LET THE MARKETS DECIDE?

Why I Don’t Get Free Market Enviromentalism

By Nancy Mahoney, 10-20-05

In the aftermath of the and Governor Schweitzer’s Energy Symposium (see New West blogs by Brooke Hewes), both of which took place in Bozeman this past week, we have been flooded with information about the state of our nation’s energy consumption, its effects on the environment, industry potential to create jobs, and the promise of new, cleaner fuels to reduce our dependence on foreign oil. It is unclear what real outcomes, if any, are to take effect in the wake of these discussions, but it is clear that Montanans of all stripes want to be part of the picture. The one thing I don’t get is the perspective of some “free market environmentalists� that believe we should all just sit back, keep government out of it, and let the entrepreneurs and investors come up with the solutions. The problem is that I can’t seem to figure out how what they say actually works…

For example, the Bozeman Daily Chronicle ran an opinion yesterday by Pete Geddes, a regular contributor and executive vice president of the Foundation for Research on Economics and the Environment (FREE) providing tax incentives for Synthetic Fuel production. He took Schweitzer’s synfuel proposal to task, suggesting that the Governor should let market processes (i.e., trial and error, the search for efficiencies) guide our energy future because it is a “more efficient and equitable process than relying on decisions made by politicians and their business cronies.�

Here is where I get confused (which I do often…), but this time on two counts. The first one is that Geddes and FREE seem to be promoting the efficiency of market systems that rely on entrepreneurs willing to take risks—sometimes huge risks—with their own money, and then bad-mouthing them in the next breath as cronies and special interests. I don't think I have ever taken a course in economics, but I do understand that the “market� is made up (in part) of actual people making decisions, and the successful ones exploit every avenue they can to get ahead—which includes governments (both home and abroad). I see that Geddes has a point about the efficiency of market demands, but I am not a fan of taking the government completely out of the equation because there is too much information that corporations clearly do not have my (or your) best interests at heart. A balance between government and the private sector clearly seems best, and is likely what most thinking folks advocate for, but how do we decide what that balance should be when facing an ever-urgent need for cheap clean energy?

This brings me to my second point of confusion: Geddes sends a clear message in his article that a synfuel program should not have tax incentives to help subsidize the significant start-up costs—estimated in the billions—of developing plants here in Montana. This puzzles me... There are already significant tax advantages for domestic oil and gas production. To be specific, in Section 263 of the Tax Code, the “intangible expenditures� (labor, chemicals, mud, grease, etc.) of drilling are 100% deductible during the first year, as is the total amount of investment allocated to the equipment needed for drilling. There are also significant tax benefits for individual investors in oil and gas (as opposed to large companies) to encourage development of domestic supplies.

Why should we extend incentives for drilling oil at home, but not for the ostensibly cleaner burning synfuels that can help replace some of our dependency on foreign oil, which—by the way—costs an estimated $33 billion per year to protect as it is exported from the Middle East (according to the Energy Exchange). Yikes! Again, I have not studied the federal budget, but if that fact is correct, $33 billion looks an awful lot like a huge taxpayer-funded subsidy for the oil industry.

Over the past weekend, I attended an Alternative Energy workshop at the Bioneers Conference where Sandy Shuptrine (Coordinator, Clean Cities Coalition) said something that sounded very smart to me (which did not confuse me...): she said that there is no silver bullet yet to replace oil when it runs out, and until the hydrogen fuel cell can be developed cheaply, we need to patch together alternative sources of energy to stretch our current supply of oil. Apparently it is a known fact that there are not enough of alternative fuel sources or renewables to replace current and future energy demands met by foreign oil, but given our current state of affairs, is there still any doubt that we need to start thinking ahead to develop these alternative sources if we want to maintain our current quality of life?

Industries will always lobby for incentives, and governments will provide them when they perceive an advantage. Free market or not, someone needs to take the lead on this one.

Like this story? Get more! Sign up for our free newsletters.