The Breakthrough Institute, the Brookings Institution, and the World Resources Institute released a collaborative paper today forecasting an upcoming bust in the green-energy market. According to the paper’s authors, federal involvement in the renewable energy marketplace has led to an unsustainable system:
Despite this recent success, however, nearly all clean tech segments in the United States remain reliant on production and deployment subsidies or other supportive policies to gain an expanding foothold in today’s energy markets. Now, many of these subsidies and policies are poised to expire — with substantial implications for the clean tech industry.
In the absence of legislative action to extend or replace current subsidies, America’s clean tech policy system will have been largely dismantled by the end of 2014, a casualty of the scheduled expiration of 70 percent of all federal clean tech policies.
Furthermore, even the authors admit that,
The maintenance of perpetual subsidies is not a sustainable solution to the new challenges facing the US clean tech industry. Clean tech markets in America have lurched from boom to bust for decades, and the root cause remains the same: the higher costs and risks of emerging US clean tech products relative to either incumbent fossil energy technologies or lower-cost international competitors, which make US clean tech sectors dependent on subsidy and policy support.
The authors still conclude that the federal government must provide financial support to the various clean-energy sectors to help them compete in the marketplace. While there should be a place for government sponsorship of research and development, it is debatable how much further interference the government should have in the marketplace.