How to win energy subsidy race: Let others do the running

Oct. 7, 2011
Through how many circles will the US run while chasing its tail on energy?

Through how many circles will the US run while chasing its tail on energy?

Responding to questions about a fat loan guarantee for Solyndra, a bankrupt maker of solar panels, President Barack Obama complained in an Oct. 6 press conference that, “China and Europe, other countries, are putting enormous subsidies into these companies and giving them incentives to move offshore.”

What to do?

“We’re going to have to keep on pushing hard to make sure that manufacturing is located here, new businesses are located here, and new technologies are developed here,” the president said. Although some ventures won’t work—such as Solyndra, on which taxpayers lost half a billion dollars—“I’m not going to cave to the competition when they are heavily subsidizing all these industries.”

So the US will continue heaving large sums at small increments of commercially challenged energy because China and European governments are making the same mistake.

Apparently, whoever spends most wins this race.

Fiscally stressed European governments are fading. Choking on the costs, many have cut solar and wind subsidies.

China, however, has huge surpluses and can spend at will for state-sponsored btus. It also keeps its currency cheap to juice trade and pilfers technology developed abroad.

Outraged, the Obama administration is complaining to the World Trade Organization about Chinese subsidies. It wants a level playing field on which to whirl itself dizzy betting borrowed money on energy whims.

The US can’t win this race. That China holds much of its debt is only part of the reason.

So why run at all? If other governments want to commit their economies to high-cost, low-yield energy, why not cheer them on? Why not let citizens of those countries assume risk for energy transitions that might be a long time coming?

In a debtor country newly encouraged about its own hydrocarbon prospects, the competitive potential of such a strategy deserves more than a smirk.

(Online Oct. 7, 2011; author’s e-mail: [email protected])