In addition to lucrative tax breaks and subsidies from the government, many fossil fuel producing companies also enjoy another type of built-in bonus: they don’t have to pay for a lot of the harm they cause to public health. If they did, it could cost billions per year and make investing in renewable energy much more attractive.

If citizens could send an invoice to coal, oil, and gas companies for all of the damage they did—medical bills, reimbursements for sick days taken thanks to illnesses caused by pollutants in the air, even funeral costs—it would amount to a staggering bill.

Many of these businesses could probably survive paying these costs, but they would have to raise the price of their product, making it more expensive to their customers. No one wants to pay more at the pump, but the adjusted cost would more accurately reflect the true costs of our consumption of oil and non-renewable power—a price that the public is currently paying anyway. The American people swallow the significant costs to health and the environment that come from conventional pollution, greenhouse gas emissions, and the risks of catastrophic events like the BP oil spill.

Of course in reality, we can’t send invoices to polluting companies to reimburse us for our doctors’ visits or asthma medication, or for our shortened life expectancy. Those things are not built into their business models—they are our responsibility. These are called externalized costs avoided by the fossil fuel sector. The price tag is hidden and often ignored, but it’s worth billions per year. Not having to pay these costs or incorporate them into their bottom line is one element, in addition government subsidies and tax breaks, that has enabled highly polluting energy sources to charge low prices and achieve enormous profits.

Renewable energy forms, of course, have fewer, and less harmful, byproducts. They typically do not cause the same kind of health and environmental problems that fossil fuels do.

Partly because fossil fuel companies don’t have to pay for the problems they cause, renewables seem expensive. When we compare the prices of solar to coal, we’re not incorporating the substantial public health bill for burning polluting fuels. But we do pay those costs, albeit more indirectly through health problems, premature deaths, and loss of environmental resources.

President Obama has been targeting subsidies to oil companies as part of his energy plan. That’s a smart economic move. It doesn’t make sense to hand out tax breaks to companies we’re already subsidizing by absorbing their externalized costs. And the fact that the tax breaks enjoyed by the fuel sector are much larger than renewable subsidies makes clear why clean energy companies have an uphill battle in attracting investors and competing on price.

And it’s not obvious how much of a break fuel industries get. The true number is shrouded by complex tax code and not made public by the IRS. To get a better sense of what we’re paying out, we’ve created a wiki where experts can help compile and catalog the tax breaks that various energy sectors receive. Having this knowledge will be an important first step in evaluating the use of taxpayer dollars to support energy companies on top of the externalities they get a pass on.

It will be politically difficult to slash oil and gas subsidies—it’s a powerful lobby backed by a wealthy sector. But it’s a sector that has been receiving government handouts for nearly a century. At the same time that they accept taxpayer largess, these groups foist billions in health and environmental costs on the public each year. If the companies that pollute had to give up their subsidies and pay the full price of the damage their emissions cause, coal, oil, and gas wouldn’t be so cheap. And cleaner forms of energy would look much more economically attractive.

Now that gas prices are hovering close to $4 a gallon, reflecting both underlying global supply demand dynamics and the fears of a supply disruption in the Middle East, we are again reminded why it is good government policy to invest in alternatives to the petroleum fuels that the US transportation sector is dependent upon.

The availability and cost of transportation fuels are core to our energy security and economic growth. Acknowledging the risks of that dependence, the US military is moving aggressively to drive advanced biofuels. We believe that Congress should continue to drive this technology as well. Extending the tax credits that are important for the deployment of the first plants that will produce cellulosic ethanol and other advanced biofuels in the U.S is an appropriate policy tool to get these first plants on line. These tax credits help alleviate the risk that is inherent with commercializing new technologies such as advanced biofuels, which can require large investments and long-time horizons. Once this first generation of plants are up and running, it will be up to us and others to succeed or fail in the marketplace based on the merits of our technologies and execution.

Already, DuPont has invested millions of dollars in advanced biofuels research and development. We are now operating a demonstration plant in Vonore, Tenn., that is producing cellulosic biofuel from corn stover, providing fuel for fleet vehicles at the University of Tennessee. In the second half of 2012, DuPont will break ground on a commercial-scale biorefinery in Nevada, Iowa, that will produce 27.5 million gallons of cellulosic ethanol annually—one of the first to be built in the U.S. Once we produce at commercial scale, we will license these technologies widely, providing expanded economic opportunities for current growers and speeding the rate of advanced biofuels production.

U.S. policy support for biofuels has already helped to encourage private investments in the ethanol industry, which last year grew to produce nearly 14 billion gallons, easily meeting the “renewable fuel” portion of the RFS and exporting record volumes of ethanol to other countries, while at the same time eliminating 485 million barrels of imported oil and contributing more than $33 billion in crop revenue to US farmers, (according to Feb. 2012 report produced by Environmental Economics for the Renewable Fuels Association, “Contribution of the Ethanol Industry to the Economy of the United States”).

It will still take time to ramp up production of cellulosic ethanol to match the volume achieved today by corn ethanol, but we cannot afford to halt the progress just as the train is leaving the station. Relying solely on US domestic fossil fuel production will not be sufficient to offset the growing global demand and geopolitical risks that will continue to create volatility and upward price pressures on transportation fuel prices.

This is why we need a strong collaborative partnership between business investment and government support for advanced biofuels.

The government has always played a role in energy generation, and it will continue to do so. The question is what kind of energy should our leaders focus on: A mature fossil fuel industry that relies on dwindling resources and endangers our families with toxic pollution? Or the clean energy sector that taps the inexhaustible power of wind and solar and reasserts America as a technological powerhouse?

