Traditional Energy Fuels Pennsylvania's Economy

Commentary

Pennsylvania has always been a leading provider of America's energy. From timber and coal to the nation's first commercial oil well, and now the Marcellus Shale boom, traditional energy is vital to our state's economy.

But these industries, and the prosperity that accompanied them, are now threatened because they have become politically unpopular. Instead of entrepreneurship and the responsible development of natural resources, today's energy companies are rewarded on the basis of their lobbying.

Much alternative energy production is economically feasible only because it receives massive infusions of taxpayer cash, typically with little accountability or regard to its ability to produce power.

While some alternative energy advocates may be sincere about improving the environment, for many the real impetus is profit. Al Gore, George Soros and other big alternative energy investors would make millions if polices such as cap-and-trade and higher alternative energy mandates were enacted. There is nothing wrong with the pursuit of profit, but using the government to force others to purchase one's product is an abuse of power and the problem with special interests today.

Pennsylvania taxpayers have spent $2 billion on alternative energy in Pennsylvania, but only 8,300 jobs have been created, with an average cost of $120,000 per job, because these businesses rely on corporate welfare for survival. A study done for the American Wind Energy Association and the Solar Energy Research and Education Foundation estimated that if the tax credits were not renewed at the end of 2008, those industries could lose 77% of their jobs.

In fact, every megawatt hour of wind energy requires $23.37 of subsidies. In contrast, incentives for the natural gas industry are almost non-existent, and coal receives a mere 44 cents per megawatt hour. However, coal contributes $7.5 billion to the state's economy each year and directly employs almost 9,000 Pennsylvanians. Development of natural gas in the Marcellus Shale is boosting the state's economy, with job creation estimated to total tens of thousands in the coming years.

The state needs new, reliable energy sources, as Pennsylvania's energy consumption is projected to keep growing. But energy sources that exist only because they are politically popular are neither adequate -- as many require traditional sources when the renewable source is not available -- nor sustainable. Today, only stalwart sources like coal and natural gas can provide the capacity needed for our energy-intensive economy without increasing energy prices.

The Rendell Administration and some legislators insist that command and control policies that pick energy winners and losers are the path to a clean future. In their minds, the more expensive electricity generated from alternative energy is the only way to protect the environment. This is simply not true.

The coal industry has been able to decrease pollution while increasing production. From 1970 to 2007, coal use increased by 225%, while emissions dropped by more than 70%. The natural gas boom is another environmental victory, as natural gas is the cleanest of the fossil fuels; it produces half as much carbon dioxide and less than a third as much nitrogen oxide as coal.

By not addressing Pennsylvania's pervasive lobbying culture, politicians are inhibiting the very innovation they are attempting to stimulate. Instead of bribing alternative energy manufacturers with grants, tax credits, low-interest loans or other enticements, the Commonwealth should rely on the creativity of its entrepreneurs. Affordable alternative energy will not come from intervention but innovation.  If political do-gooders concentrate on creating a welcoming environment for innovation, they will far surpass what has been accomplished with corporate welfare.

In the meantime, consigning today's energy providers to the dustbin of history and forcing the economy to "go green" without the necessary technology will only increase energy prices and hamper prosperity.  Traditional energy sources are fueling the state's economy largely without taxpayer aid while simultaneously reducing negative environmental impacts. Instead of decrying the existence of traditional energy and rewarding big businesses that feed on taxpayers, we should be recognizing the industry's contributions our economy and its role in our future.

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Elizabeth Stelle is a Research Associate with the Commonwealth Foundation (www.CommonwealthFoundation.org), an independent, nonprofit public policy research and educational institute based in Harrisburg.