Cutting Energy Subsidies

The incoming Secretary of Energy, Rick Perry, has talked in the past about abolishing the department that he will be running. President-elect Donald Trump has expressed skepticism with some types of energy subsidies. However, Trump’s campaign website mentioned support for “continued research into advanced energy technologies.”

As they consider their energy policy approach, the Trump team should look at the past record of federal spending, which I discuss in a new study on energy subsidies at DG.org.

The government has been subsidizing conventional and renewable energy for decades. Department of Energy (DOE) spending has been fraught with failure. Billions of dollars have been wasted on ill-advised and mismanaged projects. The study includes nine case studies of DOE failure, from the Clinch River Breeder Reactor debacle in the 1970s to the recent Solyndra scandal.

There is no need for federal energy subsidies. U.S. energy markets have changed dramatically over the past decade. Technological advances in the oil and natural gas industries—particularly hydraulic fracturing and horizontal drilling—have led to large increases in domestic production. U.S. imports of oil and gas have plunged, while exports have increased. U.S. businesses and consumers have benefited as gasoline and natural gas prices have fallen.

This energy revolution was driven by private innovation and competitive markets, and it has created environmental as well as economic benefits. Cleaner natural gas, for example, is replacing coal as a fuel source in U.S. electricity production.

The oil and gas revolution shows that American businesses can generate innovations and progress with their own resources. Furthermore, investors and major corporations have pumped billions of dollars into alternative energy technologies in recent years. The U.S. energy sector is vast, dynamic, and entrepreneurial, and it does not need subsidies to thrive.