The politics of incentives

[boatgeek]

Huge win for clean energy. . . . Clean energy tax credits are the centerpiece. Under the deal, existing renewable credits would be extended. After 2025, they would become technology neutral and based on greenhouse gas emissions reductions.

Is there any deeper thinking behind this than just that wind and solar are “clean” so we should build more of them? Doesn’t look like it. So give us a few years of this, and we’ll be right where Germany is: vast excess capacity of wind and solar panels, none of which is there when you need it, and electricity rates tripled to pay for the redundant excess capacity and subsidies to the people who built it. At least so far we have our own natural gas for the backup, but they’re trying to shut that down too.

Well, I'd sure rather have a wind turbine or solar panels* in my neighborhood than a coal plant. But that's just me.

And golly gee, when you look at average daily electricity demand curves, it's pretty clear that an awful lot of the peak demand is from air conditioning. You know, when it's hot. Because the sun is shining. Yes, there will need to be other supplies for base load. But solar does a very nice job for peak loads due to AC.



* Strictly speaking, I do have solar in my neighborhood. On my house, in fact.

 

[boatgeek]

I always appreciate that you have a firm grasp on these details. Thanks for sharing that.

Thank you for the kind words. The truth is that I don't have any special knowledge of fossil fuels or tax systems. I am comfortable with reading the text of laws and the Code of Federal Regulations to see what they say. Most of the information above is available for anyone with similar skills who's willing to put in 10 minutes of Google and reading time.

 

[jderimig]

Well, I'd sure rather have a wind turbine or solar panels* in my neighborhood than a coal plant. But that's just me.

And golly gee, when you look at average daily electricity demand curves, it's pretty clear that an awful lot of the peak demand is from air conditioning. You know, when it's hot. Because the sun is shining. Yes, there will need to be other supplies for base load. But solar does a very nice job for peak loads due to AC.

View attachment 530463

* Strictly speaking, I do have solar in my neighborhood. On my house, in fact.

I love that you have solar. Just don't make me subsidize your expensive choice.

 

[jderimig]

 

[jderimig]

 

[smstachwick]

I love that you have solar. Just don't make me subsidize your expensive choice.

The same logic could be flipped backwards. The choice of allowing dirty fuels market dominance and delayed phase-out is effectively subsidized (or paid for, or whatever word you want to use) by those who suffer the effects of runaway pollution and climate catastrophe, and it’s a heck of a lot more expensive in terms of both human cost and cold, hard cash.

 

[ThirstyBarbarian]

Huge win for clean energy. . . . Clean energy tax credits are the centerpiece. Under the deal, existing renewable credits would be extended. After 2025, they would become technology neutral and based on greenhouse gas emissions reductions.

Is there any deeper thinking behind this than just that wind and solar are “clean” so we should build more of them? Doesn’t look like it. So give us a few years of this, and we’ll be right where Germany is: vast excess capacity of wind and solar panels, none of which is there when you need it, and electricity rates tripled to pay for the redundant excess capacity and subsidies to the people who built it. At least so far we have our own natural gas for the backup, but they’re trying to shut that down too.

My electricity rates aren’t going to triple. My electricity is made on my roof and is already paid for.

I think the storage problems with uneven production of solar and wind are going to be solved with utility scale battery storage, home battery storage, and vehicle to grid battery storage, plus other forms of clean electricity production that run all day, like geothermal.

 

[boatgeek]

I love that you have solar. Just don't make me subsidize your expensive choice.

You're adorable. All of us subsidize everyone else's expensive choices. That's what civilization is. You're in upstate New York, right? So how do you get to launches in Kansas or Black Rock? Federally funded roads or flying through federally subsidized airports. You think all of that comes for free? What if I don't want to support your expensive lifestyle?

Or let's look a little closer to home for you. The top 10 employers in Rochester are 2 universities (federally subsidized), 2 health care companies (federally subsidized), 2 grocery stores, Xerox, Harris (a government contractor), a business consulting firm, and the YMCA (donations are subsidized by being tax deductible). 6 of 10 receive significant federal benefits.

Pot, meet kettle.

 

[jderimig]

You're adorable. All of us subsidize everyone else's expensive choices. That's what civilization is. You're in upstate New York, right? So how do you get to launches in Kansas or Black Rock? Federally funded roads or flying through federally subsidized airports. You think all of that comes for free? What if I don't want to support your expensive lifestyle?

