Opinion: Daily Journal

Flashback: Subsidies Don’t Alter Reality

Back tomorrow with a fresh DJ. In the meantime, here’s a 2008 column on a subject that is back in the news: tax breaks and other subsidies for energy producers.

RALEIGH – No government should give special tax breaks or subsidies to oil and coal companies. Can we all get agreement on that?

Good. Now, let’s get real. Tax breaks and subsidies for the energy mainstays of our economy are unwise. But they don’t get anywhere close to an explanation of why oil is the primary driver of transportation and coal is the primary driver of electricity generation. For that, the best resource is to study the physics and economics of power generation, as I have previously advised.

A good reason to discount the “government favoritism” explanation for our current energy mix is that alternative energy is vastly more subsidized per unit of output. As the Wall Street Journal observed in a recent editorial, a report from the U.S. Energy Information Administration estimated that tax breaks and subsidies for traditional coal technology amounted to about 44 cents per megawatt hour of power produced. The subsidy per megawatt hour of natural gas was even lower, 25 cents. And that taxpayer-sheltered, wildly expensive option of nuclear power has us on the hook for $1.59 per megawatt hour.

How about so-called renewables? They are major-league rip-offs of the taxpayers. Solar energy receives a subsidy of $24 per hour. Wind is slightly less abusive at $23. “Clean coal” technology is even more abusive at $30.

It would be one thing if alternative-energy advocates could reasonably argue that the higher costs – in taxes and power bills – would be exceeded by the benefits of foregone global warming. But they can’t. The best-available scientific judgment is that substituting these options in North Carolina, or the U.S. as a whole, or even the entire industrialized world would have such a small effect on the global climate over the next century as to be scarcely measurable. Unfortunately, the real-world costs for North Carolina families would be so large as to be unmistakable – tens of thousands of jobs lost and significant reductions in the average standard of living.

Using the alarmists’ own climate models, the only real way to make a dent in average temperatures over time would be to reduce CO2 emissions radically, by 80 percent over the next 40 years. You can’t get there with solar, wind, and fluorescent lights. You might get there with nuclear if there is some kind of monumental technological breakthrough. Save that, you’d have to return to the lifestyles of the 19th century.

Good luck with that, if you are so inclined. I’m not so inclined. I doubt the general public will be, either, once they get a whiff of it. They think energy prices are already high enough, and won’t be keen to indulge policies to drive them up still further. You’ll have to form your sackcloth and ashes brigade without us.

Hood is president of the John Locke Foundation.