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Green Economics
The Impact of Stimulus, Subsidies and Protectionismfor Green Energy in the U.S.
David Lance Shields
 
 2
Table of Contents
Overview......................................................................................................................................3
 
Background: Green Energy and Technology in the US...............................................................4
 
What is Green Energy?............................................................................................................4
 
Pre-Obama Green Initiatives in the US....................................................................................4
 
Obama’s Green Initiative.........................................................................................................5
 
Analysis: The Economics of Green Initiatives in the US............................................................7
 
Stimulus for the US Green Industry.........................................................................................7
 
Case: Too Much of a Good Thing and Germany’s Solar Subsidies........................................9
 
Cap and Trade Policies..........................................................................................................10
 
The New Green Employment................................................................................................12
 
Green Protectionism and Carbon Tariffs...............................................................................12
 
Solutions for Green Economic Challenges................................................................................15
 
Energizing Entrepreneurs Regionally....................................................................................15
 
Managed Cap and Trade........................................................................................................16
 
Towards Efficient Green Labor.............................................................................................16
 
Green Support not Protectionism...........................................................................................17
 
Conclusion.................................................................................................................................17
 
 
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Overview 
 
As Barack Obama won the Democratic nomination for president last year, he declared: “Thiswas the moment when the rise of the oceans began to slow and our planet began to heal.” Onlytwo months into his presidency, amidst economic turmoil, the president has taken on the task of reducing global warming through new policies to subsidize green energy development and taxindustry for polluting to reduce carbon emissions. No one argues that preventing the oceans fromrising is a bad idea but many question his timing and his manner of going about it. While bothhouses of Congress have agreed to consider the administration’s new green energy bill this year,more than half of the legislators do not yet support it and are waiting to see the full plan. On ahigh level, the administration has dedicated roughly a tenth of the $787 billion stimulus packageto be spent on energy and the environment. That includes $33 billion to a renewable electricitysupply, $27 billion for energy efficiency and $19 billion for cleaner forms of transport. However  pro-business advocates, Republicans and even some Democrats fear the costs to the alreadystruggling economy. Free traders argue that these costs could come from the government’sinability to choose the technologies and companies to target their subsidies. Experts at theBrookings Institution point out that the Department of Energy is currently fragmented andincapable of managing such a challenging problem. At the same time, the president supports acap and trade policy of forcing industry to curb green house gas, of which many fear volatileauction costs and the subsequent affect on rising energy costs to consumers in tough times. Aninfant green energy sector is also expected to be less efficient in allocating manpower whencompared to a mature, automated coal industry. Lastly, on a global scale, “green protectionism”must be watched out for as the administration currently considers whether to set up a tariff towards foreigner producers such as China who don’t buy into the current U.S. levels of greenreform. All of these issues will have to be dealt with to convince U.S. taxpayers that thegovernment has their best interests in mind.
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