Tuesday, February 12, 2008

Not So Stimulating

I'm not an economist, but I know the basics:  Lower the price and people will buy more.  It's true for every industry: From the proverbial widgets of freshman economics class to flat-screen TVs and tomatoes -- and renewable energy.  So, if we want to make people buy renewable energy, shouldn't we make it cheaper for them to buy it? Apparently, the Senate fell asleep during Economics 101. 
  

Last Wednesday, the Senate rejected a stimulus package that included $5.7 billion in tax incentives for (among other things) the installation of energy-efficient appliances and building improvements.  The package would have given tax breaks to wind-farm developers, appliance manufacturers and businesses that install fuel cells.  The Sierra Club reports that this is the third time in only seven months that the Republican leadership has blocked a package of clean-energy tax incentives.

 

The sad thing is, this should have been a no-brainer.  For one thing, the breaks were signed into law years ago.  Unfortunately, they are set to expire at the end of the year.  The stimulus package provided an easy vote for a short-term fix to extend the tax breaks while Congress works out a long-term solution.  Moreover, these breaks should have been an easy political win.  As Scott Segal, an energy lobbyist in Washington told the LA Times, these are one of the few things that both the Sierra Club and industry can rally behind.  The IPCC was just given a Nobel prize for finding that climate change is "unequivocal."  NASA just declared that 2007 can claim the dubious honor of tying for the second warmest year since the start of the Industrial Revolution.  Shouldn't we be doing whatever we can to encourage the use of low and no-carbon technology?

 

As Gristmill reported last week, "These tax credits are good economics and good climate policy."  That's clear to me.  In fact, it should be clear to any student in freshman economics.  It's a real shame that it wasn't clear to the U.S. Senate.

Posted by Jennifer at 03:12:02 | Permanent Link | Comments (5) |
Comments
1 - Alternative Energy Investment Incentives make sense--- but as part of an energy bill--not in my mind as part of an economic stimulative package. The purpose of the stimulative package is to get money into the economy as soon as possible so there can be a jump start of the economy. In a similar vein, there should be money perhaps spent on infrastructure upgrades, but again (Comment this)

Written by: Bob at 2008/02/12 - 07:43:18
profile
2 - Bob, It's true that tax credits may not be the panacea for a short-term stimulus - however, they undoubtedly have long-term economic benefits. In fact, wind producers are already saying that they are seeing a downturn in demand because consumers are concerned about the expiration of existing tax credits. My goal is to get these credits extended - and the stimulus package is a good vehicle for doing so in the short term. Certainly, tax credits wouold have been a great component of a comprehensive energy bill. Many recognized this - and they WERE included in the Bill for some time ... yet tax incentives for energy efficiency improvements and renewable energy production were dropped at the last minute to ensure that the Administration would sign off on the Bill. The credits are set to expire at years-end -- and I don't anticipate another comprehensive Energy Bill before then. In the meantime, we need to do something to give consumers (and manufacturers) the confidence to invest in renewable technology. (Comment this)

Written by: Jennifer at 2008/02/12 - 15:48:08 in reply to: 1
3 - Jennifer-

I am an economist, and the green proposals for the stimulus package were not smart stimulus policy, despite very good economic and energy policy.

By its nature, stimulus must be fast as possible, these green elements don't qualify. If you want to pass these at any costs, so be it, but I think it makes us look foolish and plays into our bad reputation as rich elitists when we propose windmills as the solution to everything.

When republicans said the stimulus bill was bloated with irrelevant stuff, we made truth tellers out of them. Not easy to do.

My blog post at Grist explains in depth:

http://gristmill.grist.org/story/2008/2/5/164917/4771

 (Comment this)

Written by: Jim Barrett at 2008/02/12 - 17:29:33
4 - Jennifer, I agree with you about the need for more incentives for renewables, but since I'm not an economist, I can't say whether they belong in the stimulus package or not. Sounds like Jim knows better on this. What I can say is that we need to be making a much, much better effort to elevate these issues--green jobs, climate change, the economic benefits of taking action versus not--front and center in the upcoming elections. This stuff needs to be on everyone's minds, from the candidates to the average voter, if we want to see real change on the energy front in this country. (Comment this)

Written by: Anonymous at 2008/02/12 - 19:08:15
profile
5 - if the primary focus were going to be on immediate stimuli, congress should have included umemployment insurance and a temporary food stamp increase (which can be put immediately onto EBT cards to be spent). another great stimulus measure not included in this package was a temporary FMAP increase.

People will not receive their tax credits until May when the economy may have already worsened. I don't know how long it would take for the energy-efficient tax incentives to take effect, but I don't think that "as fast as possible" was the standard by which Congress decided what to include.

In addition, the looming recession provides an opportunity for us to rethink our economy, that has not worked for a great number of people over the past several years. whereas previous economic expansions were built on increased wages, it seems that this most recent one was built on credit that people could not afford and now the bubble has burst. clean energy and a green economy is one opportunity to create some better jobs with good wages in the longer term. just a thought. (Comment this)

Written by: Melissa at 2008/02/12 - 19:35:56
Write a comment