Community Voice

Two UH economists raise concerns that subsidizing local alternative energy production might be a fiscal drain that is about paying off special interests.

On June 10, 2015, Gov. David Ige signed House Bill 623 “mandating” 100 percent renewable energy for Hawaii by 2045. The bill was sponsored by state Rep. Chris Lee, the chair of the House Committee on Energy and Environmental Protection, who wrote a Community Voice for Civil Beat the following day. Some familiar themes in his op-ed warrant further scrutiny.

The claim that pursuit of renewable energy saved Hawaii $67 million in 2012, or $150 per household, is presented without justification or citation of a source. The figure appears to be based on the erroneous notion that reducing imports and “keeping the money at home” enhances economic welfare in society. This mistaken notion was debunked in the 18th century by Adam Smith’s “Theory of Moral Sentiments,” and the “Wealth of Nations.” (For more local context, see “Keeping the Money at Home).”

But as Nobel Prize Laureate Paul Krugman likes to say, bad ideas (like self-sufficiency) are like New York cockroaches: You can flush them, but they keep coming back.

State government has made alternative energy into a priority.

Doug Murray/FPL

If innovations in China result in cheaper solar panels such that renewable energy is efficiently substituted for oil, the economy can indeed expand. This has nothing to do with self-sufficiency, it is simply the substitution of one import for another. But when panels are artificially subsidized with tax credits, they are substituted for oil beyond the efficient point, thereby creating unnecessary costs.

A fundamental concept in the economics of public