Published: Wednesday 22 August 2012
“The fossil-fuel industry is fully developed after many decades of government help. Going up against a fully-developed industry like oil and coal is enormously expensive, and the industry is trying to block We, the People from triggering private investment to help get us out from under its grip.”
Why Conservative Attacks on Wind and Solar Energy?
There has been a recent flurry of propaganda attacks on wind and solar energy by oil-and-coal-backed conservatives. A vitally important tax credit to help build a renewable energy industry in this country expires at the end of this year without Congressional action, and the old oil and coal industries -- along with certain other countries -- want to make sure it does expire.
When We, the People decide that we will benefit from helping a new industry develop, then yes, We, the People pick a winner, because it benefits us and we prosper as a result.
Background
The fossil-fuel industry is fully developed after many decades of government help. Going up against a fully-developed industry like oil and coal is enormously expensive, and the industry is trying to block We, the People from triggering private investment to help get us out from under its grip. It has nothing to do with government interfering in markets, or "picking winners and losers," this is about us helping offset the enormous competitive advantage oil and coal have due to government investment and assistance in oil and coal in prior decades. We do this because We, the People see the benefits and prosperity that will come to us from developing these alternative energy industries.
Oil and coal are, to put it mildly, entrenched in our economy, and, to put it mildly, make out very, very well because of that. Various forms of government assistance put them there and keeps them there. Aside from direct help like the tax breaks to the companies themselves and keeping taxes low at the pump (compare the cost of gas here to other countries), there are support structures like the cost of the vast military complex that keeps the oil flowing, building roads instead of rail, etc., and then of course there's the cost to us of that whole "let them dump their waste products into the environment for free" thing.
As a result vast ecosystem supporting the oil and coal industries has been built up over the decades. Delivery systems like pipelines, rail lines, gas stations, etc. are examples of this ecosystem that supports the fossil-fuel industry. Existing refineries were enormously expensive to build. So this industry now rests on decades of capital investment. The investment paid off, provided a vast return, and now offers a competitive advantage over other, newer forms of energy. A barrel of oil comes from the ground from an existing well, or a new well that benefited from decades of technological research and development, much of it helped along by government.
"Renewable" forms of energy do not yet have such an ecosystem. The manufacturing, power grid, etc. are all brand new technologies, that need the kind of investment that lets them build the supply chains, expertise and other things that get them to the trigger point where they can take off. This is enormously expensive to develop -- no matter how great the payoff will be. Countries like China get this, and are helping build those manufacturing ecosystems in their countries. Here, however, we have the entrenched political power of the super-wealthy oil and coal companies in the way, fighting tooth and nail to stop the development of this industry. (And, of course, countries like China have every incentive to do what it takes to keep us from developing this industry here.)
Why Tax Breaks?
Instead of just building up the ecosystem of an industry like alternative energy itself, our government helps trigger private investment by providing tax breaks that help overcome the competitive advantage that decades of investment has brought to established industries. Specifically, to help trigger investment in alternatives like solar and wind energy, our government gives tax credits to these industries so their product can compete now with energy products from oil and coal companies that have already made the huge capital investment (with government help) required to build their ecosystems.
Tax breaks help bring the price of a product down versus the product of an entrenched, developed industry, so new companies can grow and their supply chains and expertise and facilities can develop, until such time as they are far enough along to compete on their own. We, the People (government) do this when we feel it is to our benefit for an industry to develop here. We, the People (government) did this with aerospace, semiconductors, computers, biotech and other modern industries. These are examples of how we can trigger this effect, and then prosper because we did.
We, the People (government) did this with these tax breaks for alternative energy. Now the entrenched interests are pulling out all the stops to try to get rid of those tax breaks before the alternative energy industry takes off here. They call it "picking winners and losers" and say it is "interfering with the market" when in fact the oil and coal ecosystem currently is "the winner" because of decades of various forms of government assistance. We, the People (government) assisted those industries because at the time we wanted to grow our economy, and now we want to assist alternatives like solar and wind, because being chained to oil and coal is holding us back and harming the environment. This is supposed to be about what We, the People benefit from, not an entrenched, wealthy few and the power they have to influence and control government decision-making.
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