The Washington Post in an editorial of January 20 described the extension of the production tax credit (PTC) for wind as “wasteful.” The Post’s editorial is available here.
However, The Post’s editorial board has penned multiple editorials expressing concern about climate change and noting that the United States lacks a coherent policy to address it. Below is my letter to the editor responding to the mischaracterization of the PTC and noting the inconsistency in being concerned about climate change and then characterizing the PTC as wasteful.
To the Editor:
I am writing to compliment the Editorial Board for its nine editorials over the past 11 months addressing climate change. The editorials have cogently explained the risk of climate change and the fact that carbon emissions have been lowered in the U.S. through the use of renewable energy and natural gas but as natural gas emits carbon it is a questionable long term solution to the climate change challenge. Further, the editorials have shown a sophisticated understanding of the issue in the United States by acknowledging that in the current political environment that a broad based policy change, like a carbon tax, is not feasible.
In light of the sophistication that the board’s prior editorials have demonstrated with respect to these issues, I was surprised to see the reference to “wasteful wind energy subsidies” in its editorial of January 20. This is a reference to efforts to have Congress PTC for wind energy that lapsed at the end of last year.
The PTC is not wasteful in that it provides significant economic benefits to the U.S. economy. Econometric studies have shown that tax revenue created by the construction and operation of large wind projects more than offset the cost of the tax credit. Much of this revenue comes from tax on the salaries of the U.S. workers who manufacture the parts and build and maintain the wind farms. Every time the PTC lapses, we see factories closed in the U.S. This history suggests that if the PTC is not extended that the prior tax expenditures to create American wind industry jobs will be wasted as those jobs will move back off shore.
Second, the PTC is arguably the tax credit that best aligns the interests of the taxpayer with the interests of the government. The tax credit is 2.3 cents per Kilowatt hour of electricity actually produced and sold in the first ten years. Therefore, the tax benefit only accrues when green energy is produced.
Third, the U.S. lacks a coherent federal energy policy. Without the PTC, there is no material federal incentive for clean wind over natural gas.
An incentive outside of the tax code may provide greater efficiency than the PTC. However, as you wrote on November 7, “that would require [a] commitment to addressing climate change … and a willingness to pass well-designed laws that the political system usually can’t muster.” Thus, we are left with the tried and true PTC which has effectively reduced carbon emissions and created American jobs. Given the board’s views on climate change, it is a program it should support rather than labeling as “wasteful.”