The passage of the “One Big Beautiful Bill Act” means that subsidies for wind and solar power are slated for repeal after 2027. Unsurprisingly, this has sparked a litany of analyses explaining just how catastrophic the end of these subsidies will be for the United States and the world. While there’s good reason to doubt those claims, they shouldn’t be dismissed out of hand. The lingering question of how ending wind and solar subsidies will impact climate progress is worth scrutinizing, and an appreciation of some economic basics can help Low-Energy Fridays readers navigate the chaos.
The importance of subsidies in any industry is hotly debated, but in the realm of energy policy, the big question often is “Does this subsidy stimulate innovation?” If that seems confusing, consider that subsidies don’t really reduce costs or payments; rather, they shift those costs from the subsidized entity to the taxpayer. This means the net economic effect of a subsidy is a wash at best, though it’s usually a net economic negative because the downsides of current or future tax increases tend to outweigh the upside of subsidies.
The views and opinions expressed are those of the author’s and do not necessarily reflect the official policy or position of C3.