Compared to other areas of the economy, the U.S. energy sector (except for the electricity industry) historically has been lightly regulated and relatively free. In the past decade, however, increasing political demand for reductions of carbon dioxide emissions has led to increased government interference in the energy sector.
Such government interference has been a bipartisan affair, with Democrats commonly supporting subsidies for renewable energy sources such as wind, solar, and ethanol while many Republicans support subsidies for “clean coal” and nuclear. Conversely, free-market as well as liberal think tanks and other independent research organizations have come together to oppose subsidies.
In 2002, Carl Pope, executive director of the Sierra Club, coauthored an op-ed with Ed Crane of the libertarian Cato Institute calling for environmentalists and free-market advocates to come together to propose an alternative that would eliminate all energy subsidies and preferences from the budget and the tax code. Together, they called for an end to the “ever-escalating arms race of corporate subsidies that guarantee green technologies will never win, no matter which party is in power.”
More recently, leading environmentalists Amory Levins, chairman of the Rocky Mountain Institute, and Jeffrey Leonard, CEO of the Global Environmental Fund, have embraced the free-market, zero-subsidy energy ideal. David Roberts, an influential energy blogger on the Left, has written, “Politically speaking, supporting progressive values on energy might some day mean trading away comparatively paltry renewable subsidies in exchange for the pullback of some larger subsidies for oil and coal. If we could make that happen by opportunistically forming coalitions with libertarians and even Tea Partiers, I’m all for it.”
History shows members of both parties often have supported energy subsidies, perhaps not realizing the intellectual support for zero-subsidy energy policy is much stronger than has been publicized. Policymakers should pursue the sweeping elimination of all cash subsidies, loan guarantees, tax preferences, and production and consumption mandates for all energy industries, thereby allowing market actors—not politicians—to decide the best mix of energy sources.
The following documents provide additional information about energy subsidies.
Ten Principles of Energy Policy
Heartland Institute President Joseph Bast outlines the ten most important principles for policymakers confronting energy issues, providing guidance to help deal with ongoing changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography.
Should We Get Rid of All Energy Subsidies?
An influential environmental blogger posits that giving up “paltry” subsidies for renewable energy in exchange for the elimination of fossil fuel subsidies would be a desirable trade for progressives and an opportunity to work with conservatives.
Natural Gas Industry Cozies Up to Washington
Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, covers the New Alternative Transportation to Give Americans Solutions Act (NATGAS Act), a 2012 bill that would allocate billions of federal tax dollars to several natural gas ventures. The bill generated bipartisan support, including from former U.S. Rep. Ron Paul, perhaps one of the fiercest critics of corporate welfare in recent history.
Washington Post: Fueled by Pork
Sierra Club Executive Director Carl Pope and Cato Institute President Ed Crane coauthor an op-ed calling for “devotees of Adam Smith and Rachel Carson” to come together and call for a bill that strips away all energy subsidies and preferences to create a level playing field for energy sources while allowing taxpayers to save money.
Get the Energy Sector off the Dole
Jeffrey Leonard, CEO of the Global Environment Fund, an investment firm with a portfolio heavy in renewable energy companies, argues the subsidies received by renewable energy companies are minuscule compared to those benefiting fossil fuels, and that the subsidies artificially inflate incentives to build wind and solar farms, which enter the market prematurely and end up underutilized. Leonard admits his investments have benefitted from federal subsidies, but he argues an unsubsidized free market would benefit them more in the long run.
Influential environmentalist Amory Levins opines that for too long generous loan guarantees to the nuclear power industry have gone unscrutinized, and instead of creating an “arms-race” for energy subsidies, governments should eliminate them for all sources, including nuclear, fossil fuel, and renewable.
Mitt Romney’s Energy Plan
The Cato Institute’s Jerry Taylor and Peter Van Doren examine the energy plan proposed by 2012 Republican presidential nominee Mitt Romney. They conclude that although it is superior to President Barack Obama’s plan, it is not much better. Romney may be right to be skeptical of green energy boondoggles, but he fails to show the same skepticism toward subsidies for nuclear power or clean coal R&D, the authors note.
Ron Paul on Earmarks and ‘Corporate Welfare’ (Fact Check Biography)
The Washington Post fact-checks former U.S. Rep. Ron Paul’s aggressive public criticisms of corporate welfare and finds he is not as pure as he claims to be, having voted for tax credits for the natural gas industry and advocated a federal loan guarantee to expand a nuclear facility in Texas.
Repeal of Energy Tax Subsidies
Senate Bill 2279, introduced by U.S. Sen. Mike Lee (R-UT), would “amend the Internal Revenue Code of 1986 to terminate certain energy tax subsidies and lower the corporate income tax rate.” Lee’s bill would end tax subsidies for wind, oil, and ethanol, among other things. The goal is to allow for free competition within the energy sector.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Environment & Climate News Web site at http://news.heartland.org/energy-and-environment, The Heartland Institute’s Web site at http://heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.
If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Policy Analyst Taylor Smith at [email protected] or 312/377-4000.