The Three Conflicting Goals of Energy Policy
The Three Conflicting Goals of Energy Policy
This chapter explains that the energy policy is fatally flawed both in the process by which problems are identified and in the solutions that are chosen. In the vernacular of the economist, cheap energy plays a vital role in raising the productivity of workers because it allows the substitution of inanimate energy for animate energy. Subsidies are a contrivance because they only appear to make energy cheap from an economist's perspective. Fossil fuels historically have been the cheapest energy sources and probably will continue to be the cheapest energy sources for the foreseeable future. Getting the prices right means including in the market price the premiums that a society should be willing to pay for clean and secure energy, and also means eliminating the need for ad hoc command-and-control solutions, congressional beauty pageants, and indiscriminate choices among a range of policy options put forward by special-interest groups.
Keywords: energy policy, cheap energy, subsidies, fossil fuels, energy sources, prices
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