Subsidies are more popular but both theory and practice argue against them. Subsidising clean energy requires politicians to decide on the best way of delivering it, and their judgment is likely to be worse than the market's. America's huge ethanol subsidies, for instance, have led to overinvestment in the businesses, which is now experiencing a sharp bust, and have helped drive up the price of food, with painful consequences for the world's poor. Germany's generous solar subsidies covered the roofs of one of the world's most sunless countries with solar cells, thus pushing up the price of silicon and reducing the cost-effectiveness of solar power in countries where it actually makes sense. Both subsidies promoted the wrong technologies; both wasted taxpayers' money.
So green industrial policy is smart industrial policy. As long as you don't invest in dead ends, like biofuels or (eventually, I think) fuel cells.
The economist denies this for ideological reasons only. It believes the state should not be in the business of allocating resources. Instead, it thinks it should be the exclusive province of the banks.
(the 'market' being another word for banks under financial capitalism)
We've seen how well that works.
To support your point about Germany, which is going to reduce subsidies:
While the news surrounding the subsidy changes have sent stocks see-sawing, they haven't created large shifts and in many cases have increased share market values. The drop in subsidies, in my mind, is a clear indicator that the industry is now at a point where their success is guaranteed and no longer needs the help of the government to be profitable. This is evinced by the fact that following the announcements of cuts, Bosch said it will be investing over 500 million € for a controlling share of Ersol, a major solar manufacturer, and might even put in nearly double that for full control. Clearly an industry in crisis would not even contemplate such a move. http://ecolectic.org/?p=187
http://ecolectic.org/?p=187
Responsibility and long term planning have never been a part of that, because they cramp their ability to pile up the cash and party.
The problem with a Green Strategy is that opportunities for making a big stinking pile of cash are more limited than they would be in other areas - which is not to say that they're not available, but no one is going to get as much of an adrenaline rush from building a windfarm as from building a planet-spanning derivatives empire which could implode at any moment.
Green energy is measured, intelligent, sensible and mature, which makes it utterly the wrong choice if you're one of the Econo's consumers of financial crack.
So, most people now know - painfully, was the whole "set the markets free" ideology, but some pretty smart people managed to convince a great many not entirely stupid others that this was correct almost to the brink of disaster. Maybe it's because I'm a Londoner - that I moved to Nice.
