by xe

Created on: November 30, 2008   Last Updated: December 03, 2008

Tax Credits are not the proper way to go green or encourage sustainable energy conservation, any more than cheap gas and easy credit were good reasons for so many to buy and drive wasteful SUV's in the recent past. Tax credits can be one of several negative contributors which artificially skew the free market, and result in vehicles being tooled and manufactured for the wrong reasons. If a technology is viable, it will be introduced, survive and thrive. If the business case in a free market economy is based on bribing the consumer, then it is not a good idea.

Based upon my research, when a technology is introduced and marketed based upon tax credits and other artificial acts, the business model normally is based upon some manipulation of the decision-makers by investors or groups who profit not from the long-term viability of the technology but from the short-term tax breaks and financial distortions that result from these actions.

The most recent corn-for-fuel experiment is a perfect example of how lobbyists and investors with only financial interests can profit from the well-intentioned but over-emotional actions of the consumer. Higher food prices and a number of other backlash effects have been felt, while the reality is that the fuel costs more and delivers less energy than regular gasoline, while in no way showing the ability to justify the dedicated investment to the artificially created enterprise. The auto manufacturers benefit artificially, in that they are allowed to claim tax breaks for manufacturing these flex fuel vehicles, while only a very small percentage of buyers ever even try the fuel. Additionally, most of those who do soon realize that their mileage per dollar is lower, and quickly migrate back to conventional fuels.

I can find no proposal for these tax-credit enhanced proposals which is built upon a business case which, without these breaks, would stand alone as a viable technology or investment. There are so many alternatives under development that the choice to force a select few into favor represents a huge gamble that without free-market competition we are selecting the correct ones.

At the turn of the twentieth century, many electric cars were manufactured in addition to the steam-powered versions. The free market decided which direction to take based upon a number of factors involving consumer value and convenience. These same factors should drive the technologies and alternative energy developments today. If the sheer existence of a new powertrain is justified by tax breaks in one country, what is the global market for this product? The ability to leverage economies of scale and participate in global competition is over-ruled by the greed of the financiers who make money whether the technology survives a few years or is in fact the correct long-term choice.

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