Why Natural Gas And Ethanol Shouldn’t Be Eligible For Subsidies

Washington’s most recent energy subsidy debates are focused on tax credits for industries involving natural gas and ethanol. The credit will expire at the end of this year, still the Senate voted to remove the subsidy. Thus the opposition to the $6 billion tax credit is increasing on a national level. Some Members of Congress have removed their names from the list of co-sponsors of the bill. In spite of this, bipartisan support is focused on extending the subsidies for the use of natural gas vehicles.

To see why none of these two industries deserve subsidies we can look at John Sullivan’s statement about this matter. He said that the natural gas industry will be fine without these subsidies, but the ethanol industry will not survive. Many argue that ethanol is not worth propping up by tax credit government intervention.

If something is not competitive in economical terms, then the state should not artificially encourage these technologies. It is not normal for a market to not be able to exist without subsidies, especially when there are alternatives. If the producers say their idea is viable, then they shouldn’t need tax credits anyway.

The argument turns to helping these producers to overcome the investment “valley of death”. They might say that they need tax credits in order to push through the initial hurdles of the transition from vehicles that run on gas to ones that are natural gas-powered. However, if natural gas is a good solution, then car manufacturers will implement it.

Preferential treatment to some industries has always been done through energy tax expenditures. These credits fool people into the perception that some technologies are more competitive than they really are.


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