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Editorial: Green subsidies

A New York Times report last week notes that global warming hawks may actually be contributing to the problem with their relentless drive for renewable energy.

Eduardo Porter, an economic columnist for the Times, writes that taxpayer handouts to wind and solar interests are shoving nuclear out of the picture, which could ultimately lead to an increase in carbon emissions.

“Policy makers focused on pushing renewable sources of energy above all else — heavily subsidizing solar and wind projects, and setting legal targets for power generation from renewables —are contributing actively to shut the [nuclear] industry down,” Mr. Porter observes.

In Germany, where residents pay the most expensive electricity rates in Europe, the government is now backing off an aggressive effort to embrace renewables, Mr. Porter writes. The wind and solar power generated in the country has “mostly replaced nuclear power,” leaving coal and natural gas as the only viable backups. Carbon emissions in the nation are rising.

Market distortions created by cash giveaways to green energy firms do indeed have real-world consequences.

Defenders of renewables typically argue that subsidies for fossil fuels far exceed those for green energy projects. This is true in pure dollars, especially considering that government intervention in the oil and gas industries dates back to the 19th century. However, taxpayers get a far higher return when it comes to traditional energy sources. Tim Worstall of Forbes calculates that “per unit of energy produced, renewables … get 25 times the subsidy of fossil fuels” in the United States.

Mr. Worstall makes another salient point.

Many fossil fuel tax breaks are actually subsidies for energy consumers. But renewable subsidies “are expressly designed to go to the producers,” he notes. “Indeed, given the way that most of the green energy subsides are constructed, the producers are subsidized by directly over-charging the consumers. … We’re not wandering around throwing money at Exxon and Shell, but we are very much doing so for their counterparts in the renewables industry.”

Much of this is the result of legislative policies designed to encourage the development of alternative fuels that have resulted in what the Times in 2011 called a “gold rush of subsidies.” State mandates on power production, that report found, “have resulted in contracts with above-market rates for [renewable] project developers, and a guarantee of a steady stream of revenue.”

The risks to green energy developers are virtually nil. The risk to taxpayers and utility users are considerable. Think Solyndra.

By all means, the ultimate goal should be for energy producers to stand on their own, with the market picking the winners and losers. But if that were to happen, you can bet the fossil fuel folks won’t be the first to go belly up.

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