Republicans for the Green New Deal

 An iron law of entitlements is they become harder to reform as they grow. The Inflation Reduction Act’s green handouts are proving to be another regrettable case in point.

President Trump campaigned on repealing the IRA’s Green New Deal, but the renewables lobby won’t give up its iron rice bowl without a fight. Some Republicans have bought their line that rolling back the subsidies will raise energy prices. If you believe this, California Gov. Gavin Newsom has a $120 billion bullet train to sell you.

Like other entitlements, the green subsidies have outgrown their original purpose. Congress established the wind production tax credit in 1992 and the solar investment tax credit in 2005 to support these “infant” industries. They are now creating huge distortions in electricity markets and will add trillions of dollars to the deficit if not checked.

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Start with the costs, which were vastly underestimated by the Congressional Budget Office when the IRA was debated. The Cato Institute now estimates that these two subsidies could cost $130 billion annually by 2034 and all of the subsidies $4.7 trillion through 2050.

In other words, Republicans could pay for the entire cost of extending the 2017 tax reforms based on CBO’s scoring by eliminating the tax credits. Doing so would also save taxpayers from having to subsidize more backup power, as they do in Texas and California.

Then there are the market distortions that raise prices for consumers. Subsidies can make solar and wind cheaper than fossil fuels and nuclear power, and they have fueled over-expansion in places like the Texas Panhandle that sometimes causes wholesale power prices to go negative—that is, producers pay the grid to take their power. The renewables lobby says this lowers prices for consumers. Alas, no.

Solar and wind producers can turn a profit when prices fall below zero thanks to subsidies. But other power plants can’t. Nor can they make money running only when they’re needed to back up solar and wind. Hence many have been shutting down even as power demand increases from AI and manufacturing.

The result is power shortages and prices that can spike 100-fold in a few hours when renewables aren’t producing power. These price spikes more than offset savings to consumers from negative prices. Utilities and grid operators must also spend heavily to strengthen their systems against fluctuations in power frequencies and loads.

This is a large reason Texas’s residential power prices have risen some 40% over the last seven years and rank as the second highest in the south and central states. To prevent power outages, state lawmakers passed legislation in 2023 to subsidize gas-power plants to back up renewables.

Government subsidies and distortions beget more of the same. Bloomberg News recently reported that Interior Secretary Doug Burgum is considering using emergency powers to revive closed coal-fired plants and to keep others online. This could involve paying coal plants to run on standby. Why not instead eliminate the subsidies causing them to close?

The IRA’s sweetened tax credits let solar and wind offset as much as 70% to 80% of their costs. Democrats deviously tied the expiration of these tax credits to CO2 power emissions falling 75% below 2022 levels, which isn’t projected to happen in the next three decades.

The IRA’s tax credits for carbon capture, hydrogen and nuclear are no more defensible. The nuclear tax credit will mainly benefit tech companies that are striking deals with nuclear plant owners to power their data centers so they can claim to run on clean energy.

Big oil and gas companies are fighting to keep the hydrogen and carbon capture credits to support their unprofitable investments. But these will mostly benefit foreign companies. Three European firms last week announced plans to build in Texas the world’s first plant to capture CO2 from the air that will also rely on wind.

Many projects subsidized by the IRA are in Republican districts and states where they are easier to permit. This has GOP Members defending subsidies. Twenty-one House Republicans—many of whom voted against the IRA—recently warned House leaders against ending this corporate welfare.

But other energy projects like gas plants and pipelines don’t need subsidies. If Republicans are going to ratify Joe Biden’s Green New Deal, what is the point of electing a GOP Congress?