Clean energy is already delivering sweeping benefits to our communities. It generates jobs: nearly 90,000 Americans make their living building wind turbines and more than 100,000 people work in the solar industry. It protects our health: wind and solar power produces zero pollution, while dirty emissions from coal-fired power plants caused 13,000 deaths and more than 20,000 heart attacks in 2010 alone. And it is reviving our pride in the “Made in America” label: the U.S. is a net exporter of solar energy products across the entire value chain, adding $1.9 billion in value to the U.S. economy last year. This includes a trade surplus in China.

Clean energy has achieved these triumphs through a combination of private sector investment and government incentives. But those incentives have been short-lived and tiny in comparison to fossil fuels. The oil and gas industry received an average of $4.86 billion a year from 1919 through 2009, while clean energy received only $0.37 billion from 1994 to 2009.

While lawmakers have allowed renewable tax incentives to die, other nations have not faltered in their commitment to clean energy. China is investing $1.7 TRILLION in renewable energy and other strategic technology sectors over the next five years.

America has led every technological revolution of the past century from the automobile to the iPad. Are we really going to let China or Germany dominate the clean energy market?

Polluting energy companies want us to throw in the towel. But ceding leadership is not in America’s DNA. Nine in ten Americans—including 85 percent of Republicans and 89 percent of independents—say developing renewable energy should be a priority for the President and Congress. Americans want our nation to lead

American innovators and entrepreneurs are already using clean energy technologies to generate economic growth, protect our health, and secure our place in global markets. Imagine what they could achieve with smart, consistence government support.

The goal of our energy tax policy should be to ensure that there is a benefit to U.S. consumers and taxpayers. Economic growth, new jobs, and the freedom to travel that we take for granted all depend on access to sufficient, affordable energy supplies. But our current tax policy is not producing those results and does nothing to guarantee those results for future generations.

Multinational oil refiners and producers are enjoying healthy profits while benefiting from U.S. tax policy. But U.S. consumers are paying record amounts for gasoline, while cutting back consumption and using billions fewer gallons. And now analysts are predicting $5-a-gallon gas in 2012. It’s not hard to identify the loser in our current energy policy.

Additional drilling cannot bring prices down at the pump. The only way to reduce the high cost of oil is to bring competitive alternatives into the commercial market – and as fast as possible. We used to believe that the world was going to run out of oil before we could find an alternative. Now we’re discussing when viable alternatives will be cost competitive with oil. Ongoing research and development is rapidly reducing the cost of advanced biofuels, while oil prices continue to climb. Should we really wait until they meet in the middle? Of course not. We must maintain the effort to bring alternatives into the marketplace faster.

Aside from tax policy, petroleum benefits from its incumbent status in regulatory policy. Biofuels are subject to all the same regulations as petroleum fuels, and then some. It often seems as though the biofuels industry is running a three-legged race with environmental groups and the fuel industry as partners. The problem is that we’re the only ones trying to move toward the finish line.

It remains true that forward-looking, long-term stable energy policy is needed to bring these new technologies into the marketplace. If U.S. advanced biofuel companies are on a level playing field, we not only compete economically, but also provide an alternative to rising oil and gasoline prices. Tax policy should encourage innovation and breakthroughs that provide a benefit to U.S. taxpayers and future generations.

Senate Action Demonstrates Bipartisan Appeal,

Economic Necessity of Energy Tax Extenders

By Kate Offringa

With the price of a gallon of gas threatening to crest five dollars, the question is not whether we can afford to offer tax incentives to promote greater energy production and efficiency. Given America’s disquieting lack of energy independence, the real question ought to be: Can we afford not to?

This week’s action on the Senate floor provided an instructive glimpse into the answer. A strong majority of Senators concluded – correctly – that our tax code needs to continue incentivizing homeowners to invest in greater levels of insulation and other energy- saving measures. If the 49 Senators who voted for Senator Debbie Stabenow’s (D-MI) amendment to extend energy tax credits are combined with the 41 Senators who supported Senator Pat Roberts’ (R-KS) amendment, then an impressive percentage of the Senate favors the homeowner incentive known as 25C. Insulation manufacturers and suppliers had hoped that the Senate would adopt both of our tax credit priorities: 25C, as well as its companion, 45L. Both are indispensable to promoting energy savings and making America less dependent on energy resources, foreign and domestic.

Each of these provisions expired at the end of last year. The former, 25C, provides a tax credit of 10 percent (up to $500) for heating, ventilation, and air conditioning equipment, insulation, energy-smart windows, and other products designed to save energy. The latter is a similar credit that incentivizes construction of energy efficient new homes.

By no means are the votes on the Stabenow and Roberts amendments a set-back in the effort to enact energy tax extenders. Achieving a super-majority of 60 votes on the Senate floor is never easy, especially with both sides coupling “poison pill” amendments to their energy efficiency efforts. Still, the depth of support for the two amendments demonstrates that policymakers appreciate the positive economic chain reaction generated by energy efficiency: Increased demand for insulation triggers job creation, which in turn leads to considerable energy savings, which in turn reduces monthly utility bills. The conclusion is undeniable: The most efficient way for America to enhance its energy independence is to encourage more efficient use of the energy we have.

It all adds up to giving consumers what amounts to a “tax cut” – and to giving American workers a much needed shot in the arm.

