A new report – coauthored by researchers from the Brookings Institute, the World Resources Institute, and the Breakthrough Institute – examines the coming decline in subsidies and tax breaks for renewables, and what that decline might mean for the U.S. renewables industry. The report argues that the decline imperils the industry, but suggests that this issue presents an opportunity to reform the subsidies and programs currently in place.
The American Recovery and Reinvestment Act of 2009 ushered in a brief era of heightened support for the clean tech and renewable energy sectors, providing just over $150 billion through 2014. However, many of those subsidies are due to expire this year, and, without action from Congress, annual clean tech support will be cut nearly in half from 2011 to 2012. Concurrent with the decline in subsidies, a variety of challenges face the clean energy industry, including a shrinking European market and competition from low natural gas prices.
According to the report, the renewables industry must move away from the “boom and bust” cycle that come with federal and state subsidies. The report also suggests specific policy reforms, including reducing subsidy levels as technology costs shift, promoting a diverse energy portfolio, and increasing investment in energy R&D.
In an op-ed in The Hill, the report’s authors argue for energy subsidies that spur both market demand and continual innovation. They also argue for leveraging America’s strength as an innovation leader by increasing funding for energy RD&D. Meanwhile, subsidies for fossil fuels should be removed, according to the report’s authors, as it is a “mature industry” that has had a century “to drive down costs, reach scale, and build an energy system specific to their needs.”
What factors keep renewables from competing with traditional energy sources? What impact would you expect from the implementation of this report’s recommendations?