Or let's look a little closer to home for you. The top 10 employers in Rochester are 2 universities (federally subsidized), 2 health care companies (federally subsidized), 2 grocery stores, Xerox, Harris (a government contractor), a business consulting firm, and the YMCA (donations are subsidized by being tax deductible). 6 of 10 receive significant federal benefits.

Pot, meet kettle.

I don't live in upstate NY.

 

[boatgeek]

I don't live in upstate NY.

Ah, my mistake. I made the rash assumption that you lived where your business is registered. The same arguments apply wherever you do live.

[edit] An error removed.

 

[Tyeeking]

I love that you have solar. Just don't make me subsidize your expensive choice.

You made my point in two perfect sentences.

 

[boatgeek]

You made my point in two perfect sentences.

So you'll also stop driving on interstate highways, stop flying through passenger airports, and stop receiving products from more than 100 miles away (since those all go by interstate or federal airport too). Out of principle, you know. So nobody else has to subsidize your expensive habits.

 

[Tyeeking]

Ah, bu the devil is in the details.

There are different rule sets for how expenses are deducted for mining and oil drilling. The biggest one that I can see on a quick read of the regulations is that oil drillers are allowed to deduct the cost of acquiring the property and/or drilling rights, and miners can't. That's a pretty huge difference when millions of dollars are paid for oil leases.

https://www.law.cornell.edu/cfr/text/26/1.612-5https://www.law.cornell.edu/cfr/text/26/1.617-1
Oil companies can deduct up to 100% of the gross income from the property, and other mining companies can only deduct 50%. There are also differing percentages of what percentage can be deducted. Cobalt, lithium, and nickel have slightly higher percentages, but again I believe these are for mines in the US and relatively little of these minerals are produced in the US.

https://www.law.cornell.edu/uscode/text/26/613
If you do some basic research, you'll find that even though the Big Oil deductions are similar in nature to mining deductions, there are differences in detail that make the oil deductions more profitable.

Somehow, I doubt that you'd advocate for removal of subsidies that benefit your lifestyle.

I will read you cites latter tonight so cannot comment on their accuracy or veracity at this time.

With that said assuming that fossil fuel extraction industries have more favorable accounting treatment than other mining operations such as the cobalt, nickel, copper, lithium needed for EV’s (and I’m not saying that’s the case) I would be in favor of equalizing them. That would be consistent with my position that politicians should not be picking winner and losers. How about you? Would you favor them being the same?

 

[jderimig]

My electricity rates aren’t going to triple. My electricity is made on my roof and is already paid for.

I think the storage problems with uneven production of solar and wind are going to be solved with utility scale battery storage, home battery storage, and vehicle to grid battery storage, plus other forms of clean electricity production that run all day, like geothermal.

Storage costs is an issue if we really want to get to net zero (we wont). Recent studies have shown that the storage costs of a wind+solar grid are horrendous, $85 Trillion for the US. The main problem is dealing with wind intermittency as those periods can last several days or weeks. Here is a recent study that is more optimistic than earlier studies.

http://euanmearns.com/the-cost-of-wind-solar-power-batteries-included/
It will be interesting to see how the California and NY net-zero projects go. I hope that these will turn into a true pilot before the government intervenes and forces the whole country down this path (likely to happen when it looks like the CA and NY programs will fail).

 

[Tyeeking]

So you'll also stop driving on interstate highways, stop flying through passenger airports, and stop receiving products from more than 100 miles away (since those all go by interstate or federal airport too). Out of principle, you know. So nobody else has to subsidize your expensive habits.

Really poor examples. Government providing basic services such as highways, airports, police, etc is not the same as subsidizing EV’s over ICE vehicles.

Now if government charged ICE vehicles more than EV’s for the use of highways or the reverse, that would be a subsidy aimed at picking winners and losers and something I would oppose. Providing basic infrastructure that can be used by ICE vehicles and EV’s alike (roads) or fossil fueled aircraft and electric powered aircraft alike (airports) is not favoring one over the other.

 

[ThirstyBarbarian]

I think it’s fine for government to pick winners and losers in a lot of case when the choice serves a policy goal that the nation supports.

