A fascinating article on how various government subsidies helped the energy sector develop fracking technology can be found here.
"The free market has worked its magic," the Barnett Shale Energy Education Council, an industry group, claimed over the summer. The boom happened "away from the greedy grasp of Washington," the American Enterprise Institute, a think tank, wrote in an essay this year."
But the government was involved:
the natural gas and petroleum industries altogether accounted for about $2.8 billion in federal energy subsidies in the 2010 fiscal year and about $14.7 billion went to renewable energies, the Department of Energy found. The figures include both direct expenditures and tax credits. Congress passed a huge tax break in 1980 specifically to encourage unconventional natural gas drilling, noted Alex Trembath, a researcher at the Breakthrough Institute, a California nonprofit that supports new ways of thinking about energy and the environment. Trembath said that the Department of Energy invested about $137 million in gas research over three decades, and that the federal tax credit for drillers amounted to $10 billion between 1980 and 2002. The work wasn't all industry or all government, but both.
I think it is fair to say that most Americans dislike subsidies (at least those that benefit someone else.) We fail to recognize how many benefits we get from government expenditures.
In principal, I have no problem with subsidies, especially when they go to companies that are firmly American, and when they incentivise behaviors which may be profitable in the very long term but for which the market fails to invest in. Implicit in these kinds of subsidies is the idea that in the end the country will profit from the subsidies. I think that (environmental implications aside) fracking is thus an enormous success of a public-private partnership, and I hope politicians will see that these subsidies, when wisely applied can be hugely profitable investments in the country's infrastructure. Theoretically, the same kinds of research could be done through grants to universities, but it is much more convenient to simply make the desired research activities cheaper for private enterprise.
ReplyDeleteI tend to agree with this use of particular government expenditure. Subsidies used for especially environmental industries, I find, help in reducing the externalities the free market does not factor. I do find it interesting subsidies that actually work are newsworthy.
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