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May 28, 2023

How America’s energy policies are stifling growth and innovation

By AGASTYA MONDAL | February 28, 2013

The U.S. federal government invests in many programs that aim to benefit its people, its economy and its global standing. While many of these programs are relatively successful, the U.S. has fallen severely behind is its policy toward technological innovation, especially in the field of energy.

As the burning of the planet’s fossil fuels continues to approach unsustainable levels, it will be vital for future generations and governments around the world to make intelligent investments in renewable energy. But while countries like Germany and France strategically support their emerging renewable energy markets, the U.S. has failed to create a balance with the private sector that inspires ingenuity and innovation.

One of the major reasons why the U.S. has fallen behind in renewable energy is not only its dependence on foreign oil, but its politicians’ pathetic inability to stand up to lobbyists and special interest groups that sway legislation in favor of major oil companies. While it is true that dependence on foreign oil is nearing all-time lows, the alternatives proposed by politicians — such as natural gas drilling, fracking and the Keystone XL Pipeline — do not encourage a national policy of replacing dirty fuels with clean, renewable energy. Until politicians realize that environmental degradation and clean energy outweigh profits from the oil industry, U.S. innovation in the energy sector will continue to lag behind other developed nations.

Another factor that is seriously deterring innovation in both technology and energy is America’s use of subsidies in these emerging markets. Dubbed by Forbes as the “silent killer” of new technologies, subsidies are extremely harmful to competition and innovation.

It is necessary to understand the distinction between government-sponsored research and subsidies. The former involves budgeted money — from the National Institute of Health or the National Science Foundation, for example — given to scientists to work on specific projects. The latter involves taxpayer money that is given to private sector companies to lower costs and allow those companies to thrive.

Research is absolutely vital to technology, and governments should invest in it. While subsidies may seem beneficial to companies, they are actually very dangerous from a macroeconomic standpoint. Technological innovation is contingent on competition, especially in less established markets such as the energy sector. When the government subsidizes certain companies, competition is effectively eliminated, and both quality and innovation decline at the expense of the taxpayer. The most notorious example of this is Solyndra, a government-subsidized solar energy company that declared bankruptcy in 2011 and cost taxpayers $535 million. Subsidies not only stifle innovation in developing sectors, they come with great cost to taxpayers as well.

Overall, the U.S. government needs to seriously reconsider its energy policy before any substantial change can occur. Dangerous relationships with big oil companies and a history of failed subsidization have left America lagging behind its global peers in technological innovation. President Obama has recently stated that his administration will address these vital issues, but it will take the cooperation of Congress, private industry and the American people to foster real energy reform.

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