There are a lot of examples of government just outright banning certain harmful or dangerous products, which is the extreme version of picking a loser. But in most cases it’s appropriate.

 

[boatgeek]

Really poor examples. Government providing basic services such as highways, airports, police, etc is not the same as subsidizing EV’s over ICE vehicles.

Now if government charged ICE vehicles more than EV’s for the use of highways or the reverse, that would be a subsidy aimed at picking winners and losers and something I would oppose. Providing basic infrastructure that can be used by ICE vehicles and EV’s alike (roads) or fossil fueled aircraft and electric powered aircraft alike (airports) is not favoring one over the other.

It's not a poor example, it's the reducto ad absurdum of the absolute argument you propose. Every government action has winners and losers. Even basic infrastructure like roads advantages one locality over others because of improved mobility (this was a major issue during the railroad expansion). Highways are terrible for people whose neighborhoods are cut in half and/or have their homes taken for the right of way. Airports are fantastic for commerce and tourism but really lousy for the people right next door. Another example local to me are the hydroelectric dams in the Pacific Northwest. For an awful lot of the population (including me), they're basic infrastructure absolutely critical for a modern society. For people dependent on salmon runs, they were an absolute disaster.

There are winners and losers in every single government decision and action. If you want there to be no choice of winners and losers, you want no government at all.

 

[Tyeeking]

There are winners and losers in every single government decision and action. If you want there to be no choice of winners and losers, you want no government at all.

Every government action is not a subsidy (you know the whole topic of this thread). You are conflating a whole bunch of things and trying to call them all subsidies which is either lazy, uninformed, or just trying to play loose with the facts.

When the government uses taxpayer money for EV’s and not ICE vehicles it is picking a winner (EV) and a loser (ICE) vehicle and so favoring a particular niche. When the government builds the road that the EV and the ICE vehicle both share it is favoring neither. It is simply building infrastructure and letting the chips fall where they may (free market).

It’s not complicated.

 

[boatgeek]

Every government action is not a subsidy (you know the whole topic of this thread). You are conflating a whole bunch of things and trying to call them all subsidies which is either lazy, uninformed, or just trying to play loose with the facts.

When the government uses taxpayer money for EV’s and not ICE vehicles it is picking a winner (EV) and a loser (ICE) vehicle and so favoring a particular niche. When the government builds the road that the EV and the ICE vehicle both share it is favoring neither. It is simply building infrastructure and letting the chips fall where they may (free market).

It’s not complicated.

Well, you keep talking about how you don't want politicians to pick winners and losers, so those were a set of examples where politicians chose winners and losers. The dams are a great example, because they were built by the federal government.

If we're only talking about subsidies, what about all of the other subsidies/tax breaks previously mentioned that fossil fuel companies already receive?

 

[Tyeeking]

Well, you keep talking about how you don't want politicians to pick winners and losers, so those were a set of examples where politicians chose winners and losers. The dams are a great example, because they were built by the federal government.

If we're only talking about subsidies, what about all of the other subsidies/tax breaks previously mentioned that fossil fuel companies already receive?

My comments about politicians were clearly in the context of subsidies. Speaking of which I did indeed respond a couple of times about previously mentioned subsidies/tax policy for extractive businesses including fossil fuels. I even stated that I would be in favor of all extractive business (coal, oil, gas, nickel mines, cobalt mines, etc) receiving the exact same treatment and asked if you would support that. No response however.

 

[cwbullet]

My electricity rates aren’t going to triple. My electricity is made on my roof and is already paid for.

I think the storage problems with uneven production of solar and wind are going to be solved with utility scale battery storage, home battery storage, and vehicle to grid battery storage, plus other forms of clean electricity production that run all day, like geothermal.

Are you going to pay to dispose of the solar panels and batteries, or do you expect taxpayers to do that?

That is a hidden cost that very few calculate into the final cost.

Not a confrontation, but food for thought. Many feel the taxpayers should also subsidize this. I think not.

 

[OverTheTop]

When I talk about gas here I mean natural gas, not the stuff you call gasoline in the USA.

Here is an interesting subsidy situation in East coast Australia. The gas producers are exporting most of what they make and only selling a small quantity of the wholesale gas to the domestic market. With the price of gas going up they are now exporting more, because they can get higher prices than if they sell locally. This has actually created gas shortages and our reserves are being depleted. The government didn't force the companies to prioritise domestic supply so the companies can do what they like.