Unemployment in construction and renovation remains at near-Depression levels. At 18 percent, it’s more than double the national unemployment average. By creating a measure of business certainty, these incentives will get people back on the job, helping everyone – manufacturers, suppliers, contractors, installers, renovators, and retrofitters.

Energy efficiency isn’t some technology that will require intensive consumer education or take years to perfect. It’s here right now – and it’s a proven commodity.

CNAIMA will continue working with congressional leaders to enact energy tax extenders. We’ll also continue pushing the rest of the energy efficiency agenda for the 112^th Congress: the Bennet-Isakson SAVE Act, which would encourage greater homeowner investment in energy efficiency by correcting "blind spots" in current mortgage underwriting and home appraisals; and a revived PACE program, which would bring together small businesses and local governments to ensure accurate residential property assessments, thereby spurring a greater commitment to energy efficiency. Neither SAVE nor PACE will add to the federal deficit.

America can’t afford not to promote energy efficiency at every turn.

Kate Offringa is the CEO and President of the Council of the North American Insulation Manufacturers Association (CNAIMA).

Gas prices are again approaching $4 a gallon, and Congress is taking another look at the energy policies that will move us beyond dependence on foreign oil and volatile global oil prices. The answer is a continuing commitment to innovation policies that will give us energy choices and energy security.

Integral to that effort is a comprehensive national policy promoting displacing oil with abundant, affordable U.S. electricity. According to the International Energy Agency, the U.S. currently imports nearly 50 percent of its oil supply and spent more than $450 billion on those imports in 2011. In addition, it is estimated that, as of Dec. 2011, the U.S. consumes about 7.5 billion barrels of crude oil a year, and every $10 a barrel increase costs the economy about $75 billion.

In addition to federal support for research accelerating technology development, U.S. policy should also promote private investment in electric drive vehicles and infrastructure. Current tax credits for plug-in electric drive vehicles are helping consumers and businesses invest in alternatives that save them money on fuel. The equivalent cost to drive an electric vehicle is about a dollar a gallon.

However, critical incentives promoting private investment in advanced energy manufacturing, in alternative fuel infrastructure and electric drive trucks have been allowed to expire. Not only do these incentives help consumers and businesses take advantage of electric choices that protect them from the volatility of the global oil markets and keep energy dollars at home, they encourage investment throughout the supply chain of electric drive innovation. That creates jobs.

In weighing the “price” of any energy policy, we need to accurately measure the cost of oil dependence. The $450 billion dollars we sent abroad to pay for the energy on which our economy is built is not only an economic threat, but it is an undisputed national security threat.

Federal investment can speed our response to those threats and one of the proven effective ways to do that is to mobilize private innovation and investment in electric drive vehicles and infrastructure. By any measure, it is a bargain compared to what we are spending on the problem.

Since the early days of our country, the government has routinely intervened in energy markets. Recent research found that as early as 1789, the U.S. levied a tariff on imported British coal to promote a fledgling domestic industry. We have continued this practice throughout our history, including helping the oil and gas boom in the last century. Government support for particular industries tends to focus initially on driving new technology and building up new industries, but once subsidies are in place it proves very difficult to phase them out. For this reason, we believe that public support for energy development should be carefully targeted to speed the transition to a clean energy future.

The full extent of government interventions—from direct subsidies to tax breaks— is the subject of much confusion. Tax breaks, in particular, are very difficult to measure and have led to one of the most confusing tax codes in the world.

We started providing aid to the oil and gas industry over a century ago, and the industry has long outgrown the need for this support. To this day, fossil energy resources are benefitting from tremendous financial support, a range of sweetheart tax deals now totaling around $4 billion a year as well as taxpayer-funded infrastructure. These interventions are simply not justified any longer.

Tax dollars being banked in the pocketbooks of the most profitable companies in the world does not make economic sense. Oil and gas have saturated and dominated the energy markets for a century. These same industries boast of record profits. In our common quest to invest in a future that relies upon less polluting sources of fuel and creates a stable energy market within our own borders, we cannot continue to direct dollars away from clean energy sources and into the hands of those who have already seen decades of success.

Tax payer subsidies for oil and gas are especially galling since fossil energy continues to enjoy special treatment at the cost of environmental health. Bypassing environmental review in the name of expanded profits or to reduce development costs results in lingering public health problems, degraded lands, as well as water and carbon pollution. Attempts to correct these fundamental market distortions have been thwarted—and these must be remedied.

Instead, we should be putting our full effort into building a future that respects generations of Americans to come. That means putting new funding and policies in place to do more with the energy we already produce by making our businesses, buildings and homes more energy efficient and by rewarding those who reduce energy use or shift it to off-peak hours. The cleanest power plant will always be the one we never built. Energy efficiency saves money for consumers and businesses, but the up-front costs of insulation or efficient equipment can be daunting. Public investments in energy conservation can generate impressive results, while also reducing the pressure for energy development in our most treasured landscapes. We have underinvested in the most cost-effective energy alternatives for too long—at a time when we should be leading the world.

We must also do more to jumpstart new sustainable energy industries that have the deck stacked against them in the current marketplace, like wind and solar. These technologies should be evaluated on a lifecycle basis that includes the emissions and impacts from construction, production and transport, in addition to combustion, to ensure they are as green as they are clean. Policies like the Production Tax Credit and refundable tax incentives should be based on clear public benefits from the new technologies, and should be predictably maintained to ensure steady well-planned growth. When it comes to boosting renewable energy production, we also should look beyond subsidies—.renewable portfolio requirements, efficiency standards and government purchasing decisions can boost emerging renewable energy and energy efficiency markets.

