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Time for a Change: (Dis) Incentives for (Non) Renewable Energy in Idaho by Ken Webster

Posted by: | April 6, 2011 Comments Off on Time for a Change: (Dis) Incentives for (Non) Renewable Energy in Idaho by Ken Webster |

          “We the inhabitants of earth, in order to continue to exist, must establish an energy portfolio that does not depend on fossil fuels as a primary source.”  So might read our new global constitution, after we declare our independence from GHG emitting, carbon intense fuel sources.  But, like the U.S. Constitution, our “green constitution” requires laws to effectuate its purpose.  Those laws can take many different forms.  They can be command and control regimes like the Clean Water Act.  They can be strict prohibition statutes like the Endangered Species Act.  The National Environmental Protection Act requires only that a certain process be followed.  Our new green laws can create incentives or disincentives for certain business practices, or even how we live.  Some states, like Oregon and Idaho, have attempted to promote green energy through tax credits.[1] 

            In Oregon, the Business Energy Tax Credit (BETC) is a state income tax credit designed to stimulate development of a wide range of renewable energy and conservation projects.  In Idaho, there is a 6% tax rebate for producers of renewable energy.  The question is: do these tax incentives work?  Do they help transform these two states, respectively, from carbon intense fossil fuels states, into renewable source states vital to becoming a more sustainable society?    

            Idaho, although rarely thought of as such, has a history of being a green energy state.  The Idaho Department of Commerce’s webpage details a history of green energy dating back over 100 years.[2]  But there remains market skepticism and a lack of political support for alternative energy sources.[3]   Yet in 2005 the State of Idaho legislature passed a tax incentive for alternative energy developers.  It is an incentive in the form of a 6% tax rebate.[4]  While some support probably came from those seeking to transform Idaho into a sustainable state, it is as likely that most support for the measure was either economic or political.[5]  Regardless of the lawmakers’ motives, the rebate signaled an emerging consensus in favor of alternative energy production in the State of Idaho.  But as it has played out the rebate has proven unpopular.

The opposition to renewable energy sources like wind started early.  Communities that had wind farms going in around them had the “not-in-my-back-yard” attitude.[6]  As far back as the first proposals for wind farms outside of Blackfoot, and Idaho Falls, there were hostile letters to the editor in the local papers. 

Now, as the tax credit prepares to sundown, even those who supported it initially are jumping ship.  Ketchum’s Rep. Wendy Jaquet is wavering in her support.[7] Blaine County, where Ketchum is located, is one of the most liberal counties in the State.  Why the change of heart?  States across the nation are experiencing budget shortfalls due to overspending and shortages in tax revenue.[8]  The 6% tax credit, initially projected as a potential $2.13 million loss per year, is expected to cost Idaho $47 million over the next two years.

If Idaho chooses not to renew the tax credit, and it appears that’s what will happen, then has this incentive really served its purpose?  The State of Idaho, though it has some new green energy sources, is no closer to a renewable portfolio standard than it was 6 years ago.  In fact, this might prove a major setback.  Once a program fails, it seems increasingly unlikely that it will gain necessary political support in the future. 

A little over a year ago, Governor Otter proposed a 6% tax increase on gasoline.  The purpose was to curb a budget shortfall in the transportation sector.  The legislature chose not to approve the gas tax.  That tax increase was the fairest way to meet the budget shortfall.  Idaho continues to experience budget shortfalls.  Now support for the renewable energy tax credit is waning.  The political environment is ripe for change. 

Rather than incentivize renewable energy sources through a tax credit, which causes budget shortfalls in a time of economic uncertainty, the better choice is to dis-incentivize non-renewable, fossil fuel sources.  Tax them.  Make them more expensive than renewable alternatives.  We all use fossil fuels, every day.  We should internalize the external cost of fossil fuel using higher tax rates, a carbon tax, or some other legislative disincentive, like a Clean Water Act type command and control regime. 

The tax or control regime could be designed as a “user” system or employ the “polluter pays” principle.  Those who use the most fossil fuel, pay the most.  Those who use less, pay less.  Such a system would help put renewable energy sources on a level playing field with fossil fuels, without sacrificing an already tight budget.

[1] This is not to suggest that the States are necessarily incentivizing green energy for the sake of environmental concerns.  It is as likely that some, in both legislatures, voted in favor of tax incentives for purely economic reasons.

[2] http://commerce.idaho.gov/business/key-industries/renewable-energy/


[4] http://www.legislature.idaho.gov/idstat/Title63/T63CH36SECT63-3622QQ.htm see also 63 Idaho Code 3622QQ

[5] See the following articles on growing green jobs, gas prices, and the economy in general.  Although they are dated more recently than the energy credit, they are representative of current political motive: http://idenergycollaborative.blogspot.com/2010/05/shaping-idahos-clean-energy-future.html, http://www.idahogasprices.com/news/White_House_clean_energy_standard_gets_key_support/34506_433798/index.aspx, http://www.bootsontheroof.com/blog/2010/08/25/construction-begins-idahos-largest-clean-energy-wind-power-project/

[6] http://www.idahostatesman.com/2011/01/16/1490267/change-is-in-the-wind.html#

[7] http://www.idahostatesman.com/2011/01/28/1506033/idaho-energy-rebate-could-be-victim.html#

[8] Id.

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