Subsidies for Green Energy

Shannon McNamee and Mark Minisce, Elizabethtown College

A common trend in recent years has been to provide incentives for individuals and businesses that choose to go green. A green energy subsidy indicates the government is providing financial assistance to those who choose to invest in limiting their fossil fuel consumption by using solar panels or wind energy. A subsidy is the opposite of a tax; rather than increasing the price of a product, it makes the product more attractive by lowering its price by utilizing direct grants or tax breaks.

It is hard to consider the governmental financial support of green energy while ignoring that given to fossil fuels. Similar to green energy aid, the federal and state governments have budgeted over $400 billion in order to make old, established technology more available and profitable for consumers and firms. Those who feel that the government is promoting the use of unclean energy support cutting fossil fuel spending and moving into newer, greener technology.

The 1997 Kyoto Protocol at the United Nations set in place a limit on the participating countries’ consumption of fossil fuels and greenhouse gas emissions. This international agreement was the first step in bringing all countries to a similar level of clean energy technology. However, the U.S. did not ratify the agreement, and China, the largest energy consumer in the world, was also left out.

China is now allegedly using green subsidies to introduce its products cheaply into foreign markets. Chinese “dumping” has reduced the demand for products manufactured by American companies, causing some to go bankrupt. A prime example is Solyndra, a solar panel company that received $528 million in federal government loans. Republicans are outraged by the amount of money invested in a single company that had an expensive but unique solar design, but did not entice consumers. Overall, the Energy Department has made more than 40 guarantees (subsidies) since the 2009 stimulus package was created. According to Matthew Wald’s commentary in The New York Times, the Energy Department has committed $18 billion in guarantees and expects to commit more in the months ahead.

Though the news has been dominated by information regarding the solar panel industry, subsidies are available for a variety of markets. Consumers or businesses using wind, hydropower or other means of clean energy also receive subsidies. And let’s not forget fossil fuels–consumers received six times more in subsidies for fossil fuels (oil and coal) than any type of clean energy industry, according to Ben Sills from Bloomberg.

By providing subsidies for green energy, the government fosters the development of a domestic green energy market, increases employment levels in the industry, and encourages research and development in new sources of energy. It prevents the United States from falling behind in a market dominated by China and Europe, and the hope is that eventually, the industry will be able to compete on its own, without any further subsidies from the government.

Bibliography

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“Fossil Fuel Subsidies.” priceofoil.org. priceofoil, n.d. Web. 23 Nov. 2011.

Hargreaves, Steve. “Why green energy still needs Uncle Sam’s help.” Cnn (online). 26 Jan. 2011. 23 Nov. 2011. <http://money.cnn.com/2011/01/25/news/economy/renewable_energy_obama/index.htm>

Kanter, James. “Cost of Subsidizing Fossil Fuels is High, but Cutting Them is Tough.” The New York Times (online). 23 Oct. 2011. 23 Nov. 2011. <http://www.nytimes.com/2011/10/24/business/global/cost-of-subsidizing-fossil-fuels-is-high-but-cutting-them-is-tough.html>

Lipton, Eric and Clifford Krauss. “A Gold Rush of Subsidies in Clean Energy Search.” The New York Times (online) 11 Nov. 2011. 22 Nov. 2011 < http://www.nytimes.com/2011/11/12/business/energy-environment/a-cornucopia-of-help-for-renewable-energy.html>

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Sills, Ben. “Fossil Fuel Subsidies Six Times More Than Renewable Energy.” Bloomberg (online). 9 Nov. 2011. 23 Nov. 2011. <http://www.bloomberg.com/news/2011-11-09/fossil-fuels-got-more-aid-than-clean-energy-iea.html>

“Solyndra.” The New York Times (online) 17 Nov. 2011. 22 Nov. 2011 <http://topics.nytimes.com/top/news/business/companies/solyndra/index.html >

Sweet, Cassandra. “Dumping Claims Probed by Commerce Department.” Wall Street Journal (online). 9 Nov. 2011. 23 Nov. 2011. <http://online.wsj.com/article/SB10001424052970204358004577028604012735604.html?KEYWORDS=green+energy+subsidy>

Walsh, Bryan. “Does the U.S. Spend Too Much on Green Energy—or Not Enough?” Time (Online). 15 Nov. 2011. 23 Nov. 2011. <http://www.time.com/time/health/article/0,8599,2099480,00.ht ml>