Document Type

Article

Publication Date

2017

Center/Program

Richard Paul Richman Center for Business, Law, and Public Policy

Center/Program

The Charles Evans Gerber Transactional Studies Center

Abstract

The United States uses on targeted subsidies for both "green" energy and hydrocarbons.1 These subsidies pursue worthwhile goals. But unfortunately, many have design flaws that make them less effective or even counterproductive. 2 The goal of this Article is to show how to do better.

Specifically, this Article focuses on three sets of issues. First, there often is tension between our environmental and national security goals. Unfortunately, the economics literature on energy largely ignores these trade-offs by omitting national security from the analysis.3 This Article takes issue with this approach and suggests ways to manage these trade-offs. Second, this Article argues that subsidies are a flawed way to deal with these costs, and shows that Pigouvian taxes (or tradeable permits) are better alternatives. Third, if Congress is stuck with subsidies for political reasons, this Article offers a number of ways to improve them.

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