(1) Adversary Economics has been a consistent theme for this President. Indeed, in his February 2009 speech to a joint session of Congress (aka fake State of the Union Address), Obama spoke in very similar "us versus them" terms:
We know the country that harnesses the power of clean, renewable energy will lead the 21st century. And yet, it is China that has launched the largest effort in history to make their economy energy efficient. We invented solar technology, but we’ve fallen behind countries like Germany and Japan in producing it. New plug-in hybrids roll off our assembly lines, but they will run on batteries made in Korea.
Well I do not accept a future where the jobs and industries of tomorrow take root beyond our borders – and I know you don’t either. It is time for America to lead again.
(2) US green subsidy programs do produce one thing other than "fraud, corruption and immense lobbying bills": boatloads of harmful unintended consequences. I've mentioned this fact repeatedly in earlier blog posts, so I'm annoyed at the initial oversight. But it does give me an opportunity to point out another ridiculous case of green subsidies' awful unintended consequences, as noted in a fantastic article on new biomass subsidies from Sunday's Washington Post:
It sounded like a good idea: Provide a little government money to convert wood shavings and plant waste into renewable energy.
But as laudable as that goal sounds, it could end up causing more economic damage than good -- driving up the price of raw timber, undermining an industry that has long used sawdust and wood shavings to make affordable cabinetry, and highlighting the many challenges involved in decreasing the nation's dependence on oil by using organic materials to create biofuels.
In a matter of months, the Biomass Crop Assistance Program -- a small provision tucked into the 2008 farm bill -- has mushroomed into a half-a-billion dollar subsidy that is funneling taxpayer dollars to sawmills and lumber wholesalers, encouraging them to sell their waste to be converted into high-tech biofuels. In doing so, it is shutting off the supply of cheap timber byproducts to the nation's composite wood manufacturers, who make panels for home entertainment centers and kitchen cabinets.
While it remains unclear whether Congress or the Obama administration will push to revamp the program, even some businesses that should benefit from the subsidy are beginning to question its value....
The new subsidy provided a critical boost to an industry that took off in the late 1970s after the federal government mandated that utilities obtain part of their supply from independent power producers. Many of these contracts have now expired, leaving the industry struggling to compete in light of low natural gas prices and higher wood costs.
The future of the biomass program -- which will eventually include a subsidy to get farmers to grow crops such as switchgrass and an array of trees and shrubs -- could be determined by the Office of Management and Budget, which has been reviewing the federal rule for the program since September. In the meantime, federal money has started to flow: The administration sent $23 million to the state offices of the Farm Service Agency in the fall, and is poised to distribute another $514 million.
Biomass energy representatives, such as the Biomass Power Association president, Bob Cleaves, said those subsidies are critical to support a sector that currently supplies half of the nation's renewable energy (the other half coming from wind, solar and other sources). Seven of Maine's 10 biomass energy plants would have shut down without the new influx of funds, he said.
"The industry needs help," Cleaves said. "Is the country not prepared to spend half a billion dollars on half the country's renewable energy resources?"
The Agriculture Department, for its part, says it has no choice but to implement the subsidy the way Congress envisioned it under the 2008 farm bill. That legislation made no distinction between a waste product with little market value, such as corn husks, and the sawdust that sells for roughly $45 a dry ton.
Farm Service Agency Administrator Jonathan Coppess said his agency is strictly adhering to the statute's language and intentions. "We understand that policymaking, legislation and rule making are perfecting processes, not perfect processes, and we look forward to providing the best regulation possible to implement an important program with significant potential to benefit our national energy and agricultural economies," Coppess said in a statement....
The federal government can provide up to $45 a ton in matching payments to businesses that collect, harvest, store and transport biomass waste to an authorized energy facility. That means sawdust or wood shavings may be twice as valuable if a lumber mill sells them to a biomass energy company instead of to a traditional buyer.
This is bad news for the composite panel industry, which turns these materials into particleboard and medium-density fiberboard, and outranks the U.S. biomass industry in terms of employees and economic impact, with 21,000 employees and annual sales of $7.9 billion, according to 2006 U.S. Census data.
The biomass subsidy program could "wipe us out," said T.J. Rosengarth, the vice president and chief operating officer of Flakeboard, the largest composite panel producer in North America. "You can say, 'I've made more alternative energy,' but at what expense?"
The much larger pulp, paper, packaging and wood products industry, which ranks among the top 10 manufacturing employers in 48 states, is just as worried. The American Forest and Paper Association sent a letter to OMB on Oct. 27 warning that the biomass program "could have the unintended consequence of jeopardizing the forest products industry and the many jobs it sustains, as well as the significant quantities of renewable energy it produces."
I don't know about you, but my favorite part is the bureaucratic buck-passing. Fantastic.
(H/T Phil Levy)