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Do Alternative Energy Subsidies Endanger National Security?

Most would agree that reducing our dependence on Middle East oil is an economic and national security imperative. But with the recent collapse of Solyndra – and warning signs that other government-supported alternative energy companies may follow suit –there are clearly financial risks that come with the federal government subsidizing the clean energy industry.

At the Washington Examiner, Reps. Mike Pompeo and Jeff Flake make the case that these subsidies actually keep the U.S. reliant on foreign oil because they distort the alternative energy market:

Subsidy policy toward the renewable and alternative fuels industry has been tried for more than three decades — from President Carter’s Synfuels Corp. in the early 1980s to President Obama’s Solyndra just this year — and it has failed. …

Although subsidy seekers argue that the Organization of Petroleum Exporting Countries’ dominant position in the world oil market means that government intervention in the energy marketplace is warranted, that logic is flawed. If collusion by the OPEC cartel really boosts the price of oil artificially high, then alternative fuels should have an easier time competing against it without a subsidy. In fact, the constant pursuit of federal tax subsidies keeps some private capital on the sidelines that would otherwise be invested in alternative energy.

Another problem with the federal government interfering with the alternative energy industry is that government tends to be a very poor judge of what makes a successful private business model. There are already plenty of green energy venture capital firms out there. If a startup turns to the government for investment, that should raise questions about why it hasn’t been able to acquire this funding through private means.

Subsidizing the industry also keeps untenable businesses like Solyndra around for too long, instead of allowing them to collapse and be replaced by new innovation. It also encourages alternative energy companies to design products that target the interests of the federal government, instead of consumers.

Regardless of where you sit on federal subsidies, clearly clean energy technology won’t be at a point where it will be able to replace fuel for the foreseeable future. So instead of sending oil money to OPEC countries, it makes more sense to take advantage of domestic fuel production for the time being. And in the meantime, it might be better for the government to get out of the way and let the free market handle alternative energy innovation.



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