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Wednesday, March 2, 2011

“Clean Energy” and the Depressed Economy

Energy policy won't end the recession.

The New York Times recently gave editorial space to four former governors to share their economic and political brilliance on how to revitalize our economy. While all four dazzled readers with their wisdom, I have decided to highlight the brilliance of Bill Ritter, Jr., the former Democratic governor of Colorado, who urges Americans to embrace “clean energy.”

Ritter claims clean energy will “re-energize the economy”:

Building this new economy starts with understanding how clean energy legislation can create jobs. During my four-year term in Colorado, I signed 57 pieces of clean energy legislation. In 2007, for example, we doubled the proportion of energy in the state that is required to come from renewable sources to 20 percent by 2020. In 2010, we increased that to 30 percent for our biggest utility. As a result, Colorado now ranks fourth among the 50 states in its number of clean energy workers per capita, and 1,500 clean energy companies call our state home — an 18 percent increase since 2004. Wind- and solar-energy companies that have built factories and opened offices in Colorado have brought in thousands of new jobs.

Ritter continues with more of his “accomplishments,” and then urges Americans to follow President Obama’s plans:

Last year we capped our clean energy work with a bill that required shutting down several dirty, inefficient coal plants and replacing them with cleaner energy fuels, principally natural gas.

President Obama’s goal to produce 80 percent of America’s energy from clean sources by 2035 is absolutely achievable. But as Washington ponders its next move on energy legislation, governors can and should lead the way.

Socialism Failed

Unfortunately, while the rhetoric sounds promising, everything he wrote is nonsense. Like most American politicians, Ritter fails to understand that socialism really is a failure, and that a 25-year plan for “clean energy” development has no more chance of succeeding than any of the infamous Five-Year Plans first hatched by Josef Stalin. Colorado and the U.S. government don’t send critics of their plans to the gulag, but the “clean energy” advocates do demand that the authorities use the iron fist of coercion to achieve their goals.

My question is this: If these energy sources are so wonderful and such great investments, why do all those ventures have to be subsidized directly by tax dollars or indirectly by government mandates? If these were the profitable and job-creating ventures that Ritter claims they are, why have private firms not jumped in without the government promise to backstop their losses?

Internalize the Externalities!

If the answer is that the government has favored oil by socializing some of its costs, then the proper solution is: Internalize all the costs and let all products compete on a level playing field — no favors, no obstacles.

In a truly free market, entrepreneurs make profits by directing resources from lower valued to higher valued uses – as ultimately determined by consumers. The “clean energy economy” of which Ritter speaks assumes government knows what kinds of energy we should be using. It cannot have such knowledge. Only the free market can say.

It is impossible to build a sustainable economic recovery on subsidized “green energy,” no matter how much rhetoric to the contrary comes from Washington and the governors’ mansions. An economy cannot grow unless entrepreneurs freely can mesh their plans with consumer wishes. For Ritter to claim that government can coerce us into prosperity is not alternative wisdom; it is delusion.

  • Dr. William Anderson is Professor of Economics at Frostburg State University. He holds a Ph.D in Economics from Auburn University. He is a member of the FEE Faculty Network.