It's Alive! Alternative Energy Subsidies Make Their Biggest Comeback since Jimmy Carter

By Bailey, Ronald | Reason, June 2009 | Go to article overview

It's Alive! Alternative Energy Subsidies Make Their Biggest Comeback since Jimmy Carter


Bailey, Ronald, Reason


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"VOTERS WANT ACTION on energy," one congresswoman told The Washington Post. "They don't really care how much it costs." A Democratic president was on the verge of signing "the most important energy legislation in a decade," with tens of billions of dollars dedicated to jump-starting a cleaner alternative to fossil fuels and helping the United States achieve "energy independence." For too long, most analysts agreed, America had put off the hard choices necessary to prevent the next oil shock and wean the country from petrodictators in the Middle East. Now was the time for bold investment and leadership from Washington.

The year was 1979. At the time I was a low-level regulator in President Jimmy Carter's Federal Energy Regulatory Commission. It was a boring agency, but I got to work in its most exciting division: the special cases branch dealing with exotic new sources of power. From that perch I witnessed firsthand the sad, expensive, and now-forgotten saga of the Great Plains Coal Gasification Plant in Beulah, North Dakota. Like many projects being discussed in Washington today, Great Plains was hailed as the vanguard of a new domestic alternative to foreign oil.

In 1979, as lines at gas stations snaked for blocks, the House of Representatives, by a vote of 368 to 25, created the U.S. Synthetic Fuels Corporation, an "independent" federal entity charged with creating new fuel sources by spending $20 billion in seed money ($57 billion in 2009 dollars) during its first five years. Originally, the Synfuels Corporation was projected to spend $88 billion ($250 billion in today's dollars) over 12 years to build the capacity to produce the equivalent of 1.5 million barrels of oil per day from coal and shale.

That was just one element of Carter's ambitious energy plans. In July 1979 he announced, "I will soon submit legislation to Congress calling for the creation of this nation's first solar bank, which will help us achieve the crucial goal of 20 percent of our energy coming from solar power by the year 2000." In 1980 Congress authorized the Department of Energy to spend $1.3 billion on ethanol research and loans to produce fuel for automobiles. In May of that year, Carter declared, "For the first time in our nation's history, we will have a national energy program to put us on the road to energy security. It's more ambitious than the space program, the Marshall plan, and the Interstate Highway System combined."

Sound familiar? During the 2008 presidential campaign, Democratic candidate Barack Obama declared almost daily that developing new energy sources and breaking our addiction to foreign oil would "take nothing less than a complete transformation of our economy." He explicitly compared his plan to putting a man on the moon and building the Interstate Highway System.

President Obama has not forgotten candidate Obama's promises. In a February address to a joint session of Congress, the president boasted: "Thanks to our recovery plan, we will double this nation's supply of renewable energy in the next three years. We have also made the largest investment in basic research funding in American history." Obama promises to create 5 million new jobs by investing $150 billion in clean energy technologies during the next 10 years. He also aims to put I million plug-in hybrid electric vehicles on America's roads by 2015, promising buyers a $7,500 tax credit. Even more ambitiously, 25 percent of our electricity supposedly will come from renewable sources such as wind, solar, geothermal, and biomass by 2025. To tie a ribbon on the alternative energy package, the president asked Congress to impose a cap-and-auction scheme to reduce greenhouse gas emissions 80 percent by 2050.

Will such policies produce the promised results? They didn't three decades ago.

After Carter's equally ambitious moves, global oil prices dropped like a rock. The deregulation of natural gas led to vast new fossil fuel supplies, and abundant stocks of cheap coal kept electricity humming down transmission lines. …

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