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Are Tax Credits or Grants More Efficient Spurring Clean Energy Innovation?

April 13, 2011

Federal Grants are almost twice as effective as tax credits in spurring clean energy innovation, according to Reassessing Renewable Energy Subsidies — a recent report by the Bipartisan Policy Center. From 2005 to 2008, the federal government incurred a liability of almost $10.3 billion due to tax credits given to wind projects totaling almost 19 gigawatts of new generation capacity. However, researchers calculated that direct grants issued at the time of commission could have achieved similar gigawatt production at a cost of only $5 billion. The report also found that state and federal policies have been a significant driver of clean energy's rapid growth over the last decade. However, uncertainty and intermittent incentives have discouraged long-term planning (e.g., infrastructure, transmission and manufacturing), slowed R&D investments from the private sector and hindered the growth of clean sector jobs. Read the report...

energy, tax credits