Many companies (brick, chemical, fabric are just some) can't afford the extra cost of gas used in their processes and are closing permanently.

The price of gas went through the roof. The government has a mechanism in place where they can peg the price of the gas supplied domestically. Great. They triggered that and we ended up without having to pay the 300% increase. Now, here is where the subsidies come in. There is a mechanism whereby if the suppliers have to provide the domestic gas at discounted prices the energy providers can claim hardship since they can't sell the gas for the price they are getting overseas. Enter the government, assisting them with top up payments adding to their bottom line.

So they create an artificial shortage themselves and then reap the benefits .

Interestingly Western Australia has legislated the local supply is to have priority, so they don't have this problem.

The energy retailers are all over the place. Small ones that were trying to look after their customers have folded. Larger ones, typically that provide both gas and electricity, seem to be in a win-win situation. People who bail out from gas go to electricity so they don't care too much.
================

FYI electricity is around $0.30/kWh here, and they have just wound back the feed-in tarif from $0.12/kWh to $0.09/kWh for our solar power system (10kW). Payback went from around six years to much further out so we will never recoup the cost. There is talk of $0.06/kWh, at which point I will consider whether I will feed the grid or not. I don't consider paying over 30c/kWh and only getting 5c/kWh feed in rate. They would be selling my power for a 500% profit, and they haven't even had to generate it. Grrrr

 

[lakeroadster]

As long as there's not a ban, I don't see it being a big deal for most people. My cars will last the rest of my life; I sold my newest two, s 99 and a 97.
I have two 96's left, and one has a new engine in it, and I have an engine on the stand for the other one.
I don't live in the rust belt, so this won't affect me at all.

They won't ban them, but when gasoline is $100 a gallon and the stations all disappear, ICE vehicles will no longer be economically feasible to use, except in parades.

 

[Peartree]

View attachment 530476

Mod warning. This subject dances on the line of our forums rules on politics. Naming politicians puts it over the line. Please just don't.

 

[Peartree]

Really poor examples. Government providing basic services such as highways, airports, police, etc is not the same as subsidizing EV’s over ICE vehicles.

Now if government charged ICE vehicles more than EV’s for the use of highways or the reverse, that would be a subsidy aimed at picking winners and losers and something I would oppose. Providing basic infrastructure that can be used by ICE vehicles and EV’s alike (roads) or fossil fueled aircraft and electric powered aircraft alike (airports) is not favoring one over the other.

Your own example of "basic infrastructure" is itself a classic example government choosing winners and losers. The primary mode of transportation in the US until the 1950s, was railroads. But, under pressure from Detroit, as well as prominent congressmen from states that benefitted from selling cement, the United States shifted government infrastructure spending from rail to highways, and then later from highways to airports. Today, any time someone talks about government spending for rail improvements, which are far more green than either highway or air, and which receives only a tiny fraction of what we spend on highways or airports, everyone says that we shouldn't subsidize corporations. Because, somehow, government spending that directly benefits Boeing, or United Air Lines, or Ford, or dozens of others, is better than spending that benefits BNSF, CSX, or Norfolk Southern even if the latter offers demonstrably high returns to the taxpayers and is better for the environment.

Infrastructure spending absolutely *is* a classic example of government choosing winners and losers. The reason that every developed country has a vibrant passenger rail system and we don't, despite the fact that we once did, is because the government chose to make it that way by choosing winners and losers.

 

[ThirstyBarbarian]

Are you going to pay to dispose of the solar panels and batteries, or do you expect taxpayers to do that?

That is a hidden cost that very few calculate into the final cost.

Not a confrontation, but food for thought. Many feel the taxpayers should also subsidize this. I think not.

I’m not sure how California handles recycling solar panels, but I have over 20 years to figure it out.

Personally, I think ALL products should include a disposal fee that is added to the sales price and collected up-front from the consumer at the point of sale.

 

[boatgeek]

My comments about politicians were clearly in the context of subsidies. Speaking of which I did indeed respond a couple of times about previously mentioned subsidies/tax policy for extractive businesses including fossil fuels. I even stated that I would be in favor of all extractive business (coal, oil, gas, nickel mines, cobalt mines, etc) receiving the exact same treatment and asked if you would support that. No response however.

