As former National Cancer Institute director Samuel Broder has warned, if it was up to the government to “cure polio through a centrally directed program instead of independent investigator-driven discovery, you’d have the best iron lung in the world, but not a polio vaccine.”
If our well-intentioned but inherently limited government would have choked off our air supply then, why would it be any different with centrally directed energy research, development, and commercialization? The basic premise is simple: Government shouldn’t pick winners and losers. For the latest evidence, look no further than the newly exposed 900 pages of email traffic between Obama Administration officials and lobbyists.
It all started a little less than a year ago, when the Federal Government issued a formal response to a study conducted by economist Dr. Gabriel Calzada, which determined that Spain’s subsidies to wind energy had killed more jobs than they created. Through a FOIA request, the organization responsible that sponsored Calzada’s analysis brought to light incriminating emails exchanged between the DOE’s National Renewable Energy Lab and special interest groups including the American Wind Energy Association (AWEA) and the Center for American Progress.
Notwithstanding the merits of the government’s argument for a moment, it is grossly inappropriate to side with lobbyists to smear the competition. Only in this case, the government crossed that line. This is a classic example of what Professor Bruce Yandle of Clemson University has named the Baptist-Bootlegger theory of regulation.
Yandle’s theory stems from early 20th century religious efforts in the South to limit the sale of alcoholic beverages on Sundays. Bootleggers were all too willing to support this seemingly contradictory campaign, because it allowed them to keep the market all to themselves.
More and more in the climate debate, we’re seeing modern rent-seeking organizations following the bootleggers’ lead and collaborating or even co-opting regulatory agencies to gain a competitive advantage through regulation instead of through competition and cost advantage. In this case, wind energy proponents want subsidies and mandates. And government -- which has bought into the climate apocalypse -- is all too willing to provide them. In the end, this kind of collusion stifles technology and imposes hidden costs on consumers.
Of course, we cannot totally ignore the merits of the government’s R&D in a discussion as important as energy, natural resources, the world’s largest economy, and millions of jobs. Energy is the fuel of prosperity. And there is a role the government can play in the field of energy research. But that influence should cease before commercialization, which goes well beyond its competence. If our energy system is made less efficient or more costly, it is harder for our entire system to produce competitive goods and services in a global economy.
When consumers have to pay higher than necessary prices for energy to heat and light their homes, they have less money to spend elsewhere. Even if politicians try to suppress those higher costs, they only end up diverting resources from some other use. In the end, some one bears the burden of higher costs or subsidies.
An age old debate seeks balance between what government can do versus what it should do. This question is at the heart of the energy policy debate. The Obama Administration and some in Congress are focusing like a laser on suppressing the use of fossil energy and trying to use their power to force zero emission alternatives like wind and solar into the energy mix before they are cost competitive.
This attempt is just another variation on industrial policy which in the case of government picking winners in the commercial field is unequivocal, unequivocally negative. In time, it will go the way of other attempts. It will waste resources, divert attention, encourage rent seeking by some companies, and in the end fail because they are not sustainable. The lessons of the ill conceived and ill-fated Synfuels Corporation of the 1970s have not yet been learned. Because of the importance of energy to our economic well being and prosperity, efforts that have the effect of rationing, limiting supply, and raising costs must either fail or be a brake on economic growth because in a global economy the whip of competition rewards the efficient and punishes the wasteful. Our economy has been the model for the rest of the world because it rewarded innovation and the benefits of competitive forces.
In the search for lower carbon energy systems, the government should support research, prevent barriers that deter or delay bringing new technologies to market, and create an environment where 1,000 flowers can bloom. It should not tilt the playing field to favor some technologies at the expense of others. But, that is exactly what is being done today.
William O’Keefe, chief executive officer of the George C. Marshall Institute, is president of Solutions Consulting Inc.