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To cut deficit, energy subsidies should be limited, reformed

Supporters of wind power say that it needs government subsidies.

“Every energy technology is supported by the federal government. Wind energy is no exception, nor should it be,” says the American Wind Energy Association, which represents developers who seek to be profitable, but require government support to launch their enterprises.

The association’s position is that because taxpayers support fossil fuels and nuclear energy, they should be fair and also support renewable energy such as wind power. In short, the last thing that taxpayers should want is to be unfair.

Probably, the last thing that taxpayers really want is to pay more taxes.

Simply letting wind developers into the subsidy game, especially when the federal deficit must be cut, is a bad idea.

Does that mean that we should leave things as they are with fossil fuels, harmful to the environment, getting tax breaks and handouts, while denying help to more desirable resources?

No, but the federal government needs to take a completely new look at subsidies.

As a country, we can decide that we want to foster the development of new energy resources and devote public funding to that purpose. China, our biggest competitor, is doing that, so we may have to do it just to hold our own.

The problem, however, seems to be that we don’t know when we have done enough with tax dollars, and an industry can stand on its own.

For example, Exxon profits reportedly are soaring as world oil prices climb. Yet Exxon and other oil companies continue to receive government support in many forms, all at taxpayer expense.

The oil companies maintain that they really subsidize the government, because they pay taxes. The rest of us taxpayers can tell the difference between paying taxes to government and receiving subsidies from it.

So why do mature energy companies still get support? They have the money to make campaign contributions and to fund lobbyists, both actions that can ensure that the subsidies continue even when they are no longer justifiable.

It might be argued that energy costs are lower for consumers, because of government subsidies. Consumers may benefit from the lower cost supplies, but taxpayers are paying a part of the bill through subsidies. To the degree that consumers and taxpayers are the same people, this is a shell game.

Experts struggle to make good estimates of what energy subsidies cost each year. If all forms of spending relative to energy are taken into account, including tax breaks, the total undoubtedly reaches into the billions.

Suppose all subsides were eliminated, instead of simply adding wind power support to the subsidy list.

Admittedly, that might be a pipe dream, given the extensive support for programs and the political chits that are outstanding. It’s hard to believe that members of Congress representing oil or natural gas producing states would ever vote to end subsidies.

Still, if the government could find a way to reduce and eventually eliminate unnecessary subsidies, then no resource could claim to be treated unfairly.

Government gives tax dollars to private industry so that it will pursue public goals, but it has no assurance of success or even that the funds will be spent efficiently. While taking government money, energy companies don’t want any strings attached.

It seems reasonable for government, as the source of funds, to set performance goals relative to price, production and profits, which, as attained, could cause the flow of subsidies to slow and then stop. That way, subsidies could be phased out.

Government could decide if it wanted to subsidize wind power and other new renewable resources. There could be a cap on just how long the support was available.

Adding reasonable and limited subsidies for wind power, while reducing other, unjustified energy support, should mean less cost to the taxpayer

Also, a somewhat more market-based approach to some subsidies could be introduced. Give consumers green energy vouchers, which they can use to pay for only designated resources, such as wind power or electric cars. Developers then could compete for the redeemable vouchers, which could promote lower prices.

Something needs to be done to halt the seemingly unending upward spending spiral each time a new energy resource appears. Just because some resources are subsidized does not mean all need to be.

If there is to be any hope of bringing government spending under control, energy subsidies must among the items on the table.

I’d like to see the deficit-cutters in Congress and the profit-seeking oil companies hammer this one out.

Gordon L. Weil, a weekly columnist for this newspaper, is an author, publisher, consultant and former international organization, U.S. and Maine government official.