Raw deal
As the pace and scale of natural disasters increase and scientists continue to sound the alarm about the warming climate, Democrats are calling for grand reinventions of America’s energy industry. Through programs like the Green New Deal, they aim to increase subsidies for renewable energy sources like wind, solar and hydroelectric to avoid the most catastrophic effects of climate change. Opponents and GOP leaders deride that approach as an economic wrecking ball. While some still dismiss the scientific consensus on human-caused warming, even Republicans who prioritize this issue fear that building a new industry through a government expansion is the wrong move for America.
An Existential Threat
Climate change is an existential threat to life as we know it. Humanity has never faced a more urgent task than the race to reduce the consumption of fossil fuels in order to stem the catastrophic rise in worldwide atmospheric temperatures, and that requires a dramatic shift in how we think about the economy. The only way to quickly replace oil and gas with renewable energy sources is through government action as sweeping and transformative as the country’s responses to other cataclysmic events, such as the Great Depression and World War II.
Subsidies are not a new idea. The federal government has invested in the development and distribution of new energy sources since the start of the republic. A Yale study found that the oil and gas industry received more government funding in inflation-adjusted taxpayer dollars at its early stages of development than green energy does today. The U.S. still spends billions of dollars each year on fossil fuel subsidies, money that should now be redirected to renewable energy sources.
“We need to phase out fossil fuels completely,” says Martha Molfetas, a senior fellow at the think tank New America. “Renewable subsidies will increase our energy security, reduce air pollution and avoid the negative water and soil impacts that fossil fuels have caused over the past 100 years.”
Tax incentives like those included in the Inflation Reduction Act are a form of support that can also help renewable energy developers to get up and running faster and at a lower cost. This in turn can help consumers to make costly initial investments in retrofitting their homes, such as installing solar panels and heat pumps. Like any government investment in new industries, this will result in more people entering the renewables market, increasing the use of these technologies, creating jobs and growing the economy.
Trust the Market
Tax credits and other subsidies mean large expenditures of money. And that money must come from raising taxes, increasing the federal debt, or both. “Green energy subsidies will be financed with still more government debt,” says Jonathan Lesser, an adjunct fellow at the Manhattan Institute, a conservative think tank. “In another five years, the interest on debt could be the largest item in the government budget.”
Not only will subsidies hinder private investment in new energy sources, they won’t even make renewable energies more affordable. According to The Wall Street Journal editorial board, “the government-forced green energy transition” has driven up prices for wind and solar manufacturing parts by artificially increasing demand — and those costs will be passed on to consumers.
Instead, the U.S. should unleash the power of the free market to reward innovation. Eliminating dependence on government would incentivize clean energy technology leaders to compete for private capital and market share by coming up with better solutions at lower costs. “Two wrongs don’t make a right,” Lesser says, acknowledging the government’s historical support of oil and gas. “The idea that you can subsidize your way to economic growth is a fantasy.”
Another fantasy is the idea that we can reach net zero by replacing fossil fuels with wind and solar alone. Nuclear should be part of the mix, as it is in countries like France and Finland. Small modular nuclear plants could be a meaningful part of a diverse energy mix that helps us decarbonize the economy — especially if industry leaders are incentivized by the market to keep creating cleaner, safer forms of nuclear power.
This story appears in the March 2024 issue of Deseret Magazine. Learn more about how to subscribe.
