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Energy Part 1 – Do the Nuclear, Oil, and Coal Industries Receive Welfare?

ImageA great deal of time and effort will be spent discussing energy in the upcoming election. I am glad to see this dialogue and think that citizens, elected officials and experts alike need to be open to learning about new approaches and policy options. A flexible mind is not a sign of flip-flopping. I am starting a series of columns looking at energy issues by asking if coal, oil and nuclear energy are subsidized by taxpayers in order to mask their full cost.

Free Market Solution or Not

My question is fair. Free markets are supposed to gravitate toward the best product for the lowest price. Conservatives are supposed to support free markets. Yet, why is it that economic conservatives are pushing for more oil drilling and more nuclear plants when the free market would dictate that this is not the best product for its price? First, oil is much cheaper to extract from the ground in the Middle East so U.S. drilling unless subsidized will not be price competitive. Second, many costs of coal and oil are already benefiting from government spending: those with black lung disease receive Medicare and Medicaid, crop loss due to acid rain is partially compensated for/insured by the government, (even if we leave Afghanistan and Iraq aside) the U.S. government has military bases and/or a military presence in Kuwait, in the United Arab Emirates, in Qatar, in … all to ensure a relatively stable flow of oil. Taxpayers pay these Medicare/Medicaid bills and military costs. This all amounts to government subsidizing of the oil and coal industries.

I am not so naive as to say the U.S. could just leave Kuwait or the super rich U.A.E., but if new tax payer money is going to go into the current energy crisis the money should go to the most cost effective solutions. Second, zero emission and low polluting energy sources lack the back-end costs such as Medicaid expenditures for coal miners with black lung disease or paying to protect nuclear plants. The last groups to receive tax money/grants/tax breaks should be groups dedicated to new coal, nuclear and oil capacity. There may be moral reasons to argue for this – but from a cost standpoint if we consider the full costs of coal, oil and nuclear – promoting efficiency and producing clean energy are both cheaper options.

4 Financial and Human Costs that Government Subsidizes

1. Birth defects, cancer and miscarriages associated with the toxins produced in mining, refining and burning fossil fuels. Nuclear plants in the U.S. such as the Hanford Nuclear power plant and waste site in Washington state have a history of shortening lifespans of those who lived near the plant and its waste. Cheap wattage as a trade off for cancer?

2. The security associated with guarding a nuclear plant as well as making sure nuclear waste does not fall into the wrong hands has to be paid for by someone. My guess is that U.S. military personnel will be paid by tax payers to guard new nuclear plants and the waste they produce. Maybe Blackwater will get the contract, but either way taxpayers pay more than the sticker price of nuclear produced wattage.

3. Cleaning up nuclear waste is not cheap. For instance, the clean-up of the Fernald reactor site in southern Ohio cost $4.4 billion in tax payer money.

4. Children who live near heavy traffic are nearly 20% more likely to develop asthma. If those children are insured they simply raise demand for medical services and that raises prices across the board (demand raises prices in general). If these children are not privately insured, tax payers foot the bill or hospitals pass costs along to other patients.

I am sure I could go on, but the point is that if markets tend toward an equilibrium that seeks a balance of quality and price, then the “drill here, drill now, pay less” movement and the new nuclear plant movement are not market friendly. Real accounting of the costs associated with coal, oil and nuclear energy are hidden by government spending and yet the anti-welfare anti-big government GOP is behind these options. Why is that? I have to question the veracity of anyone who would argue with a straight face that such a plan would save money in the short and long term.

Unless winning debate points against Sean Hannity is my goal, the key question remaining is what proposal or basket of proposals is the most effective? Part 2 will make use of the Rocky Mountain Institute to answer that question.

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