The question is not whether we should have energy incentives, but rather ensuring our real needs and preferences are the basis for the policies we have in place. Investing in new energy efficiency and renewable technologies and removing outdated tax preferences for fossil fuels will result in a cleaner, safer and more secure America for future generations.

The most important question for the United States Senate as it considers the Stabenow, Burr/Menendez, and DeMint amendments on energy subsidies is not what our country’s energy mix should be, but who should decide.

For decades, Washington’s so-called experts, bureaucrats, technocrats, and would-be central planners have insisted that consumers are massively irrational and make bad energy choices. Politicians across the political spectrum have fallen under their sway and created a vast array of incentives, subsidies, mandates, and regulations to push consumers toward their favored technologies.

It hasn’t worked. It won’t work. It can’t work. Just as central economic planning was exposed as a tragedy of unprecedented scale in the Soviet Union and elsewhere in the 20^th century, the idea that experts can successfully displace the essentially dispersed knowledge of millions of consumers is doomed to fail on a piecemeal basis. Not in spectacular fashion, but in the usual dreary way – higher prices, less choice, less innovation.

Obama looks at the scandals, corruption, and waste that large-scale subsidies of renewables have wrought and insists that we should “double down.” Like a reckless gambler desperately trying to get back to even, Obama is risking our tax dollars and economic future.

According to the EIA, Washington gave away $37 billion in energy subsidies in 2010, more than double what it gave in 2007. Renewables received about 3.5 times as much in subsidies as fossil fuels.

Some on the left attempt to mischaracterize legitimate cost recovery mechanisms for oil companies as subsidies, but it should be noted that EIA’s official estimates correctly do not. Getting the base right is the most important part of designing any tax system, and legitimate business costs should be deductible for everyone, including politically vulnerable oil and gas companies.

But actual subsidies – market distortions designed to change behavior and replace consumer preference with political preference – should all be eliminated. That includes the $2.8 billion in annual subsidies received by oil and gas companies.

Today the Senate will vote on DeMint’s amendment to end all subsidies, as well as the Stabenow amendment to extend a grab-bag of expiring subsidies and the Burr/Menendez amendment to create vast new subsidies for natural gas vehicles.

This vote will tell us, clearly, which senators think consumers should be in charge of making our own energy decisions and which senators want to make those decisions for us – at a cost of billions of our tax dollars.

The DeMint Amendment gives the Senate an opportunity to get rid of all these subsidies, all at once, across the board. It does it without raising taxes by using the revenue to cut the overall corporate tax rate. It’s a critical test of seriousness to see which senators actually understand and believe in the free market.

Phil Kerpen is vice president for policy at Americans for Prosperity and the author of “Democracy Denied” (BenBella Books, 2011).

Government investments in energy or any other area must be strategic, both in magnitude and direction. Optimally, they should also be performance based. The negative connotations of the word “subsidy” arise in large part because so many government investments have not met those criteria. They are either misdirected or inappropriately large. Subsidizing housing developments in flood zones where homes and lives are likely to be lost or funding fishing fleets at levels greater than the value of the fishery itself are good examples of misdirected subsidies that waste taxpayer dollars and have unintended, though often predictable, consequences.

The same is true for subsidies directed at the oil industry. When these programs were first set up – some back in the early 1900’s – the oil industry needed a boost, and some may argue that that boost benefitted our quality of life. But the industry no longer needs that boost, many companies receiving these subsidies rank among the richest in the world regardless of whether you look at revenues or profits.

Also, the amount of the subsidy has become excessive, to the tune of $10 billion per year or more, at a time when we can least afford to lose those funds from our Treasury. In this case, the unintended consequences – climate change – can not be ignored, nor can the local health impacts of fossil fuel combustion.

But investing in new clean energy ventures is a very different matter. The companies involved are not among the richest in the world, and the sums that can provide the needed boost are considerably lower.

A recent Congressional Budget Office report puts the price tag for credits for renewable electricity production at $1.4 billion per year, six times less than the $10 billion figure for oil and gas. Clean energy investments like the Investment Tax Credit for offshore wind currently being considered in Congress make up an even smaller fraction of what we are currently forking over to the oil industry each year.

Yet clean energy investments will pay us back in the future. We are already beginning to see the disastrous impacts of our single-tracked reliance on fossil fuels. Today’s New York Times editorial on ocean acidification and its impacts on food security and ocean ecosystems, and recent studies linking human-induced climate changes to extreme weather events like the 2010 heat wave in Moscow or flooding in the UK, are just the tip of the iceberg when it comes to impacts from climate change, which in total are expected to cost in the trillions.

Can we save a lot of money for the Treasury by cutting unnecessary and wasteful subsidies to the oil industry? Yes we can. Do we need to stimulate clean energy which will ultimately create hundreds of thousands of jobs and reduce the impacts of climate change, improving the economy and environment? Absolutely, and we can do that for much less than what we currently spend subsidizing the cause of climate change. Energy subsidies must be strategic both in the amount spent and the way it is directed. It’s both common sense and good business, two things we need more of in Washington.

What factors should lawmakers consider in granting tax incentives to various energy sources?

There should be serious analyses of the potential first, second and third order effects of any subsidies to any energy source. Often the analyses start and stop at simple static, one-dimensional analyses presented by lobbyists and others who are trotted before Congress. Often subsidy issues are, like this overall question, focusing on one subsidy or other separately.

