Subsidies Unbound

The budget is not the only contentious matter that Montpelier is dealing with this week.  There is also the question of subsidizing renewable energy sources.  One is tempted to ask, in the face of the budget impasse, why legislators think we can afford to subsidize anything, but never mind.  For the moment, the question comes down to this: should utilities be compelled to buy electricity generated by wind, the sun, or the burning of methane gas and to pay for it at rates that guarantee the producers will make a profit and the consumers' bills will go up.

Supporters of the legislation argue that the amount of electricity we are talking about (50 megawatts) and the probable cost increase to the consumer (couple of bucks) are both small.  But government intrusions always start small and sound reasonable.

Consider the federal farm program, a dragon that even Sir Obama cannot slay.  Farm subsidies, like all government programs, have generated their own power base.  They have constituencies that depend on the money; tame politicians who crave the votes; and lobbyists who need the work.  They will fight to the last ditch to keep that federal money coming.  It took 40 years to kill a mohair subsidy even though nobody could ever explain exactly why the survival of the Republic depended on a robust domestic mohair industry.

Closer to the issue – since it is energy-related – is the matter of ethanol.  All the arguments against paying farmers for growing corn to fuel cars have been made and they are ultimately persuasive.  But never mind.  Midwestern farmers like the ethanol program.  Which means that the people they send to Washington love it and the rest of us are stuck with it.  Ten years from now, subsidized GM clunkers will still be burning subsidized ethanol.

So if the renewables bill becomes law, one can safely predict that the producers can count on legislators (politicians) to guarantee their profits at whatever price it takes.  And 50 megawatts will soon become 100 and, then, 200.  Subsidies are like kudzu.  Once they take root, they grow without restraint and are impossible to control or kill. 

For a home-grown example of this phenomenon, consider the Vermont taxpayer's subsidy of Amtrak which amounts to some $70 for each passenger.  The legislature could kill the subsidy.  The people who have been riding Amtrak on a taxpayer-financed discount would have to take a bus (horrors) but the state would save a cool $5 million.

But so far, the Amtrak subsidy has survived the budget cuts.  Amtrak is designer label transportation, just as wind turbines generate designer label electricity.  Right now, Vermont needs to cut up the credit cards and start shopping at Wal-Mart instead of the boutiques.

There is, after all, a recession going on.

Comments

[Tom]

Don't forget trucking subsidies - trucks don't pay relative to the damage they do to roads.

And 'conventional' energy sources get subsidized at a much greater rate then 'green' ones. See here:
http://www.awea.org/pubs/factsheets/Subsidy.pdf

[george kuusela]

re-subsidies unbound. i always thought amtrack should be able to sustain itself or go under. i was then told that Vermont owns all the tracks within the state and it is the amtrak subsidies that pay for the rail upkeep as freight gets no subsidies. is this a catch 22 or should freight and the state be able to pay their own way?

[Dennis Lukas]

Great picture of affordable housing!

[Ron]

Good article, Geoffrey.

Tom: you need to use more precise language. Total subsidies to fossil fuels may have been larger in absolute terms, but the RATES of subsidization (conveniently not mentioned in the AWEA document) are much higher for renewable energy.

[greenmtnpunter]

State of VT owns most of the rail lines but not all. The NECR- former Central VT Railway- running from MA border-Bratt- WRJ- Montpelier Jct- Essex Jct- St Albans- Alburg, plus a couple of branch lines, is still owned by Canadian National and is Amtrak's Vermonter route. And, yes, Amtrak is subsidizing much of the track repair on this line to keep it up to the 59 mph Amtrak minimum.

CN, the former CA government owned railroad, went public back in the '90's, has been quietly acquiring American railroads since, and is now # 4 in North American freight traffic. What bugs me about the Vermonter is that the former "Montrealer/Washingtonian" no longer goes into Montreal. The excuse is that the Canadian
labor unions charge too much to run the train from the border into Montreal.

Meanwhile, CN is sending high volumes of overhead freight south via the NECR. So, where is the quid pro quo? Instead of State of VT subsidizing the Amtrak route in Vermont, why aren't the Feds doing it? And/or the Canadian government? The "Montrealer" was once a very popular train and could be again if it went into Montreal- who knows, perhaps it could become profitable if it goes someplace people want to go?

[Christopher Parker]

I suppose mentioning Amtrak quickly brings up transportation subsidies in general (the rural air program for flights to Rutland, for example, or the public aid to the Burlington airport and of course all the money spent on state highways and the huge amount of property taxes spent on local roads).

I agree with you - lets get rid of transportation subsidies. Let's make the trucks pay their full way so freight railroads can be competitive paying their way too. Lets up the gas tax (or find another method) to cover the true cost of driving.

Until we do this, each form of transportation must fight it out for it's share in the pie.

Which just proves your point about how hard it is getting rid of subsidies.

Because until we do get rid of road and air subsidies, Amtrak advocates will hold onto theirs.