As the question of stimulus collides with an eagerness to invest in green energy, it's worth keeping in mind the sort of investments we're making now As Craig Cox
writes:
Every gallon of ethanol produced costs federal taxpayers 51 cents in subsidies. That means the 9 billion gallons of ethanol the 2007 energy bill mandates for production this year cost us $5.1 billion in tax breaks to the companies that blend ethanol with gasoline. The Energy Information Agency reported in April 2008 that 79 percent of all federal subsidies for renewable fuels - including solar, wind and geothermal - went to support ethanol production.
One more time: 79 cents of every dollar the federal government invests in renewable energy goes towards corn ethanol, a heavily subsidized boondoggle that is little better than gasoline. Which is why I worry about targeted investment strategies. It's not impossible to conjure up massive investment strategies that would make a tremendous impact on global warming. Gar Lipow does a nice job of it
here. But it's hard to imagine such an initiative entering the United States Congress and not emerging as pork encrusted in corn. The incentives are too poorly aligned. We know that a certain segment of powerful senators and representatives will use their jurisdiction to force the leadership to buy their vote. And after they do it, the next most powerful group of legislators will do the same, as they need to get reelected to, and it's not as if there's a pristine bill to protect any longer. And then will come the next most powerful group. And so on. The public choice critique is actually quite convincing here. Something like cap-and-trade, which uses market incentives rather than the legislative process to guide investment decisions, is substantially more promising. It makes sense for Tom Harkin to subsidize ethanol, but it doesn't make much sense for companies in need of cheap energy to invest in ethanol.
Steven Teles, however, will tell you that a cap-and-trade plan will get gummed up, too, and so much will be exempted and rebated and set aside that it will, in practice, be nearly as bad. He suggests going even simpler, with a straight carbon tax in which you take the revenues and send everyone a huge yearly check, much like they do in Alaska.
As the question of stimulus collides with an eagerness to invest in green energy, it's worth keeping in mind the sort of investments we're making now As Craig Cox writes:
