Biofuels lobbyists have been successful in securing federal funding and regulatory support. As an industry that thrives on federal subsidies, any threat to its privileged status is a cause for alarm. This week Energy Secretary Stephen Chu set off such alarm when he told a group of alternative energy developers that “if it were up to me, I would put every cent into electric cars.”
The Department of Energy has closed $1 billion this year in loan guarantees for all-electric luxury sports cars while releasing less than $20,000 as of last month in ARRA funds for biofuels, according to previous reports in the Digest.
More importantly, Secretary Chu is providing nearly $800 million in Recovery Act funding to develop and deploy the next generation of biofuels, which he believes must play an important role in our transition to a clean energy economy…Anyone who has spent five minutes listening to Secretary Chu also knows he is one of the country’s staunchest advocates for pursuing a broad portfolio of clean energy research, and has warned against investing all our resources in a single technology to the exclusion of all others.
Policymakers often make grandiose promises, such as proposing to make America “energy independent” or to convert the nation to a “green economy.” Those visions don’t make any sense, but even if they did history shows that the Department of Energy would be incapable of putting them into place with any degree of competence. Federal energy schemes are often poorly managed and generate huge cost overruns, or they aim at objectives that make little economic sense.
The problem is that nobody knows which particular energy sources will make the most sense years and decades down the road. But this level of uncertainty is not unique to the energy industry—every industry faces similar issues of innovation in a rapidly changing world. In most industries, the policy solution is to allow the decentralized market efforts of entrepreneurs and early adopting consumers figure out the best route to the future. Government efforts to push markets in certain directions often end up wasting money, but they can also delay the development of superior alternatives that don’t receive subsidies.