SubsidyEye

Solar Industry Lobbies Senate for Manufacturing Tax Credit, Cash Grant

"Subsidies for fossil fuels is what has got us in this mess and it's time to cut all the corporate welfare out so a real free market can work. Then RE because it doesn't need fuel will easily be the low cost energy source."

Agreed: eliminate subsidies to fossil fuels. But it is unlikely that cutting those subsidies would be sufficient to flip the basic market equation in favor of renewable energy. For one, per unit of energy, the subsidies to fossil fuels in the United States are much, much smaller than the cost gap between fossil fuels and renewable energy. (It is a different story in countries that heavily subsidize or regulate the end-user prices of energy.) Second, the prices of fossil fuels sold in the United States are already pegged to international prices. The reduction in domestic production that would result from the elimination of subsidies to fossil fuels would not be enough to substantially raise the world prices for coal and oil (and, by extension, natural gas) and hence we shouldn't expect domestic prices to rise all that much.

What WOULD make a difference would be to both eliminate subsidies AND raise taxes on fossil fuels. Whether tied to carbon or to other pollutants (note: coal-fired power plants already pay for SO2-emission permits), raising taxes on fuels closer to those already imposed even by poorer countries, like Turkey (not to mention Australia, Japan and European countries), could make a big difference. So would reducing corporate and private income taxes (which should be part of any package of increasing fuel taxes).

Put that altogether, and some forms of renewable energy might be able to compete with fossil fuels. But there will be many others -- e.g., algae-based biodiesel or bio-jet -- that will remain much more expensive for many years to come.

Confusion with China's Solar Subsidy

Eric, do you know whether there are local-content obligations attached to these subsidies, as there are (70% local-content) for wind-power projects?