NCPA - National Center for Policy Analysis

Green Energy Is a Luxury Good

October 27, 2011

While green initiatives abound in times of economic wellbeing, this splatters to a halt when economies go south.  Though recessionary downturn does not obscure the truth about climate change or the need for continued action in order to rein in ever-increasing rates of emissions, the fact of the matter is that greenness is a luxury good -- it can only be afforded when the time is right.  This can be seen doubly so in the current debt crisis in Europe, first because stifled economic growth limits attention to long-term green initiatives and second because green policies are partially to blame for the crisis in the first place, says Patrick Michaels, a senior fellow in environmental studies at the Cato Institute.

In Spain, which President Obama touted as a paragon of economic stewardship while on the campaign trail in 2008, numerous policies wasted enormous amounts of federal funding in the name of greening up the country.  The government subsidized the purchase and use of residential solar panels via power purchases, yet this program invoked costs and debts far greater than the economic benefit obtained from the panels.  A similar program in the United Kingdom saw wide participation (15,000 installments last month) despite the fact that the United Kingdom is one of the cloudiest countries on earth.

Only the severe economic downturn could reveal the blatant wastefulness of these policies to citizens of these countries, recognizing that they could no longer afford to be so generous with their anticlimate change initiatives when their governments have insolvency fears.  This reversal in public sentiment is reflected in sweeping changes to green initiatives around the world as various nations tighten their belts.

  • Spain announced a 40 percent reduction in its wind power subsidy.
  • The European Commission's energy department is questioning the wisdom of its go-it-alone global warming policies, citing loss of economic competitiveness.
  • The British government pulled the plug on its budget-bending carbon capture and storage facility.
  • Japan announced it is reconsidering its plan to cut carbon dioxide by 25 percent in the next 8 years, citing a wealth drain in its attempt to meet the target.

These policy reversals track perfectly with the economic model predicated on recognition of greenness as a luxury good.  It flourishes with economic growth, and is almost immediately cut when the impact of a recession is felt.

Source: Patrick Michaels, "The Great Green Energy Crack-Up," Forbes, October 21, 2011.

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