Last month, the U.S. Departments of Energy and the Treasury announced the availability of $150 million in Advanced Energy Manufacturing tax credits for clean energy and energy efficiency manufacturing projects across the United States. The offering, which is part of a larger $2.3 billion in credits issued in accordance with the American Recovery and Reinvestment Act, is designed to support manufacturing of a range of clean energy products, from renewable energy equipment to energy efficiency to advanced energy storage and carbon-capture technology.
As I read this announcement, I started playing a bit of mental ping pong, wondering to myself if such tax credits and subsidies are helpful and/or necessary. Certainly, this is not a new debate, and those in favor of limited government and pure capitalism have made the case many times over that free markets, left to their natural cycle, will generally arrive at the appropriate end-result. Perhaps this is the case if monetary gain is the only end-result worth pursuing and if free markets exist in a vacuum. However, if the idea is to transition to an energy system that is more environmentally friendly and sustainable in the long-term, I’m not so sure free-market capitalism would ever enable “green” energy to compete with traditional energy sources like coal, for instance, until the last burning ember has been extinguished. I’m not even sure if the concept of “clean coal” would have ever emerged if there weren’t some sort of incentive (R&D subsidies, public pressure, etc.).
On the other hand, those trying to highlight just how ineffective subsidies and tax programs can be might point to the U.S. Farm Bill and stories of how incentives tied to it have, in some cases, made it more lucrative for farmers not to farm. Moreover, here in the U.S., it would be hard to argue with anybody who has doubts about public programs at a time fraught with fiscal cliffs and ham-handed cost-cutting sequesters that our government can’t seem to come together to effectively address.
For me personally, the ping pong ball is still bouncing around in my head on the issue of subsidies and tax credits. I do believe a green energy industry, for example, could take shape organically without subsidized assistance. But would such an industry emerge without significant environmental impact, pollution, and overwhelming public outcry? I don’t know, and some might argue that this is the natural process we must work our way through to arrive at a logical conclusion.
On the other side of the table, Americans are justly frustrated with a government that can’t seem to get out of the way as we try to emerge from years of painful recession and slow economic recovery. There are certainly plenty of examples that show how government programs can be more hurtful than helpful.
In the end, I think we’re best served when we look within—rather than toward Big Government or Big Business or Big Whatever—for answers. My concern though is that we’re so exposed to white noise from self-interested messaging, whether it be from the business community or government or some other group, that our ability to see and think clearly is compromised. I wonder, when we look in the mirror, can we still be trusted to do the right thing?
Thanks for your readership,
— Matt Migliore, Executive Director of Content