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POLITICS

Green-energy subsidies spark trade war

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Politics,Beltway Confidential,Timothy P. Carney

When President Obama attacks oil & gas subsidies he almost always includes an interesting modifier. “Let’s stop giving taxpayer subsidies to oil companies that don’t need them,” Obama said while advocating more corporate welfare in Iowa, one of the biggest beneficiaries already of green-energy corporate welfare thanks to infamous ethanol subsidies and mandates.

You see, Obama correctly points out that oil and gas make a profit without their subsidies, but that ethanol, solar, and wind operations “need” corporate welfare in order to stay in business. This Wall Street Journal editorial adeptly lays out how subsidized green energy is compared to fossil fuels. Among other numbers, the WSJ points to a Congressional Research Service Study finding:

that in 2009 fossil fuels accounted for 78% of U.S. energy production but received only 12.6% of tax incentives. Renewables accounted for 11% of energy production but received 77% of the tax subsidies—and that understates the figure because it leaves out direct spending.

All our various loan guarantees, tax credits, tax deductions, direct grants, mandates, renewable-energy standards, and so on offend not only free-market-believing Americans, but also our trade competitors.

China is threatening a trade war with the U.S. over our green-energy subsidies:

China’s Commerce Ministry on Monday said six renewable energy projects in five U.S. states have violated global trade rules, following a nine-months-long probe, but it stopped short of announcing any penalties.

The ministry’s announcement is the latest in a string of tit-for-tat moves in the clean energy sector which have pit China against its two-largest trade partners, the U.S. and European Union. China’s ruling comes as clean energy policy is becoming an issue in the U.S. presidential elections and at a time when demand for wind and solar-power equipment from Europe is falling.

China’s commerce ministry said in its final ruling that the projects, including a solar-power venture in Massachusetts and a wind-power one in Ohio, received subsidies that violated World Trade Organization rules and served as trade barriers to Chinese exports to the U.S.

Of course China subsidizes the heck out of its renewable energy, too. The question is why Obama consistently says we can’t let them “win” this self-destructive race.

And of course, Obama is right. We should end oil and gas subsidies. The WSJ editorial board suggests the right solution:

All of this suggests a radical idea. Why not eliminate all federal energy subsidies? This would get the government out of the business of picking winners and losers—mostly losers.

Mr. Obama’s plan to eliminate oil and gas subsidies would lower the budget deficit by less than $3 billion a year, but creating a true level playing field in energy, and allowing markets to determine which energy sources are used, would save $37 billion. That’s an energy plan that makes sense.

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