Subsidies: mired in arbitrariness

In Short

Subsidies are deemed arbitrary, which makes them questionable as a prime tool to support the green transition.

A Few Details

Subsidies are controversial because they are often arbitrarily implemented, with loose relations to GHG emission cuts. For example, subsidies for electric vehicles are a fixed number whether they are used intensively or not. It is a bit better with subsidies per KWh generated by solar and wind power, but it doesn’t consider intermittency and inadequate power supply.

Their allocation by political process is somewhat random and can favor some corporations more than others, which is considered unfairly “market-disruptive”. For example, Tesla ran out of subsidies as its car sales exhausted its budgets.

As subsidies are controversial, economists suggest “carbon pricing” for taxing out gas and coal in function of the precise amount of GHG emissions, which looks more objective than arbitrary subsidies.

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