Why are there government subsidies for water, electricity, fossil fuels, and other resources? Doesn’t this just encourage resource depletion?



  1. 0 Votes

    Probably, but the issue is far from being cut and dried. Government subsidies to traditional energy providers, especially oil and gas companies, have been part of US federal budgeting policy since 1916. Most are in the form of tax breaks, but there is some direct money too. The reasons for these subsidies are myriad. Often they began out of a desire to stimulate modernization and industrialization of under-served areas, such as Franklin Roosevelt’s Tennessee Valley Authority in the 1930s. These types of subsidies very often work their way into federal budgets as a result of political processes: the classic “pork barrel” behavior of politicians seeking to curry favor with their constituents by bringing federal projects and money into the area or supporting local business interests with subsidies. Do these policies increase resource depletion? There are many who think so, and the Obama administration has signaled in its new budget a reduction in these subsidies in favor of greater incentives to green power. Naturally this is a politically charged issue and those whose subsidies are running out are already crowing about being subject to “tax increases.” How this will play out in the political sphere remains to be seen.

    However, there are good reasons for giving some breaks and subsidies to traditional energy providers, for example, incentives to make their operations greener. The coal industry has been the recipient of tax breaks aimed at helping them modernize their plants to emit less particulates. In an economic climate where it’s still generally more profitable to pollute than to spend the money and time to go green, government incentives in the form of tax breaks or direct grants are really the only way to make it worth a polluter’s while to change its ways. So I don’t think all subsidies to traditional energy providers can be painted with the same brush.

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