Proper analyses of energy subsidies will take into account the overall energy system and the distortions that will be created by increasing or decreasing present subsidies or creating new ones. Most people when they think of subsidies in economic terms they think in terms of shifting supply and demand curves and that ends it. However, the real economics of subsidies is far more complex than the Economics 101 versions that pass for full studies.

Subsidies have dynamic qualities and involve sometimes very complex feedback mechanisms. Take for example the pet subsidy idea now being bandied about in Washington: cut all subsidies to oil and gas.

Given the political risks the oil markets face in the Middle East, West Africa and beyond this does not seem the right sort of time to cut tax breaks for oil and gas companies to a large extent. Also, this seems rather odd given that one of the political kicking bags these days is the absurd notion that we have expensive gasoline. We don’t, but let’s face it most people in the country think we do even if we do not.

So let’s follow this through. Let’s cut back on some potential tax breaks to oil exploration and production. That would tend to bring less oil on line. Now let’s cut back on any potential tax breaks to oil refineries. That would tend to make gasoline more expensive not less. Add in the increased costs to oil exploration and production to the increased costs to refining and we get, voila, even higher gasoline prices.

Now, lets’ get to the higher order effects can we? If we effectively increase the costs to oil exploration, production, and refining then diesel prices will also likely increase. When diesel prices increase then we have increased transport costs for food, furniture, medicines, and all of the every day things people need. That sounds like government induced inflation to me. This is really not the right time to do this, now is it?

Increasing the costs of transport fuels, and about 96 percent of our transport fuels are oil based, will tend to weaken the employment markets. Companies large and small will have to pay more for fuel and will have less left over for hiring people or improving capital, machines and the like.

We are still in a fragile economy. Is this the best time to score some political points with part of the base at the cost of American jobs? I don’t think so.

One of the effects of increasing costs to domestic oil exploration, production and refining might be to spur movement toward natural gas vehicles? Or, at least that is how the argument goes. International prices of oil are going up due to political and other events even as oil production in the country increases. Whether we produce the oil here or it is produced outside of the country we are still subject to the international prices of oil. That is unless you want to now subsidize oil and refined products, such as has been implicitly argued for by some of our Presidential candidates who want a “$2.50 gallon of gas”. That may cost about $170-200 billion in subsidies to the oil industry. Now don’t these seem like contradictory goals? Maybe we need someone who can think about more than one simple idea at once and has serious economics training and common sense running?

Anyway, back to natural gas. The price of natural gas is quite low now. We have a natural gas revolution in the works with fracking and other technologies. We could move to compressed natural gas vehicles fairly quickly if it were more acceptable to the public. We could also move to greater use of natural gas in electricity generation. This has already happened. The natural gas car seems a bit more far away. (Even so, Egypt and many other developing and developed countries are more serious about natural gas cars even though they have far less potential in natural gas than we do.)

Oh wait! Do I see another policy contradiction? Indeed, but this is Washington. Policy contradictions are the norm.

So we want to take away certain tax breaks, etc from the natural gas industry and yet we want to push natural gas cars? That is an obvious contradiction, but such contradictions are often rarely pointed out in the political atmosphere of non-think in Washington.

And there is another contradiction here. Many want to move to the electric car. That required electricity. Yes, no kidding. So we will likely need lots of natural gas at cheap prices to help move on the electric car. So let’s cut back on the tax breaks, etc to natural gas? That would increase the price of gas.

But that would also increase the price of fertilizers to farmers. Along with the increase in the price of refined oil products people would be paying even more for food, cotton, etc. Maybe we need thinner people, but most of those who like to eat really don’t like to eat more expensive food because of an ideology that can’t get beyond the simplest misuse of economics.

What about subsidizing solar and wind? Well, that depends on what kind of solar and wind technologies and there where, what and how of the subsidies. We need give more fidelity to our subsidies, tax breaks and more. Giving solar tax breaks to people in Alaska seems to not make a whole lot of sense. Giving them to people in Southern California does. But wait? Isn’t California already doing this?

Because of the nature of the economics of solar and wind and how geography, average wind strengths and reliability, average solar radiation and reliability, seasonality and more can change from state to state or even for areas within states should not the states be better deciders on this? Maybe the federal government could give each state a certain amount of possible monies to help them support the diffusion of new energy technologies and then leave it up to the states how to do this.

In a perfect world this might be a good idea, but then the solar, wind, and other lobbies will get involved and distort the system. However, this does seem better than just having this done in Washington without consideration for the local, regional, seasonal and other factors.

Washington might also want to consider “Conditional Subsidies” based on the characteristics of the energy system and technologies to be considered, and the local and other parameters that the technology would be working in.

Conditionality would also have to bring into account the changing domestic and international markets for the energy system to be “helped out”. Do I hear Solyndra being said by someone reading this? Most likely I would.

We also need to look at our policy changes as they compare to policy changes in other countries. Our corporate tax system is driving some clean energy companies to other countries. Also, there are some countries out there that send 10s of billions into their energy systems for R&D and more. We normally send “chump change” in and expect miracles.

If we are going to make decisions to distort markets to push what the leadership might think are winners then we should do this all out.

Otherwise, let the market decide.

Subsidies and tax breaks are normally used to help infant industries and technologies to grow to their toddle and adolescent stages. When they are adult and aged it might be best to reduce or cut the subsidies. However, we also have to consider the 2^nd, 3^rd, and 4^th order effects of any of those changes from one distortion to another.

