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CFE agenda 020816
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CFE agenda 020816
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2/8/2016
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CFE minutes 020816
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For one thing, not all subsidies are created equal, and the government actually has a good track record in <br />promoting new energy technologies. New developments often face two market gaps that can potentially <br />delay or even kill them: the "technological valley of death," in which promising advances hit a technical <br />brick wall, and the "commercialization valley of death," in which an effective technology can't get to <br />market. Government research labs and subsidies have supported a number of forms of energy — from <br />nuclear energy, to hydraulic fracturing, to photovoltaic solar — through these troughs. <br />And there's nothing unique about the government's support for solar. According to the Congressional <br />Research Service, total government support for the oil and gas sector over the years dwarfs the amount of <br />support for the solar industry. <br />Furthermore, the solar investment tax credit is pretty smart. It's structured so that as solar power becomes <br />more efficient, the effect of the credit on each watt produced becomes smaller. Ideally, we would let <br />markets decide the winners on their own, but so long as government is intervening in markets, it should <br />do so in an evenhanded way. Similarly, any government support for the solar industry should be <br />impartial, rather than having government bureaucracy pick and choose favored companies as it does <br />through its loan guarantee program. The solar investment tax credit comes close to that ideal. <br />And there's nothing in free - market economic theory that precludes government support. Markets tend to <br />underproduce what economists call positive externalities — that is, the broad social benefits, like a <br />cleaner environment, that aren't captured on a company's balance sheet. <br />Solar panels, and the companies that make them, are replete with such benefits: They eliminate redundant <br />power plants that otherwise lie idle, empower consumer choice and have fewer negative consequences <br />than most other forms of energy. But markets don't always reflect these, which is why it makes sense for <br />subsidies to enter the picture. <br />The kerfuf le over the Solyndra collapse aside, many conservatives already agree, and have for years. <br />When I was at the Council of Economic Advisers under President George W. Bush, we believed that an <br />across - the -board energy policy was by far the best approach — and that included solar. From both a <br />market and an environmental point of view, supporting the solar industry should make sense, no matter <br />which side of the aisle you come from. <br />Ben Ho is an economics professor at Vassar and Columbia. He served as the lead energy <br />economist for the White House Council of Economic Advisers from 2006 to 2007. <br />
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