An Effective Energy Policy Requires Consistency

In response to my post in which I bemoan the lack of consistency in our energy policy (and thus the uncertainty facing potential investors in renewable energy), Gary Tulie, frequent commenter from the UK, writes:

Why can’t the USA and the United Kingdom structure their renewable energy policies a little more like Germany?

I am not saying we should necessarily adopt their policy wholesale; however it is clear that the success of Germany in boosting Renewable Energy production is mostly due to consistent policy over a long period of time.

I have read that in the oil markets, the cost of variability in price to the global economy through boom and bust, and changing levels of economic activity is the equivalent to an increase in average oil prices of around $10 per barrel. Inconsistent policy which creates frantic surges in demand followed by drought makes renewable capacity more expensive than necessary as companies face substantial costs growing then shrinking their businesses – recruiting staff then making them redundant, and leasing / buying buildings which are soon underutilized, and driving manufacturing to markets with a more consistent policy.

A slightly less generous policy with consistency – which does not regularly expire and get reinstated would create far better conditions for investment, and avoid a substantial amount of disruption and wasted efforts.

Good point.  As I’ve often written, I advocate for a floor on gasoline prices.  If there were a true commitment on the part of our government to establish a progressive energy policy in which fossil fuels were phased out over a period of time, we’d simply say that anything under, perhaps, $5 per gallon would be swept off as a tax to reduce the deficit.  Now, in a flash, everyone would know the minimum value proposition for competitive goods, e.g, alternate fuel vehicles. 

I’m not saying that this has any chance whatsoever of actually happening; I’m saying that it’s what I would do if I had the power.  

I know there are people who say that it’s not government’s role to pick winners, and that the European countries that have taken bold steps here are essentially fascists. I disagree. In my opinion, it’s the function of government to move against social evils and promote social goods.  That said, I can’t think of a more appropriate thing that government could do, given the vast and uncaptured externalities of fossil fuels.