I feel like a kid who just lost playing 4-square. And I’m so pissed I want to drop kick the Republicans over the fence.
The failure of the Consumer First Energy Act and The Renewable Energy and Job Creation Act to pass cloture in the Senate is a thorn in my side. The CFEA would have taxed windfall profits and suspended tax breaks for US oil companies, among other things. Revenues gained would have been channeled towards investment in energy efficiency and renewable energy technologies.
The REJCA was even more important. It would have extended investment tax credits for solar energy systems, as well as production tax credits for other renewables. As is stands, these tax credits will end December 31st, 2008. And there will be no new tax credits for those cool underwater tidal turbines.
But before I punt Inhofe and his clan out of my consciousness, let’s make the stakes of tax incentives for renewable energy perfectly clear.
These latest defeats are so troublesome because demand-side policy support for clean energy technologies is crucial not only to clean up our current carbon footprint, but also to create the technological advances and economies of scale that will reduce the price of renewables in the future. Cheap renewables in the future might mean China and India will develop greenly too. But most importantly, by failing to lend a hand to the renewables industry, we are contributing to the continued lock-in of the fossil fuels industry.
Lock-in is what occurs when economies of scale combine with political influence and network effects to effectively “lock in” an economic practice. (A great social scientist, Greg Unruh, is an expert on it) The outcome is that economic structures we know to be bad—like the fossil fuel industry—persist long after we first discovered how foolish they are. They contribute to massive, negative global externalities (i.e. global warming) and sway politicians long after they should be dead and buried.
Thankfully, fossil fuel lock-in may be coming to an end.
The record high energy prices that have, on the one hand, generated record profits and therefore served to further lock in entrenched energy interests, are reaching a politically unsustainable level. Trade is being blocked and people are getting a little too testy for their professions. The restrictions in oil supply that are a blessing for firms at lower levels of demand—they allow $40 billion a year in profit to be made—have become a political liability.
The economies of scale and political influence these firms have used to lock themselves in, are being overwhelmed by political unsustainability generated by fundamental resource constraints.
However, lock-in cannot be overcome by political liabilities alone. There need to be viable economic alternative to conventional fuels. For this, we need the help of policies like production and investment tax credits to generate large economies of scale in renewables. Without the nudge of such policies to help renewable energy firms descend the cost curve, this political moment might be squandered. OK, see you Inhofe…sucka.
It really does look like massive price hikes in fossil fuel energy are the only thing that will shake people out of their lifestyle obsessed slumber and lurch, finally, toward renewable energy.
No one likes high gas prices but in my opinion the Government should jack them up massively (a form of rationing) and spend all the money from the increased excise on public transport and renewable energy plants both large and small.
I’m just wondering whether we will get out of the fossil fuel Lock In before we blow it with the environment.
Roger at http://www.green-planet-solar-energy.com
Roger,
Thanks for the post and great site you have. It’s always need to see clear explanation of technology and policy of solar. Big fan of PV here.
I agree that prices will play the major role in breaking lock in. And the government needs to invest now in the clean technologies that will replace fossil fuels. But where, I wonder, will it get this money? My colleagues tell me gas taxes and rationing are impossible in this country. I am inclined to believe them.
So we have to float some bonds or auction carbon permits to get money. All expenses will eventually get back to the public through prices, but the rule in the US seems to be that the more roundabout the price impact, the better. Everyone is so damn short-sighted.