Energy - giving credits where due
President Reagan has proposed the repeal of tax credits for consumers and businesses that put conservation techniques and solar energy to work. He sees it as both an economy measure and a show of faith in the free market. But even budget director David Stockman admits that there isn't ''any plausible economic rationale'' for eliminating the credits when other energy subsidies have been increased.Skip to next paragraph
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Mr. Stockman is right. By nullifying the credits, the administration would undermine one of the country's few new growth industries. It would also destroy the only production incentive government has offered consumers - as opposed to suppliers. And it would further skew subsidies to energy producers.
Together, household and commercial energy now account for roughly one-third of United States energy use. While manufacturing consumes more and transportation almost as much, the energy used in buildings is ''strategic'' energy, because much of it can be displaced or replaced by conservation and renewable energy sources now, giving us needed liberty to divert oil and gas to other uses and to cut back on oil imports.
The industry gearing up to supply us with renewable energy stands at a critical pass. Sales, as wryly noted in the trade press, are still below those of lipstick manufacturers. Yet, collectively solar businesses have an estimated net worth of $1.2 billion and a 40 percent annual growth rate. If the industry can sustain this growth spurt long enough to establish a firm footing in the energy market and a mass-production capability, solar energy technologies may become cheaper and will certainly become more widely available.
But the energy market takes none too kindly to newcomers. So far, government has had to subsidize every major energy source - coal, oil, nuclear power, and solar energy - and, if recent history is any guide, the effects of withdrawing the tax credit are only too predictable. While Congress fretted over energy tax legislation in 1977 and 1978, for instance, the flat-plate collector industry languished because consumers postponed purchases. But collector sales doubled (from 5.8 million to 10.3 million square feet) during the first year the tax credit took effect. Later, when Congress upped the original credit from 30 to 40 percent, sales jumped immediately by another 29 percent.
Consumers' responsiveness to solar and conservation incentives should be interpreted to mean that the tax credits are working. A logical reading of solar sales figures in view of government intervention suggests both that federal help is still needed and that energy consumers will take action if presented with reasonable options. Yet last month Department of Energy spokesman Philip Garon announced that ''the marketplace will encourage people to use solar energy on their own, but the nuclear industry is weak and requires a government presence to put it on a stronger footing.''
That ''stronger footing,'' as quantified in administration proposals now before Congress, will cost taxpayers $1.6 billion next year - 35 percent more than this year's bill. Meanwhile, oil producers recently received a $11 billion respite from the windfall profits tax. Clearly, Peter is being robbed to pay Paul even though government's stated commitment is to the rapid development of all domestic energy sources.
If concern for the fate of a potentially large new industry or for consumers' demonstrated desire to conserve and produce energy does not keep Congress from repealing the solar and conservation credits, perhaps a sense of justice about how energy subsidies are dispensed will. There is, after all, David Stockman's opinion to consider.