Likewise, subsidies targeted to supporting renewable energy sources are also bad policy. American subsidies for renewable energy like wind, solar, and biofuels increased from $5.1 billion in 2007 to $14.1 billion in 2010. These subsidies were instituted with the noble intention of developing clean, domestic energy. But policymakers don't seem to understand that renewable energy subsidies make it less--not more--likely that we will ever have a viable source of green energy. Subsidies allocate resources to politically favored technologies rather than those which are most effective. For instance, the politically powerful corn farmers of Iowa have kept government propping up ethanol with subsidies, despite its proven inefficiency as an energy source.
Government, swayed by the demands of lobbyists and special interest groups, uses subsidies to pick winners and losers in the green energy industry. Lavish subsidies for inefficient energy sources have hampered the development of greener and more effective technologies. In a free market, investors will invest in alternative energy technology that makes economic sense.
In past, special interest lobbying and campaign donations have kept energy subsidies alive. But, the debt crisis means politics as usual cannot continue. The debt crisis provides a strong imperative for Congress to scrap harmful subsidies. If not now, when?
Cutting energy subsidies would garner bipartisan support in both houses of Congress, demonstrating that there’s room for cooperation. By working together, Republicans and Democrats can use the debt crisis as an opportunity to cut wasteful spending and improve the environment. Finally, a debt reduction measure everyone can agree on.
Eleanor Vaughan is a junior fellow at the Independent Women's Forum.