This is the subject of my latest column for Bloomberg, here is an excerpt:
A recent study finds that, of all domestic subsidies, the most effective involve replacing dirty electricity generation with clean electricity generation. Basically, that means subsidies or tax credits for solar and wind energy. Those are twice as effective as rebates for electricity, housing climate, or subsidies for buying electric or hybrid vehicles.
Current local and national policies provide subsidies for both electric vehicles and solar and wind power, although the details vary. It would be better if the US turned some of those funds into subsidies for solar and wind power.
Green energy advocates, however, often support public funding of any policy that reduces emissions. “Less money for electric cars” is not the kind of message they really want to send. However, in a country with a shortage and limited support for green energy projects, thinking hard about trade-offs is necessary.
When it comes to green energy policies, many countries are struggling to meet their commitments. Australia, for example, scrapped its carbon tax a decade ago, and many countries talk about a carbon-free future in vague and loose terms. The UK has a net zero target for 2050, but is not on track to meet the intermediate targets. It is foolish to carelessly support a strategy above all else.
So we need to make a choice, and this paper provides guidelines.
Original research from Robert W. Hahn, Nathaniel Hendren, Robert D. Metcalfe, and Ben Sprung-Keyser.
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