Wednesday, August 8, 2012

The Case For Renewable Energy

  My last post was about the dangers of doubling down on natural gas and coal production as our primary sources of electricity, while this post will focus on the benefits of a push toward renewable energy.  I think that now is precisely the time to begin an earnest national effort to revolutionize US energy production; every year we wait just diminishes our gains from making an early investment.  The arguments about global warming and the environmental benefits of renewable energy have been made time and time again, by folks who are much more knowledgeable about climate change, so I'll skip them for now.  The environmental preference for renewable energy is well-established, but changing our national energy production is always derailed by economic concerns.  I'll present my case for making a change to renewables solely through an economic lens in order to show how skewed the current system is, and how certain simple policy changes will redefine the energy industry.
  First, proponents of conventional energy production point to the fact that oil, coal, and gas are cheaper to produce than renewable energy.  If this were the case, why do those corporations get extremely special treatment in the tax code?  It isn't a fair fight in a free market when one side gets local, state, and national tax incentives due to the extremely influential energy lobbyists.  I'll give you a quick smattering of some statistics I dug up: the federal government provides about $2 billion in subsidies to conventional energy companies annually, from 1918-2009 that average federal subsidy was about $4.8 billion.  It is impossible to argue that the oil companies would have such a stranglehold upon energy production without the billions dollars of preferential treatment they have received from the federal government.  The American Coalition for Ethanol estimates that, when local and state tax breaks are factored in, the total tax subsidies for oil companies ranges from $133-280 billion pro annum.  All this is occurring at a time when the 3 largest domestic oil companies posted a combined profit of $80 billion dollars.  To put the icing on the cake, Exxon paid only a 2% tax rate last year, even though it is the third largest American corporation and continues to post massive profits.  I wonder how many other industries could benefit from a 2% tax rate and billions in tax subsidies?  It's no wonder that oil and other conventional fuels are currently more viable, because we built the system that way.
  Here's how we can balance the scales: make it a profitable venture to start a renewable energy company.  People worry that expensive initial costs will not be offset by the energy savings in the future, so we should provide huge incentives to entrepreneurs and small business owners to start renewable energy companies and implement environmentally friendly practices into their businesses.  There are some strides being made in this direction that are promising: federal tax deductions of up to 30% for solar and wind power, and 10% for some other renewable sources.  I would like to see those deductions go way up, perhaps in the form of federal subsidies so that the business owner doesn't have to deal with the burden of the upfront costs.  I've heard the argument that the reason the tax code favors the wealthier segment of the population is because it encourages innovation by promising huge rewards.  Thus, people will take a gamble because they hope to strike it big.  I think a better system would not raise the ceiling for accomplishment, but would raise the floor, so that if one fails, they don't fall so hard.  Make it easy to start a business, to acquire tax credits, to grow your company, and above all, make it less painful to fail.  This can be accomplished through business tax credits and incentives for renewable energies, as well as fixing and augmenting the social safety net (much easier said than done, I realize).
  On the other side of the tax code, we should tie the tax breaks of the energy companies to renewable incentives.  I don't think the best way to achieve energy independence from conventional sources is to go cold-turkey, because that would result in massive blackouts, inefficient distribution, and the loss of thousands of jobs.  The results would be catastrophic, if we simply pulled the plug on conventional energy sources.  So make it profitable for the big companies to change.  If we say, just as an example, Exxon can pay a low tax rate (although 2% is way too low,) as long as they meet such-and-such green standard, then green technologies become more economically viable.  One way to do so is link tax subsidies to research and development in renewable energy sources, or to provide a matching tax break whenever a company implements solar or wind power instead of oil.  Make it the same upfront cost to build a conventional oil rig as it would be to install a massive solar plant, and more companies will make the change.
  Aside from the tax code, which is broken in all sorts of places, we have quite the stagnant job market.  There is no time like the present to improve the infrastructure of America, and this creates many jobs on a national scale.  The transition to green energy production provides employment opportunities at every turn. We need construction workers to build new plants, install new equipment, retrofit schools and public buildings, etc.  The market for engineers expands greatly, as new technologies need to be improved and made more widely available.  There are a number of administrative and inspector positions to ensure that environmental standards are being met, and managerial positions will open up to manage new divisions of conventional energy companies.  I don't see how a massive investment in renewable energy would be bad for the economy, because it boosts private and public sector hiring, thereby growing the tax base and the number of consumers. The way to get ourselves out of this recession is by putting America back to work.
  At the very least, there is one policy that everyone should agree on: refitting our schools and public buildings to make them more energy-efficient and environmentally friendly.  Many public buildings were constructed decades ago, with outdated standards for energy efficiency and environmental friendliness.  What better way to create jobs in every school district across the country than to renovate our public schools?  This would put thousands of people back to work in every state, thereby increasing tax revenues greatly.  Furthermore, green schools would pay for themselves in a relatively short period of time, when one factors in the savings on heat, gas, and electricity.  Something as simple as replacing the windows to let in less air, or to refit the insulation to save on heating and cooling bills would save millions of public dollars every year.  In short, going in and fixing up our schools saves public money through lowered operational costs, puts thousands of Americans back to work, grows the tax base, and puts a renewed sense of pride back in our schools.  It would be a point of national pride to say that we have the most environmentally friendly public schools in the world.  I have thought long and hard about this particular policy piece, and I cannot think of a good argument against it.  Renovating our schools and public buildings is a policy proposal that should gain national consensus - in fact, I think there are few issues that could garner such broad-based support.  It's time we led the charge to creating a more environmentally friendly world.  It will never happen without our support.

No comments:

Post a Comment