With new data showing that low income-earners spent 24 percent of 2011 income on energy, up from 22 percent in 2010, it’s time to rethink government subsidies for alternative energy – wind, solar and biomass – and electric vehicles.
Renewable energy raises prices, slowing economic growth and disproportionately hurting the poor. Yet President Obama, who purports to represent the most vulnerable among us, touts these technologies as a way to reform the economy.
On Sunday, Obama said, “We have doubled the amount of renewable energy we generate, and thousands of Americans have jobs today building wind turbines and long-lasting batteries.”
No mention of costs or of increases in electricity bills. Nor of the failed government-funded solar and battery companies that have cost American taxpayers billions of dollars.
Mitt Romney wants to end taxpayer subsidies for green energy and allow states control over their energy resources.
The Labor Department’s annual survey of consumer spending, released on Tuesday, shows the average American household spent 7 percent of its income on electricity, natural gas bills, and gasoline and motor oil in 2011. But the spending is not evenly distributed. Earners in the top fifth spent only 4 percent on energy, whereas those at the bottom spent 24 percent.
Green energy received $6 billion in tax breaks in fiscal 2012, according to the Joint Taxation Committee. In addition, the federal government has spent $6.3 billion on green energy projects.
Much of this is wasted. Of the 33 energy loan guarantees made under the Energy Department’s programs, 26, or almost 80 percent, have filed for bankruptcy or have missed production goals.
Most people think green is good but pay little attention to associated increases in costs. In 2015, it will cost between $49 and $79 to generate one megawatt hour of electricity from natural gas. A megawatt hour from onshore wind will cost between $75 and $138, and from solar photovoltaic will cost between $242 and $455.
Some states are requiring electricity to be made with renewables, raising costs to their residents. In California, 33 percent of electricity has to be produced by renewables by 2020, even though the state’s budget deficit is $16 billion.
These higher energy prices harm poorer Americans and slow our economy. Compared with most major economies, the United States is relatively energy-intensive, so an increase in prices raises the cost of doing business here more than elsewhere. As a result, America becomes a less attractive place to invest.
When originally enacted in the mid-2000s, tax breaks for green energy were justified by the desire to reduce American dependence on Middle Eastern oil and lower carbon emissions from oil and coal, which might cause global warming. This rationale disappears with the discovery of 200 years of inexpensive domestic natural gas. America now has a source of domestic energy that is far cheaper than wind or solar power. With China, India and other emerging economies unwilling to limit their emissions, U.S. efforts will have practically no effect on global warming – they will merely damage our economic growth while conferring no particular benefit.
Some scientists, including Nobel Prize winner Paul Crutzen, believe altering some features of the Earth’s environment to reduce warming, or geoengineering, would be more cost-effective. Possibilities include injecting sulfur particles into the upper atmosphere, spraying clouds with sea water to increase reflectance and painting buildings’ roofs white.
This would be far less disruptive to business activity, less threatening to employment, and most importantly, it would reduce warming even if large economies such as China and India do not agree to reduce their emissions.
With the poorest fifth of American households spending almost a quarter of their income on energy, America shouldn’t waste taxpayer dollars making it more expensive.