Cheat-Seeking Missles

Wednesday, April 30, 2008

Fatal Energy Policies

"While all the presidential candidates were railing about lost manufacturing jobs in Ohio," writes Thomas Friedman in today's NYT, "no one noticed that America’s premier solar company, First Solar, from Toledo, Ohio, was opening its newest factory in the former East Germany — 540 high-paying engineering jobs — because Germany has created a booming solar market and America has not."

Well, that's a biased way to present good news. It's not like First Solar shut down it Ohio operations and moved lock, stock and barrel to Germany. Rather, they saw a strong emerging market rich with government incentives and expanded their operations.

Friedman's overarching point -- that America needs a sound energy policy -- is correct, but he picks weird way to present it and ends up with a policy that panders to the Warmies and the expense of the consumers.

Friedman starts by picking a lousy example in First Solar. He wants the US to incentivize alternative energy, which is a somewhat good idea, so he focused his example on First Solar's German operations -- but he ignored the company's Malaysian plant because he certainly doesn't want call for cheap US labor.

And neither did he want to write about Ohio's crumbling infrastructure and rustbelt ways to drive up the cost of business. Otherwise, he might have mentioned that First Solar pulled up its roots last week and moved to Arizona.

Still, there's much I agree with in Friedman's analysis, starting with his dislike of the currently voguish drive to cut or eliminate federal gas taxes over the summer. His point -- that we're giving money to China to incentivize us to enjoy ourselves by driving our SUVs to vacation spots -- is sound on the China debt front, but elitist in how he wants to mandate our behavior. (He did not divulge the Friedman vacation plans, BTW.)

He is also correct that if it is our goal to use incentives to quicken the development and market penetration of renewable technologies, incentivizing the use of gasoline is not the way to do it, whether it's the McCain/Clinton tax cut idea, or all the existing credits that go oil's way.

I think reasonable incentives for alternative energy -- accelerated depreciation for alternative energy infrastructure, reduced regulatory burdens for "green" transmission corridors, tax credits for purchases -- are a good idea if they're carefully watched so they don't become permanent subsidies for successful businesses.

I'd go further, though, and say that all politically motivated federal give-aways -- the gas tax cut, Obama's college freebie or the checks the IRS mailed out last week -- send the wrong message. Government isn't in existence to dole out freebies, and whenever it does, it keeps the free market from making the adjustments necessary to sustain a sound economy.

Friedman also acts as if we have only one energy source available to us -- alternatives -- and wants to pretend we can just leave oil behind. Alternative energy is called alternative for a reason. There's a Big Daddy energy and then there are these yapping alternatives that say they can replace Big Daddy, but they're hardly out of diapers.

If we worry, as we should and Friedman does, about our increasing debt to China, then why should we continue to compete against China on world markets for oil? If we're worried about the social and economic consequences of the rising cost of energy, why shouldn't we work to increase all supply?

Friedman says nothing about opening ANWR or the continental shelf to drilling; he's mum on exploration on federal lands; there's not a peep about the benefits of fuel mix standardization or the construction or expansion of refineries -- all things that would greatly benefit America's energy picture and economy.

These are simply discounted with the charge that any use of oil simply increases "our contribution to global warming for our kids to inherit."

America is moving dramatically toward more efficient, cleaner use of petroleum, from Priuses and clean-burning diesels to more efficient industrial applications. And as long as the debate on global warming isn't over -- and it's not -- it's perfectly fine to use it, drill it and refine it until the alternatives shed their diapers and are ready to replace Big Daddy.

Get it wrong, and the economy crashes and people suffer. And Friedman gets it wrong.

Labels: , , ,