Tax Dirty Energy or Subsidize Clean Energy?

by Shawn Regan

Now that cap-and-trade legislation is dead in Congress, some are beginning to organize around a completely different approach. Instead of trying to raise the cost of dirtier energy, what about lowering the cost of cleaner energy?

Today, the American Enterprise Institute and the Brookings Institute released a joint proposal to increase federal spending on clean energy innovation to $25 billion a year, up from the current $4 billion a year. David Leonhardt writes in the NYT:

These proposals reflect the political reality that raising the cost of dirty energy is unpopular, especially when the economy is so weak. Finding the money to make clean energy cheaper, even when government budgets are tight, will probably be an easier sell.

See the full article for more and for commentary from AEI scholar and PERC board member Steven Hayward.


  1. Excellent article, except for one tid-bit. The ‘market-based’ solution that was the backbone of cap and trade legislation had very serious flaws. The truth is that carbon prices have never been established and neither has anything like it ever been done. Theoretically, one could see not only jobs on the line, but the consumer price index and ultimately inflation being affected by an unknown quantity, namely the swinging price of carbon emissions on a market-based system.

    As many who study public policy know, change of this nature comes about with incentives more than merely fines or punishments. With that said, the article is absolutely correct in suggesting that greater tax breaks and government financing is needed to push clean and green technolgy forward.


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