Should governments intervene in energy markets?
Sources
Rogin, Ali et al. WhatA look at the economic impact and progress of Biden’s Inflation Reduction Act so far. PBS. Sep 21, 2024
The Inflation Reduction Act (IRA) signed in 2022 is an effort to combat climate change by investing in manufacturing, reducing emissions, and providing cleaner electricity to the ecoomy. One of its goals was designed to encourage the private market to engage in clean energy projects which has been successful, with other obstacles. The majority of the $370 billion in funding was allocated to electric vehicles, batteries, and solar/wind manufacturing; However, almost half of those projects have been delayed or paused indefinitely. Systemic issues, including lack of skilled labor, inflation, and high interest rates, play a major role in these delays.
Should governments intervene in energy markets?
Governments have power to create monetary incentives and investments to encourage people and entities to shift towards sustainable energy sources; as such, intervention may be beneficial. However, government interventions may also yield unintended consequences as shown by the progress of the IRA. For instance, IRA funding might favor certain technologies over others and allocate resources unfairly, contributing to an unintended shift in the energy market. In the case of the IRA, we have also seen that 40% of its projects have been delayed or paused indefinitely due to systemic market failures including overproduction from China and lack of skilled labor.