WSJ: Green Energy Programs Often Increase Emissions

Tuesday, 20 Aug 2013 01:07 PM

By Dan Weil

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The Obama administration's environmentally-oriented energy programs actually increase carbon emissions in some cases, according to a Wall Street Journal editorial.

Journal editors reach that conclusion based on a report on energy subsidies released by the National Academies in June.

In 2008 Congress formed a National Research Council special committee to investigate the tax code to see how specific policies increase or decrease greenhouse gases. The committee, which is part of the National Academies, found that "several existing provisions have perverse effects, while others yield little reduction in greenhouse gas emissions per dollar of revenue loss."

The committee called ethanol and other biofuel subsidies a "most striking" example.

"The 45-cents-a-gallon ethanol tax credit expired in 2012, but before it died it was increasing carbon emissions by 5 million tons every year, at a cost of $5.26 billion," the editorial states. "As they say, it's not easy being green."

The ethanol credit has expanded over the decades to become the single biggest U.S. energy tax benefit. "The committee shows that the subsidy was economically equivalent to a taxpayer-funded coupon at the pump, slightly lowering the price of blended fuels," the editorial says.

"As gas became artificially cheaper, consumers naturally used more of it. While the ethanol credit expired, the ethanol purchase mandate still survives."

Other tax provisions haven't necessarily increased carbon emissions, but have done much to lower them either, the editorial says. For example, "the renewable electricity tax credit for wind and solar will reduce emissions by roughly all of 0.3 percent by 2035, which is still minuscule globally."

The committee attempted a probe of tax credits for home energy efficiency improvements, "but these programs 'resisted analysis' because they are so complicated, which is a running theme in the report," the editorial says.

"The best existing analytical tools are unable to determine in a reliable fashion the impact of some important subsidies," the committee found.

"Ponder that one: the roughly $24 billion that the U.S. spends annually on energy subsidies is so complex that its impact can't be understood by America's top scientists and economists," the editorial states.

The committee recommends a direct tax or cap-and-trade instead of tax subsidies. "Yet those would raise prices for consumers and hurt economic growth . . . ," Journal editors write. "Better simply to end the subsidies."

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