Our anti-market, pro-deficit energy policies

On Tuesday, Senate Republicans — minus Olympia Snowe and Susan Collins, but plus Democrats Mark Begich, Ben Nelson, and Mary Landrieu — managed to filibuster an effort to eliminate $21 billion in tax breaks for oil companies. Which is, I guess, useful information: However important deficit reduction is or is not, it’s not as important to Senate Republicans as tax breaks for oil companies. Noted.

But it’s also worth noting that oil companies aren’t the only energy producers who get subsidized. In a just-released paper, Michael Greenstone and Adam Looney attempted to tally up the full costs — economic, social and environmental — of various energy sources and included, as part of their argument, this information on direct subsidies:

I’m careful to say “direct” because this doesn’t nearly cover the waterfront. We cap liability for nuclear disaster at $12.6 billion. Oil companies are legally responsible only for the first $350 million in costs from an onshore spill and the first $75 million for an offshore spill. A variety of tax credits and regulatory standards encourage the blending of ethanol into other fuels. Those are all subsidies, too, though they’re not counted on the graph.

The irony of our energy debate is that the pro-market position would look something like this: Price energy at its real cost, no matter the source, and wipe out the various subsidies in the system. As the free-market philosopher F.A. Hayek said, we cannot leave the “harmful effects of deforestation, or of some methods of farming, or of the smoke and noise of factories . . . to the owner of the property in question. . . . In such instances we must find some substitute for the regulation by the price mechanism.”

But Republicans are opposed both to pricing energy at its real cost and to unraveling subsidies for incumbent energy sources. That means we’re left trying to stack subsidies atop subsidies, which might, given sufficient money, work to goose some innovation in the renewable sector, but which definitely isn’t the cheapest way to move forward. Our energy policy, in other words, is both anti-market and pro-deficit. I’ll leave you with one more graph from Greenstone and Looney, trying to tally up not only the private costs but also the social (mainly health-related) and environmental costs of various energy sources. Note that when these costs are added in, wind energy suddenly becomes competitive with coal: