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Sunday 20 Aug 2017 | 14:34 | SYDNEY
Sunday 20 Aug 2017 | 14:34 | SYDNEY

Reader riposte: Green subsidies

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14 November 2008 13:50

Kien Choong writes in response to my post and Fergus' post, both of which critiqued The Economist:

The Economist leader is right to say that the US government should not be subsidising renewables per se. However, this is not to say there is no room for government funding to correct 'market failure'. The examples cited by the Economist blog (eg. infrastructure investments, smart electrical grid, subsidies to basic research) are projects that may be subject to market failure. Thanks for raising the issue in your blog.  The public discourse around government subsidy of carbon reduction measures needs to be more sophisticated. 

This raises a small correction I wanted to make to Fergus' post. Fergus is, on the whole, correct to say that the US car industry has been resistant to innovation and fuel efficiency. But GM has made a bold move in this direction recently with the development of the battery-powered Chevrolet Volt. Read this Atlantic Monthly profile to see just how important this car is for the company and for a post-petroleum automobile industry.

This raises the question of whether there is more justification for bailing out GM because they are pursuing environmentally friendlier vehicles. I would still say 'no', for the reason Kiem cites. Perhaps GM's bankruptcy would put back the development of electric cars by a while, but there is lots of competition in this field, and perhaps GM's design was not the best one anyway. The US government is not in a good position to make such judgments; the market is.

Unfortunately, though, if GM does go under we would be denied a fairly attractive electric car...

Photo by Flickr user gmeurope, used under a Creative Commons license.

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