Arnie Johnson very properly wants us to have a clean environment and lots of jobs. So does everyone else I know. But the real question is, “Are the continuing subsidies for alternative energy going to be effective in reaching those goals?”
The first problem I have with the subsidies is that they are corrupt crony capitalism at its worst. As just one example, the Department of Energy 1705 loan guarantee program had 460 applicants and 26 of them received government funding support. Of those 26 approved programs, 90 percent were controlled by bundlers or major donors for administration political campaigns. Additionally, many of these firms have declared bankruptcy, experienced layoffs, or had other financial problems – Solyndra was joined by A123, Abound, Amonix, Beacon, Bright Source, and many, many more.
The second problem I have with the subsidies is that they are very inefficient at producing jobs. In Spain, a comprehensive study by researchers at La Universidad Rey Juan Carlos found that each “green” job cost more than $750,000 and 2.2 jobs were destroyed in the non-green sector for every new green job. Anecdotal evidence here suggests that we are not doing much better. According to Investor’s Business Daily, executives at Johnson Controls turned $300 million in green technology grants into 150 jobs – that’s $12 million per job. Worse, the federally subsidized Smart Grid Initiative at General Electric will be a net destroyer of jobs – 28,000 meter-reading jobs will be replaced by the Smart Grid’s automatic transmitters. And the 2009 economic-stimulus plan spent $90 billion on clean energy and “saved or created” 225,000 positions through 2010, the President’s Council of Economic Advisers reported in November 2010 – that’s a cost of $400,000 per job.
My final problem with the subsidies is that they are economically unsustainable. According to a recent CNBC report on energy economics, coal energy costs 4 to 5 cents per kilowatthour, natural gas energy costs 3.5 to 4.5 cents per kwh, wind energy costs 7 to 9 cents and solar energy costs 15-50 cents. This means that switching to wind would double everyone’s electric bills (though some of this might be paid through taxes and subsidies) and switching to solar would quadruple everyone’s electric bills. Most Americans would not choose to pay this much more for wind or solar.
If we decide that we need to reduce carbon emissions, we should levy a tax on all carbon emissions. This would provide the transparency needed to eliminate the crony capitalism, provide incentives for political orphans like geothermal and tidal energy to develop their promising technologies, and let the voting public decide if the taxes are too high to justify the benefits.
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