Market Power - The Mistake of Subsidizing Pet Energy Causes | Jerry Taylor and Peter Van Doren | Cato Institute: Commentary

Market Power - The Mistake of Subsidizing Pet Energy Causes | Jerry Taylor and Peter Van Doren | Cato Institute: Commentary: "The story most conservatives tell about energy policy is different from the stories they tell about other economic-policy matters. Rather than defend free markets, they bang the table about the need for national energy plans and government timetables for energy-plant construction. (For example, see Lamar Alexander elsewhere in this issue.) We're told that markets will fail to provide the energy we need, fail to prevent demand for energy from surging beyond reason, and fail to attain suchimportant objectives as environmental quality and a strong national defense.

The conservative case for government intervention in energy markets is just as flimsy as the liberal case for government intervention in any other sector of the economy. Energy markets may not work as perfectly as in a textbook model, but they work — and government works even less perfectly."

"Most conservatives seem to believe that a reduction in imports will insulate us from price shocks caused by developments overseas. That is nonsense. A supply disruption anywhere will increase the price of crude oil everywhere for the same reason that an early frost in Florida will increase the price of citrus produced in Florida and California by roughly the same amount."

"Others fear that reliance on imports requires us to undertake military commitments to ensure that oil continues to flow. But producers have even more reason to worry about the safety of their facilities than we do and, likewise, more reason to ensure the security of international oil-shipping lanes. Hence, they have every incentive to defend their oil infrastructure, whether we help foot the bill or not."

"Consider the current love affair of the Right with "clean coal" technology. Billions of federal tax dollars have been spent since the 1980s on various iterations of this concept — most recently via George W. Bush's "FutureGen" project and the "Clean Coal Power Initiative" — yet the marketplace has not been friendly to new coal plants. From 2001 through 2007, 179,382 megawatts of natural-gas-fired electric generators were added, but only 3,311 megawatts of coal-fired generation capacity came online.

It's not that we don't know how to make coal facilities cleaner — it's that we don't know how to make coal plants both cleaner and profitable. Throwing more tax money at this riddle will not necessarily produce an answer. Why are conservatives doubling down on the same ill-fated taxpayer adventure that Ronald Reagan labored so mightily to kill in the 1980s?"

"Despite promises in the 1950s that nuclear power would soon become "too cheap to meter," 50 years of lavish federal subsidies and regulatory preferences have yet to produce an industry that can turn a profit without taxpayer help."