4 Reasons Congress Should Extend Renewable Energy Tax Credits

Congress is stalling on a small bill of huge importance, the World Resources Institute reminds us: The bill would extend two renewable energy tax credits, the Production Tax Credit and the Investment Tax Credit.

The tax breaks help prop up the wind, solar and other renewable energy industries. The idea is that the handouts from the government help foster competition, innovation and research that the free market wouldn't otherwise undertake because the cost would be too high.

There's ample evidence to show that's the case, as the World Resources Institute chart at right demonstrates.

Congress reconvenes today to discuss, among other things, energy policy. All they'll really be doing is posturing for their respective candidates, however, and that means that the renewable energy tax credits -- which both parties and their candidates support -- may well be held hostage to this battle: Republicans entrenched in support of offshore drilling, and Democrats entrenched in support of taxing oil company profits to fund more renewable energy projects.

Here are four reasons, ripped from recent headlines, that demonstrate why the tax credits should be passed, and passed soon.

1. Oil Still Costs $100+
   Oil may not cost $140 anymore, but the run-up in prices this year -- and the increase today on news of Hurricane Ike's projected path through the Gulf of Mexico -- demonstrate clearly that relying on black gold is a bad bet going forward.

   As the world population grows, and more millions move into the middle class, the demand for oil could increase 50% by 2030 worldwide, leading to a massive supply crunch. In other words, it's smart strategy to invest in alternatives now. Wind and solar power may not be quick answers to our fuel needs, but ultimately they could be used to generate hydrogen -- but only if the industries are supported enough so that they achieve new technological breakthroughs.

2. Unemployment Is Above 6%
   The unemployment rate hit 6.1% in August, the highest level in five years, as 84,000 American jobs were lost. Investments in renewable energy industries can create new jobs -- millions by some estimates. One study estimates that losing the tax credits -- which expire at the end of 2008 -- would cost $19 billion in investment and 116,000 jobs.

   The longer-term implications are graver. Given that oil supplies will run short, and global warming makes burning fossil fuels unwise, it's all but certain that some country will lead the world in renewable energy innovations. If the United States does, then it will reap the most benefits in new jobs.

3. The Arctic Is Melting
   A 19-square mile ice shelf that was thousands of years in the making disintegrated in the Canadian Arctic this month, as the extent of sea ice neared a record or near-record low. It's only the latest sign that global warming is real, present and all but certain to throw the world dangerously out of balance if we don't do something -- like start generating electricity without emitting carbon.

4. Russia Overwhelmed Georgia
   Relying on oil only enables "petrodictatorships," as Thomas Friedman describes in his upcoming Hot, Flat and Crowded: Why We Need a Green Revolution -- and How it Can Renew America. Russia, the world's second-biggest oil exporters, can afford to thumb its nose at the West because it controls the fossil fuel conduits that keep Europe running; Iran can muscle its way toward a nuclear arms race in the Middle East because it's flush with oil; Saudi Arabia can pay for all those repressive madrassas to train holy warriors because the House of Saud is rich on our imports. The best way to turn the tide is to cut off their funding -- and that means running the economy on something other than oil.

WRI and its partners are calling for a five- to 10-year extension of the tax credits, rather than the typical one or two years. This would give the industries more lead time to develop new projects, attracting more investors who could bank on the government help. They also want to see additional renewable energy technologies benefit from the tax breaks, which seems smart since no one knows today which process or technology will be the best fit for tomorrow's problems.

The tax credits amount to a tiny step toward re-engineering the American economy to run on clean, carbon-free fuels. If we can't even do this, the larger challenges will seem that much more out of reach.