Recently, I was involved in a debate on federal subsidies for the renewable energy industry. The claim was that the use of subsidies for renewables is a waste of money and that renewable energy should stand on its own against oil, gas and nuclear.
First, let’s understand that a subsidy is any action by the U.S. government (or any government level) that provides an identifiable financial benefit associated with the use or production of a product, resource or energy source. Such financial benefits can be tax “breaks” which are defined in the IRC Section 901 as provisions in the Tax code that Congress has enacted to benefit a specific sector or segment of society. Since they allow that segment to not pay a tax or to defer payment of a tax, they are a cost to government, ergo a subsidy.
A subsidy can be couched in many ways. It can apply to many industries. It is generally established based on a perceived public need to develop or improve something and it requires that a common group (us) pay for the first steps to help a new industry to grow.
So, should conservation practices and renewable energy receive a subsidy? Stay tuned to the next blog entry to see what I think about this issue…