February 12 2009
The current economic climate in the United States appears dire for many industries. In response to the drastic economic downturn, Congress has passed a massive $789 billion economic “stimulus” package. In addition to the much talked about banking and automobile industries, another major recipient of these funds will be the renewable energies industry. While the main focus of debate surrounding the legislation was about the high cost, wasteful spending, and effectiveness, there should also be a dialogue to consider if it is appropriate for government to be in the business of subsidizing specific technologies over others, and if such government intervention is superior to the free market in encouraging innovation. During President Obama’s campaign, he stressed his commitment to renewable solar and wind energy production, and the economic stimulus legislation has given him an opportunity to make good on these promises. Unfortunately, it is unlikely that this policy path will meaningfully improve our energy future. Past experience with such subsidies show that government often ends up supporting dubious technologies, and decisions on who receives subsidies are more likely to be driven by politics than by a serious assessment of the most promising producers.