There are environmental, employment, inflationary, financial, and other effects from the change in subsidy and tax policies for energy system and technology.

Getting this right is important, but it is not simple. Sometimes the simple is the enemy of the good, just as the perfect can be the enemy of the good.

No energy technology can wear a halo. They all have costs. We need to get real with all of them.

(This post was written jointly by Weiss and Richard Caperton, director of Clean Energy Investments at American Progress.)

For the past 150 years, the federal government supported the development of emerging energy sources. This support included access to resources on public lands and waters, helping build railroads and waterways to transport fuels, building dams to provide electricity, subsidizing exploration and extraction of fossil fuels, providing financing to electrify rural America, taking on risk in nuclear power, building highways for motor vehicles, and conducting research and development of virtually all energy sources. In addition, the health costs from pollution produced by burning coal and oil that Americans bear are a form of subsidy too.

The most recent investments support the development and commercialization of clean renewable electricity, and vehicles and fuels powered by something other than oil. Over the past 20 years, there has been bipartisan agreement to create and fund incentives, grants, infrastructure, and other support for the clean energy technologies of the 21st And we can no longer afford assistance for mature fuels such as oil that received an annual average of $4.86 in federal support compared to 37 cents for renewable energy, according to “What Would Jefferson Do? The Historical Role of Federal Subsidies in Shaping America’s Energy Future,” by DBL Investors.

It’s time to end this lopsided support for oil, and invest in renewable sources instead. For starters Congress should act right now to invest in the wind and solar industries by extending the production tax credit for wind, expected to expire at the end of 2012, and the Treasury cash grant program that benefits solar production. One-third of new electricity generation capacity in the past four years comes from wind power, in part due to support from the PTC. Domestic manufacturing has grown from one-quarter to nearly two-thirds of wind energy components.

The expiration of the PTC would kill a whopping 37,000 jobs, according to the Navigant consulting firm. For instance, Vestas—a leading manufacturer of wind turbines—recently announced that it will have to lay off as many as 1,600 workers if Congress raises taxes on wind power by not renewing the PTC.

Similarly, the solar industry has benefited from the grant in lieu of the tax credit program created by Section 1603 of the American Recovery and Reinvestment Act. The Solar Energy Industries Association noted that:

As of February 2012, the 1603 Treasury Program awarded over 4,400 grants totaling $1.98 billion for more than 22,000 individual solar projects in 47 states and has supported over $4.6 billion in private investment.

A one-year extension of the program would create an additional 37,000 jobs in 2012 in the solar industry alone. In addition, a one-year extension would result in nearly 2,000 additional megawatts (MW) of solar installations above baseline by 2016, enough to power 400,000 homes.

In other words, every dollar of federal support for the solar industry attracted $2.30 of private investment, which created thousands of jobs and powered thousands of homes.

Last week President Barack Obama proposed adding incentives to help Americans cope with high gasoline prices via investments in vehicles that used little or no oil. These incentives would help make advanced efficient vehicles more affordable, and accelerate the deployment of electric cars and natural gas trucks.

While these existing and proposed investments in new, clean energy sources last a limited time, tax breaks for big oil companies have no such expiration date. These breaks cost $4 billion dollars annually, and several are nearly 100 years old. Beneficiaries include the big five oil companies: BP, Chevron, ConocoPhillips, ExxonMobil, and Shell, which made a record combined profit of $137 billion in 2011. And these companies produced 4 percent less oil than they did in 2010.

In 2005 President George W. Bush noted that such support for big oil should be unnecessary with high prices. He said “I will tell you with $55 oil, we don’t need incentives to the oil and gas companies to explore. There are plenty of incentives. What we need is to put a strategy in place that will help this country over time become less dependent.” In other words, big oil tax breaks are unnecessary but investments to reduce oil dependence would be valuable.

Even though government support for new, clean energy technologies is swamped by investments in mature fossil fuels, some conservatives want to end clean energy investments in the future. For instance, House Energy Committee Chair Fred Upton (R-MI) and Rep. Cliff Stearns (R-FL) criticized investments in wind and solar companies, saying said "It is not the role of government to pick winners and losers in the market.” Yet these two representatives—and every voting House Republican, joined by 13 Democrats—voted to keep unneeded tax breaks for big oil, including some of the most profitable companies in the world.

Our current energy profile threatens public health, national security, the economy, and our environment. We can begin to address these threats by continuing support for new, clean technologies while ending tax breaks for big oil.

Subsidies, tax preferences, deductions, incentives and loopholes. Unfortunately, these terms are used interchangeably by politicians and the media and, for the most part, imply there is something unseemly about the tax code. In fact, the 13,000-page Internal Revenue Code, in addition to being a platform for raising federal revenues, is also an experiment in social engineering.

For example, home ownership is encouraged through the deductions for mortgage interest and local property tax payments. Personal saving is boosted through provisions that permit tax deferrals on current income that is deposited into IRAs and 401(k)s. And the tax code contains hundreds of provisions to induce businesses to undertake certain desirable activities, such as the search for energy resources.

President Barack Obama rails constantly about the need to remove the huge and unnecessary subsidies to the oil and gas industry. But the industry doesn’t actually receive “subsidies.” What it does receive is access to the same “deductions” that are available to most other manufacturing and mining industries. Simply put, deductions from gross revenue allow businesses to write off legitimate expenses incurred in the production of that revenue to ensure that taxes are levied on net income.

