There are sound market ideas that address issues of high energy prices. Throwing money at corporations is not one of them.
The House of Representatives Committee on Appropriations released its report language on the Energy and Water Development Appropriations bill for 2014. While the House deserves credit for scaling back government spending on activities more appropriately conducted by the private sector, Congress needs to take an ax to the Department of Energy’s (DOE) Advanced Manufacturing Program as well as the DOE’s Vehicle Technologies, Bioenergy Technologies, and Hydrogen and Fuel Cell Technologies programs.
The committee’s goals of addressing high gas prices and supporting American manufacturing are laudable ones, but the solutions do not necessitate taxpayer-funded programs. The incentive to develop alternative fuels already exists. Americans spent nearly $500 billion on gasoline and bought nearly 13 million new vehicles in 2011 alone. Globally, the transportation fuels market is a multitrillion-dollar one. If any alternative fuel technology captures a mere slice of that market, it will make billions of dollars in profit annually.
This is precisely why we do not need the DOE alternative fuel programs or the loan guarantee programs to advanced vehicle technologies. Markets make these investments and take on risks all the time, but unlike government programs—which privatize the gains and socialize the losses—the market properly aligns risk and reward. We don’t know what the next breakthrough in vehicle or fuel technology will be, but whether it’s electric vehicles, biofuels, hydrogen fuel cells, or something completely new, that breakthrough will certainly be driven by the private sector.
The DOE’s Advanced Manufacturing Office is also completely unnecessary and nothing more than corporate welfare. Past grant recipient companies have included LyondellBasell—one of the largest chemical companies in the world, with annual revenues of $45 billion—and Dow Chemical, which had $57 billion in sales in 2012 and invests over $1 billion annually in research and development.
As the committee report correctly states:
Energy costs are a major contributor to manufacturing costs, and technology innovations that steeply reduce energy consumption in industrial and manufacturing processes can give American manufacturers competitive advantages.
Manufacturers already know that energy is a significant input cost and will innovate to find ways to lower costs and gain a competitive advantage. Companies will make these investments if they believe that the technology is promising, worth the risk, and the best use of their investment dollars.
We’ve seen a manufacturing resurgence in the United States—but not because of a government program of taxpayer-funded initiatives. Entrepreneurs and energy producers sparked a shale gas revolution that has dramatically lowered input costs. American manufacturers and industrial companies will flourish on their own with a good tax policy, immediate expensing of equipment, and increased energy development that would lower their input costs.
These are sound market ideas that address issues of high energy prices. Throwing money at corporations is not one of them. Congress should eliminate these programs entirely.