Tax Breaks for Wind and Solar—Bad Energy Policy, Bad Post-Coronavirus Recovery Policy

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Along with the usual environmental claims, the House of Representatives’ $1.5 trillion infrastructure package is being sold to the public as a post-coronavirus job creation bill. It now includes the sweeping renewable energy subsidies in the Growing Renewable Energy and Efficiency Now (GREEN) Act, including measures extending the investment tax credits (ITC) for wind and solar energy. This is both bad energy policy and bad jobs policy.

There’s a heavy dose of dishonesty in the latest attempt to extend the ITC. First, these highly favorable tax provisions, first introduced in 1978, were originally supposed to be temporary, justified on the grounds that wind and solar energy were “infant industries” that needed a few years of help before they could compete with the established conventional energy sources. However, the ITC has been repeatedly resurrected  since and under this bill would get extended further—through January 1, 2026 for wind and January 1, 2028 for solar.

In addition, wind and solar proponents often boast that these alternatives are now economically competitive with even cheapest conventional sources. But if that were true, then special tax breaks would not be necessary.

Now, supporters in Congress are making the dubious claim that extending these tax credits is a sensible post-coronavirus jobs bill.

Reviving the economy and post-lockdown job creation will be a major priority for Congress for the foreseeable future, but the link to renewable energy subsidies is weak. Granted, the self-described clean energy industry claims significant COVID-19 related job losses, and there is little doubt that these tax credits will incentivize at least some additional jobs building new wind and solar facilities. However, the same would be true of any of number of sectors at which Congress could choose to throw tax dollars. In fact, there is probably less bang for the buck with wind and solar industry subsidies, as they have proven themselves to need a constant flow of generous handouts to stay viable and keep people employed.

Even better for long-term economic health and job growth, Congress could refrain from the extra spending and leave more wealth in the private sector and thus allow investment and job creation to unfold in a more rational fashion.

Toward that end, the more constructive role for the federal government would be to eliminate the regulations that have proven themselves to be  “never needed” and to streamline the cumbersome and often years-long federal approval process for major energy and transportation infrastructure projects. For example, all energy projects, including wind and solar, would benefit from the Trump administration’s proposed reforms to the National Environmental Policy Act that currently impedes many job-creating endeavors.