By contrast, a “subsidy” is a direct payment from the government—i.e. taxpayers—to a business entity to promote development of a new technology or product that is deemed desirable from a societal perspective. Currently, renewable energy sources such as wind and solar are being subsidized to the tune of $12.5 billion a year, presumably because of the perceived environmental benefits that attend these non-polluting technologies. The argument for continuing these subsidies is that wind and solar are infant industries that have not yet achieved economies of scale. Unfortunately, that is never likely to happen because renewables—with the exception of hydropower—are unable to achieve the scalability and energy density of generating plants fueled by coal, natural gas or nuclear.

In contrast to renewables, the oil and gas industry receives about $2.8 billion in tax preferences. Not only do these incentives pale by comparison to the subsidies for wind and solar, especially when compared on a btu-equivalent basis, but the economy gets a lot more bang for the buck. 2011 was the third consecutive year of higher domestic oil production while natural gas output reached an all-time high. Over the past five years, about 158,000 new jobs have been created in the oil and gas industry while employment growth associated with renewables has been miniscule. Indeed with the recent failures of Solyndra, Beacon Power and other renewable energy companies, industry-wide employment has probably declined.

Despite more than a decade of huge direct taxpayer support, renewables still can’t meet the market test and, therefore, their subsidies should be reduced or abolished. If policymakers are genuinely concerned with cutting greenhouse gas emissions while enhancing America’s energy security, a better allocation of federal largess would be to target subsidies, preferences, incentives or whatever we choose to call them at natural gas and nuclear. These clean-burning fuels can heat our homes, power our vehicles, and generate electricity for America’s households and industries a lot more cheaply and reliably than renewable.

The climate and energy policy debate needs a reality check: the emperor has no clothes. In other words, most clean energy alternatives are not cost and performance competitive with their fossil fuel counterparts without significant support. And more deployment subsidies and tax incentives will not drive down the real, unsubsidized cost of clean energy below fossil fuels. To do so, innovation – not subsidies – should be at the center of the climate and energy policy debate.

Unfortunately, innovation is often only used as a buzzword in the clean energy debate. It’s why many advocates wrongly believe that deployment is what spurs technological breakthroughs. Yet, if we’re to get serious about addressing America’s energy and climate challenges, innovation has to move from buzzword to policy strategy. And a good place to start is to assess how we’re going to make clean energy cheaper than fossil fuels without subsidies so we can rapidly and widely deploy clean technologies worldwide.

More of today’s energy incentives and subsidies aren’t the answer for a number of reasons. First, existing clean technologies are not ready for primetime except in very niche markets and require significant innovations to make them viable both nationwide and globally. We need new battery technologies, new solar architectures, alternatives to critical materials, utility scale energy storage options, scalable advanced biofuels, and so on. These aren’t small technological challenges that can be overcome by boosting production of existing technologies.

Second, counter to some advocates, deployment alone doesn’t spur enough innovation. At least not the types of innovations I just briefly mentioned. Ultimately, we need entirely new clean technology learning curves. Subsidizing 1 million more existing EV batteries isn’t going to lead to the step-function leaps in innovation. Scaling up production through deployment does spur incremental innovations and it does play a part in an innovation strategy. But today’s clean technologies aren’t at the precipice of competitiveness and our deployment policies aren’t aligned or correctly structured to spur the necessary innovations.

Third, subsidizing existing clean technologies in America does little to reduce global carbon emissions. Without clean energy innovations, we cannot expect developing countries to subsidize their way to a clean economy given its higher costs when those countries are simply trying to gain access to any affordable energy (and food, housing, healthcare, etc.). Thus we need to make clean energy more than a global “luxury good” to drastically reduce carbon emissions, which will take innovation, not just more domestic subsidies and tax breaks.

And finally, energy policy choices are limited by America’s budget and fiscal restraints. Our energy policy investments aren’t limitless so we have to make smart choices. If we are limited to 100 units of energy policy to make clean energy cheaper than fossil fuels without subsidies, how should we allocate them? Today the lion’s share of those units go to deployment, so further tilting our policy emphasis with more subsidies still ignores the need for more innovation.

Realistically, the question isn’t whether government should or shouldn’t subsidize energy technologies, but instead when can targeted, temporary deployment policies be used to drive energy innovation. And today’s deployment policies aren’t driving the innovations we need. As such, ITIF has continued to call for more public investment in clean energy RD&D. In addition, advocates and policy makers need to have a candid debate on how to reform, restructure, and reorient our deployment policies to match our technological needs. We need to reallocate and reorient our limited energy policy investments, not just add more of the same.

((These comments were submitted by Thomas P. Kimbis, Vice President of the Solar Energy Industries Association.)

For more than a century, the federal government has supported the development and efficient use of domestic energy, recognizing that energy powers America's economy. Among several worthy policies under consideration of extension by Congress this week is the 1603 Treasury Program, which has helped the solar industry create jobs across America while leveraging millions of dollars of private investment toward a public goal.

This nation is blessed with an abundance of diverse, domestic natural sources of energy that have provided jobs for millions of citizens and made America the strongest nation on earth. Today, we face some hard choices during tough economic times. It is important that today, more than ever, we choose as a nation to support our energy industry, for it is energy that will power the businesses of today and tomorrow and pull us back on our feet.

Over many decades, the federal government has chosen to invest in energy production and to do so through multiple methods, tax policy chief among them. Diverse national goals, such as encouraging home ownership and college education, are driven by federal tax policy to promote values and activities that we as Americans support. Promoting a productive and diverse energy sector is an option before Congress today, and one that it should continue to support, rather than turn its back on when we need it most.

