Free Market Energy: Advantage RenewablesPosted: December 11, 2011 Filed under: Environmental Science | Tags: economy, Environment, environmental science, fossil fuels, free markets, government subsidies, renewable energy 1 Comment
The energy industry receives roughly $20 billion in subsidies and tax breaks every year, with the lion’s share going to fossil fuel industries (Leonard, 2011). Not only does renewable energy receive far less subsidies annually, but especially when viewed from a historical perspective. Fund and Healey (2011) found that inflation-adjusted, average annual subsidies for fossil fuels were 5 times that of renewables, while nuclear power was subsidized at a rate of 10 times that of renewables. In the final analysis, the federal government are underwriting the energy sector unevenly, put renewable energy development at a significant disadvantage, given both the high startup costs of innovation and competition from large, entrenched, subsidized, organizations; hardly a level playing field.
Despite the inherent challenges faced by those committed to renewable energy development, renewables have a distinct advantage; namely, they are renewable. While coal and natural gas remain plentiful in the United States, concerns over reaching peak oil, coupled with growing demand in the both the developed and developing world, have driven oil prices to record highs, making the development of renewable alternatives feasible despite the high cost of capitalization in the energy industry. Even the Defense Advanced Research Projects Agency has invested in renewables, developing an algae-based biofuel alternative for jet fuel (Goldenberg, 2010). In a free market system, devoid of subsidies for either fossil fuel or renewable energy development and production, the advantage goes to renewable energy; it is simply a matter of time and the laws of supply and demand.
More importantly, it may be possible, given the country’s financial woes, to drop energy subsidies entirely. In a year when four energy companies are in the top ten of the Global 500 Most Profitable Companies, collectively earning more than $90 billion annually (CNNMoney, 2011), while the country is facing massive debt problems, and taxpayers are being squeezed, it would seem the time might be right to level the playing field. Leonard (Leonard, 2011) believes the time may be right politically as well, given the rise of the Tea Party on the right and a disaffection with ethanol on the left.
U.S. dependence on fossil fuels has become increasingly problematic with the implications felt in the economy, military, industry, politics, and the environment. In an ideal world, the federal government would subsidize the development and production of renewable energy, minimally, at the same level as fossil fuels. Unfortunately, the U.S. government uses energy policy to pick winners and losers in the energy sector and provides fossil fuel producers a distinct market advantage. It is time to phase out all government subsidies in the energy sector and let the most efficient technologies compete in the open market; with the advantages inherent in renewable energy, the shift away from fossil fuels is simply a matter of time.
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CNNMoney. (2011). Global 500 2011: Most profitable companies Retrieved December 9, 2011, from http://money.cnn.com/magazines/fortune/global500/2011/performers/companies/profits/
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