A subsidy-free policy for green energy and innovation

Lynne Kiesling

Reason’s Shika Dalmia has been making some libertarian-friendly Cabinet recommendations, and in her discussion of possible candidates for Secretary of Energy, she reminds us of a great idea floated jointly by Ed Crate of the Cato Institute and Carl Pope of the Sierra Club a few years ago, in 2002:

But there is a better way for Obama to promote green energy that doesn’t involve breaking the federal bank: A zero subsidy energy policy, something that Carl Pope, former executive director of the Sierra Club, and Ed Crane, president of the CATO Institute, jointly advocated some years ago. Instead of asking taxpayers to subsidize green technologies, such a policy would simply eliminate existing subsidies for coal and oil that supply the vast bulk of American energy. It would also replace existing coal and oil taxes with pollution taxes to internalize emissions that pose actual harm to human health or property. This would create a level playing field in energy markets – whose absence environmentalists have long claimed is responsible for making solar, wind and other green fuels uncompetitive.

I endorse this approach enthusiastically; in fact, I blogged it back in 2005, along with related work by Cato’s Jerry Taylor, as well as in 2002.

Interestingly, that 2005 post of mine was a critique of the then-draft energy bill (a version of which ultimately passed). At the time, my reaction to that bill was the same as is my growing opinion of how the Obama administration is shaping up:

Meet the new boss, same as the old boss

With thanks and apologies to Pete Townsend (and yes, it’s a Who song, but Pete’s the songwriter on that gem, so I’m being a pedant).


7 thoughts on “A subsidy-free policy for green energy and innovation

  1. Unfortunately, this is completely and totally not viable, because it does nothing to address the two biggest subsidies that the government gives to oil and coal:

    1. The US navy and military in general. As long as oil tankers sailing around the world aren’t responsible for their own security, the price of oil will never reflect the actual effort that it takes to pump said oil and deliver it half way around the world. And then there are the wars that America fights for oil and the allies it protects, none of which would be possible without high levels of military spending by the US government.

    2. American zoning and land use policy. Oil’s biggest subsidy are the mandatory suburbs, where local land use regulations prevent one from building densely (and density is inversely correlated with energy use in the US), and thus encourage us to have bigger houses and drive farther and live farther from urban centers than we otherwise would. This sort of policy is made almost exclusively at the local government level, so the federal government really doesn’t have much say in it, though appointing Supreme Court justices who would look into reversing the Euclid vs. Ambler Real Estate decisions that legitimized government interference in individuals’ land use decisions.

  2. Unfortunately, this is completely and totally not viable, because it does nothing to address the two biggest subsidies that the government gives to oil and coal:

    1. The US navy and military in general. As long as oil tankers sailing around the world aren’t responsible for their own security, the price of oil will never reflect the actual effort that it takes to pump said oil and deliver it half way around the world. And then there are the wars that America fights for oil and the allies it protects, none of which would be possible without high levels of military spending by the US government.

    2. American zoning and land use policy. Oil’s biggest subsidy are the mandatory suburbs, where local land use regulations prevent one from building densely (and density is inversely correlated with energy use in the US), and thus encourage us to have bigger houses and drive farther and live farther from urban centers than we otherwise would. This sort of policy is made almost exclusively at the local government level, so the federal government really doesn’t have much say in it, though appointing Supreme Court justices who would look into reversing the Euclid vs. Ambler Real Estate decisions that legitimized government interference in individuals’ land use decisions.

  3. Kudos for the Who reference. They are, after all, some of the leading thinkers on public choice…

  4. I look forward to the renewed discussion regarding internalizing environmental externalities costs. It has been about 15 years since the last round. It should make equally entrancing theater this time.

  5. I look forward to the renewed discussion regarding internalizing environmental externalities costs. It has been about 15 years since the last round. It should make equally entrancing theater this time.

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