December 19, 2009

Green tax laws: can there really be subsidy-free energy?

A common refrain from those who oppose the development of clean technologies is the added cost required over traditional “non green” products. Critics to carbon tax, cap-and-trade, or any other subsidizing regime often point to an enfeebled economy and then to the cleantech industries need for regulatory support.

This argument, however, fails to account for the inherent costs associated with traditional carbon-based fuels. Even setting aside the external costs of carbon consumption, which scientists and politicians are currently wrangling over in Copenhagen, the mature and established energy industries have always relied on governmental support.

There is no such thing as subsidy-free energy. The rise of oil, coal, natural gas, and nuclear power are all attributable, in part, to direct or indirect financial support from governments that sought to develop them. Nuclear energy in the U.S., for example, received $50 billion in direct government funding for research and development between the years 1973 and 2003.

The oil industry, despite making record profits, still benefits from billions of dollars in tax incentives. The low cost of natural gas reflects a leasing system of public lands that values resource extraction over other uses.

Energy, like all other major industries, inevitably faces government regulation. The low price of carbon energy, which renewable energy must now compete with, directly results from intentional decisions made by previous generations to develop the fossil resource.

Decisions now, or in the future, to use policies and legislation as an incentive to foster growth of the cleantech industry would not mean that governments are meddling in the free economy where they haven’t before, but rather they are simply replacing one philosophy of energy regulation for another.

Source: Alex Kerr

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