From coal and oil, to nuclear and natural gas and, most recently, renewables, every major energy source has been supported through federal policy. America needs an "all of the above" approach to energy that puts our citizens back to work and promotes our national security. One policy that deserves to be extended is the 1603 Treasury Program. This is not a new tax incentive; this program entails a simple tweak to the tax code that allows businesses to claim an existing tax credit earlier in the project development process, resulting in enhanced project bankability and lower investment costs.

In the two years since its enactment, the 1603 Treasury Program has been a proven success and given taxpayers a good return on investment. As of February 2012, the 1603 Treasury Program awarded over 4,400 grants totaling $2 billion for more than 22,000 individual solar projects in 47 states and has supported over $4.6 billion in private investment. According to a report published by EuPD Research in October, a one-year extension of the program would create an additional 37,000 jobs in 2012 in the solar industry alone. In addition, a one-year extension would result in nearly 2,000 additional megawatts (MW) of solar installations above baseline by 2016, enough to power 400,000 homes.

Everyone in Washington and across the nation understands that we have seen better economic times, and that choosing from among competing policies while maintaining fiscal discipline is difficult. Given its history of success, however, 1603 Treasury Program stands on a proven track record as a low-risk, high-reward policy that deserves to be extended.

It’s dumbfounding that the Administration and Congress would consider more doling out additional subsidies for energy given the sorry history of such ventures into industrial policy. Over the past four years, data collected by the Energy Information Administration (EIA) show energy subsidies have grown from $4 billion to about $37 billion annually with most going to so-called “renewables.”

Subsidies create more problems than they solve -- a testament to the laws of unintended consequences and economic distortions. The best thing that the government can do for energy development is to let the market work by setting a level playing field and establishing clear, cost-effective regulations that do not discriminate.

The history of subsidies since the 1970s oil embargo is a monument to waste, fraud, and abuse. There is simply no basis for assuming that government bureaucrats and elected officials are smarter than the market. When they attempt to engage in such behavior, they are validating Hayek’s concept of the fatal conceit. At a time when our economy is weighted down by uncontrolled deficits and an unacceptable national debt, the government should go on a 12-step program to discontinue new subsidies and begin to dismantle existing ones.

The dream of an energy market without subsidies, however, is just that a dream. A more realistic goal involves our leaders exhibiting greater restraint. They must abandon the notion that government can successfully and sustainably promote politically favored forms of energy through mandates (ie. clean energy standards, etc.) and tax expenditures (ie. loan guarantees, grants, etc.). These measures simply produce rent-seekers, moral hazard, and schemes to extract profits that can’t be gained from the market. (Solyndra hardly qualifies as a unique case.)

If policymakers believe incentives are needed, they should offer them across the board for a realistic but limited period of time. Otherwise, to quote President Reagan<http://atimeforchoosing.com/>, they become the next thing to eternal life. The R&D tax credit and accelerated depreciation for example can serve useful social purposes and they don’t discriminate for or against specific industries.

President Obama’s attempt to take away a general tax credit from the oil industry is an example of why government attempts at industrial policy lead to shameful outcomes. The government should be seeking ways to encourage economic energy development, not engaging in punitive actions and discrimination because of success. As a Wall Street Journal editorial (“Republicans Blow With the Wind,” March 7th) recently warned, attempts to use “Big Oil” as a strawman are not only unfair but unjustified:

The most dishonest claim is that wind and solar deserve to be wards of the state because the oil and gas industry has also received federal support. That's the $4 billion a year in tax breaks for oil and gas (which all manufacturers receive), but the oil and gas industry still pays tens of billions in federal taxes every year.

Wind and solar companies are net tax beneficiaries. Taxpayers would save billions of dollars if wind and solar produced no energy at all. A July 2011 Energy Department study found that oil, natural gas and coal received an average of 64 cents of subsidy per megawatt hour in 2010. Wind power received nearly 100 times more, or $56.29 per megawatt hour.

Proponents of energy subsidies have an obligation to demonstrate how they can avoid repeating the history of past mistakes, failures, and abuses. They must first document the lessons learned and then lay out a course of action to avoid repeating them. Of course, that would represent a triumph of hope of experience and isn’t likely to happen any time soon. Since the history of energy subsidies over the past 40 years is so dismal, the only real course of action is to swear off the practice.

The government has a role in insuring a diverse portfolio of energy resources for the national security and economic welfare of the public. But that means the government should not subsidize mature technologies in mature markets by mature companies - which means the $70 billion of subsidies for petroleum, natural gas, coal and nuclear should come to an end immediately which would save $1 trillion over a decade. The government should subsidize newer technologies in immature markets, but as they mature begin ramping them down and then out. It would be unfair to zero out the wind production tax credits, but rather to establish a transparent ramp down over the next 15 years would probably be great public policy assuming you closed out the traditional energy credits. President Reagan proposed just that but by the time the Congress was done, the traditional energy industries kept all their subsidies while the residential solar credit for homeowners was ended putting 90,000 people out of work in the mid-1980's. Targeted tax credits to expand or drive certain results is also valid public policy such as the tax for natural gas in trucks, increasing US refining capacity, transition to electric vehicles, and more rapid federal procurement of energy efficient vehicles and products in federal buildings including renewable energy. These targeted incentives focuses on national and economic security by more rapidly reducing energy imports and stabilizing energy prices for consumers - in both vehicles, and for natural gas and electricity.