Well, I was taking some time to think about that. I can definitely see the value in some differences in approach to subsidies/tax benefits depending on the industry and its methods. Let's just think about the coal industry for a moment. There are wildly different impacts to the surrounding community created by deep bore mining, open pit mining, and mountaintop removal mining. Whatever subsidies there are for coal mining should account for that in some manner, or require that the companies pay in advance for cleanup/site restoration. Prepayment would be important given a long a sordid history of companies extracting every bit of coal then declaring bankruptcy and sticking the taxpayer with cleanup costs.

Are you going to pay to dispose of the solar panels and batteries, or do you expect taxpayers to do that?

That is a hidden cost that very few calculate into the final cost.

Not a confrontation, but food for thought. Many feel the taxpayers should also subsidize this. I think not.

Do you pay to dispose of a large flat screen TV? Solar panels should be covered under whatever E-waste policies your local community has. Usually, that's either free (to keep heavy metals out of the waste stream) or some nominal fee. Often, consumers get free disposal and companies (like the ones that you'd use to take solar panels off your roof) have to pay.

Batteries are the same way. Hopefully, battery recycling will get to the point that lead-acid batteries are now, where there will be enough value in a used core that they will be bought and recycled rather than entering the hazardous waste stream. Note that it wasn't that long ago that used lead-acids went into the landfill with everything else.

 

[Tyeeking]

Your own example of "basic infrastructure" is itself a classic example government choosing winners and losers. The primary mode of transportation in the US until the 1950s, was railroads. But, under pressure from Detroit, as well as prominent congressmen from states that benefitted from selling cement, the United States shifted government infrastructure spending from rail to highways, and then later from highways to airports. Today, any time someone talks about government spending for rail improvements, which are far more green than either highway or air, and which receives only a tiny fraction of what we spend on highways or airports, everyone says that we shouldn't subsidize corporations. Because, somehow, government spending that directly benefits Boeing, or United Air Lines, or Ford, or dozens of others, is better than spending that benefits BNSF, CSX, or Norfolk Southern even if the latter offers demonstrably high returns to the taxpayers and is better for the environment.

Infrastructure spending absolutely *is* a classic example of government choosing winners and losers. The reason that every developed country has a vibrant passenger rail system and we don't, despite the fact that we once did, is because the government chose to make it that way by choosing winners and losers.

The government did not shift transportation from railroads, to cars and then to aircraft, consumer demand did that. Government reacted to the shift in consumer preference by building the infrastructure to support it. It’s consumers that picked the winners and losers in that shift.

As early as 1929 (well before the 1950’s) some 60% of US families owned an automobile. That was not because of subsidies it was because consumers enjoyed the freedom and prestige of car ownership. Hell they still do.

And BTW Warren Buffet is very wealthy as a result of railroads continuing to do just fine, somewhat ironically because they haul so much coal and oil.

 

[smstachwick]

But, under pressure from Detroit, as well as prominent congressmen from states that benefitted from selling cement, the United States shifted government infrastructure spending from rail to highways, and then later from highways to airports.

Fascinating.

My understanding was that the Interstate Highway System was originally conceived to improve the military’s capabilities for rapid ground transport around the country, but I’d be curious to know more about this angle.

 

[boatgeek]

So now that we’re in the proper thread I will ask my question again. You said the EV manufactures cannot keep up with supply. So if that is the case why is there a need for such large tax incentive subsidies for the purchase of EV’s?

The government did not shift transportation from railroads, to cars and then to aircraft, consumer demand did that. Government reacted to the shift in consumer preference by building the infrastructure to support it. It’s consumers that picked the winners and losers in that shift.

As early as 1929 (well before the 1950’s) some 60% of US families owned an automobile. That was not because of subsidies it was because consumers enjoyed the freedom and prestige of car ownership. Hell they still do.

And BTW Warren Buffet is very wealthy as a result of railroads continuing to do just fine, somewhat ironically because they haul so much coal and oil.

If roads were so popular, why would the government need to step in and fund them? Isn't that just choosing winners and losers?

To be fair, our freight railway system is the envy of the world and what makes money for Buffett. Our passenger rail system is a joke among developed nations. The fact that both run on the same rails is a major part of the problem.