies threaten both our prosperity and health as they make fuel use more expensive and divert money and resources away from increases in productivity and innovation-including innovations in health care.
I agree that subsidies for conventional sources of energy are not helpful and support their elimination as well. Though subsidies for "renewable" fuels are much more extensive than subsidies for conventional fuels on a per unit of energy produced. For instance, the U.S. EIA estimates that coal gets 44 cents of subsidy for each megawatt hour produced while solar and wind each get over $23 per megawatt hour produced. The federal Production Tax Credit gives wind generators 2.2 cents per kWh, which is 36% of the industrial price of electricity in Texas.
My agenda, as well as that of the Foundation, is one of allowing people whenever possible to make decisions for themselves in the market place rather than having people in government or in special interest groups make decisions for them. I have seen time and time again how individuals' decisions are transmitted through the voluntary mechanisms of the marketplace to the benefit of many others around them.
Government doesn't regulate business; it regulates people. And every time the government decides to regulate the market decisions that people make it is telling them that it can make better decisions for them than they can themselves. The people using government might use economic fairness, the environment, or many other rationales to support their intervention, but it doesn't change the fact that they have replaced the freedom of the marketplace with the coercion of the government and imposed their will on others.
Government has its place, but picking what energy sources we will use now and in the future isn't one of them.