The brewing scandal regarding Solyndra is an opportunity to consider which roles the federal government can and should play in developing alternative energy and which roles it should not. Take as a starting point the friendly column by Joe Nocera in Friday's New York Times:
But if we could just stop playing gotcha for a second, we might realize that federal loan programs — especially loans for innovative energy technologies — virtually require the government to take risks the private sector won’t take. Indeed, risk-taking is what these programs are all about. Sometimes, the risks pay off. Other times, they don’t. It’s not a taxpayer ripoff if you don’t bat 1.000; on the contrary, a zero failure rate likely means that the program is too risk-averse. Thus, the real question the Solyndra case poses is this: Are the potential successes significant enough to negate the inevitable failures?
This article by Michael Flectcher in yesterday's Washington Post is well worth your time. It follows the push for green jobs in Ocala, Florida as it has met with almost no success over the past couple of years. In brief, there is plenty of money for retraining and there are plenty of workers to be retrained, but there is no market for the products. Nor will there be until the price of fossil fuel emissions is much higher. From the article:
The industry's growth has been undercut by the simple economic fact that fossil fuels remain cheaper than renewables. Both Obama administration officials and green energy executives say that the business needs not just government incentives, but also rules and regulations that force people and business to turn to renewable energy.
Without government mandates dictating how much renewable energy utilities must use to generate electricity, or placing a price on the polluting carbon emitted by fossil fuels, they say, green energy cannot begin to reach its job creation potential.
In the name of protecting low-income workers from the high price of gasoline (and other dubious reasons), we did not put a carbon tax in place. But when they lost their jobs, we trained them for jobs that would exist only in a high-carbon-tax environment. Brilliant!
After the election, I suggested that the Obama Administration move forward with a green tax swap -- higher taxes on fossil fuels, coupled with lower payroll taxes in a revenue neutral way. Lately, I have been thinking of another pairing of carbon taxes, this time with grants back to states. Here's an outline:
The knock on carbon taxes is that they affect heavy users more than light users of fuel. That's unavoidable -- that's how the taxes curb the usage -- but there are ways to vary the intensity with which this happens. Suppose that the federal government made an estimate of all the fossil fuels that were used in each state in a base period, like the two years from 2007-2008. The federal government could then rebate the tax revenues to each state in proportion to its base-period usage. States that made reductions in usage relative to the base period would receive a net gain from the tax. The estimates might be done on a per capita basis, to account for changes in population over time.
Continuing a series that began last week with health care reform, I suggest that another high priority for the Obama Administration is what is known as the Green Tax Swap -- an increase in the gas tax combined with a reduction in the payroll tax rate that fully offsets the revenue increase. (By gas, I mean all fossil fuels used for any purpose, but others might restrict what is taxed only to gasoline.) What is the rationale for this?
I was on NPR's Marketplace this evening with a commentary titled, "We need a carbon tax on gasoline." Here's the teaser:
Can you put a price on pollution? That's the question Congress takes up this week as they begin debate on the Climate Security Act of 2008. The legislation would enact a cap-and-trade system, whereby large polluters would buy and sell emission permits.
Commentator and economist Andrew Samwick has taken a look at his carbon output and his family's. He says if we're serious about cleaning up our act, we should consider a straight tax on carbon.
In a nutshell, while it is true that the largest part of our emissions come from automobiles, plenty still come from heating our homes and traveling by air. The more emission reduction we can get at the thermostat and in the air, the less we need to squeeze out of automobiles.