Are we losing the subsidized clean energy race to China? Let’s hope so

Do we need to retain the Green New Deal-style subsidies from the Inflation Reduction Act or risk losing the clean energy race to China? Many lobbyists are saying so as the Senate debates the budget reconciliation bill following a House-passed version that included several subsidy cuts. But history shows that this tiresome scare tactic should be ignored.

Lobbyists are going all out playing the China card. Typical is a recent letter signed by the American Petroleum Institute, National Association of Manufacturers, and others predicting dire consequences from repealing the tax credits for green hydrogen. The letter manages seven mentions of China, including the warning that “other countries, and particularly China, will pull further ahead in the race to fulfill global market demand for hydrogen-based energy molecules.”

Like most other subsidized alternatives, fuel from hydrogen is no longer an infant industry–it has been “just around the corner” for several decades and even scored a mention in President Bush’s 2003 State of the Union Address. But apparently, the technology still can’t get anywhere without special treatment. Hardly a race worth winning.

Indeed, the track record on all such alternatives urges caution. Ever since the oil shocks of the 1970s, Congress has repeatedly tried to predict the next big thing in energy and throw a lot of taxpayer money at it. But none of these subsidized endeavors ever really blossomed. Several ended up, like hydrogen, on the permanent dole. This includes wind and solar, which first received federal tax breaks in 1999, but whose lobbyists are still asking for extensions. Other government supported energy projects are now forgotten, like the big plans to turn American coal into gasoline. But nearly all were accompanied by ominous predictions that we are falling behind China.  

Even the most laughable of federally-backed boondoggles came with such fears, like the Obama administration’s infatuation with algae fuels. At the time, lobbyists were warning that China was poised to win the global algae race.   

Lost on the subsidy supporters is the fact that the biggest energy breakthrough in decades and a genuine game changer–fracking–was something that emerged without tax credits, grants, loans, or other government incentives. It showed that the American free market alone can continue winning the energy race, and that a federal government picking winners and losers is nothing more than a costly diversion in the wrong direction.

In truth, the only thing that will happen if the Chinese out-subsidize us on energy is that they will have wasted more money than we did. This is why Congress should take advantage of the opportunity provided in the budget reconciliation bill to repeal as many of these subsidies as possible.