tag:theconversation.com,2011:/africa/topics/subsidies-2165/articlesSubsidies – The Conversation2024-02-28T12:33:55Ztag:theconversation.com,2011:article/2178832024-02-28T12:33:55Z2024-02-28T12:33:55ZThe true cost of food is far higher than what you spend at the checkout counter<figure><img src="https://images.theconversation.com/files/577158/original/file-20240221-22-p0v0vh.jpg?ixlib=rb-1.1.0&rect=8%2C0%2C5822%2C3872&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Stickers don't tell the whole story.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/customer-shops-at-a-grocery-store-on-february-13-2024-in-news-photo/2008637358">Scott Olson/Getty Images</a></span></figcaption></figure><p>After several years of pandemic-driven <a href="https://www.gao.gov/products/gao-23-105846">price spikes at the grocery store</a>, retail food price inflation is <a href="https://www.nytimes.com/2024/02/20/business/economy/food-price-inflation-cools.html">slowing down</a>. That’s good news for consumers, especially those in low-income households, who spend a <a href="https://theconversation.com/swelling-grocery-bills-are-pummeling-the-poorest-who-spend-over-a-quarter-of-their-incomes-on-food-186980">proportionally larger share of their income on food</a>.</p>
<p>But there’s more to the cost of food than what we pay at the store. Producing, processing, transporting and marketing food creates costs all along the value chain. Many are borne by society as a whole or by communities and regions. </p>
<p>For example, farm runoff is a <a href="https://theconversation.com/to-reduce-harmful-algal-blooms-and-dead-zones-the-us-needs-a-national-strategy-for-regulating-farm-pollution-186286">top cause of algae blooms and dead zones</a> in rivers, lakes and bays. And <a href="https://refed.org/food-waste/the-problem?gad_source=1&gclid=Cj0KCQiA5rGuBhCnARIsAN11vgSiHk7wAwmYKS-jz9eGPkOcGbEmBtbSUvPCULQTHcrDZ39d5AlQA28aAvHzEALw_wcB">food waste</a> takes up one-fourth of the space in U.S. landfills, where it rots, generating methane that <a href="https://theconversation.com/about-one-third-of-the-food-americans-buy-is-wasted-hurting-the-climate-and-consumers-wallets-194956">warms Earth’s climate</a>. </p>
<p>Exploring these lesser-known costs is the first step toward reducing them. The key is a method called <a href="https://www.taylorfrancis.com/books/oa-edit/10.4324/9781003050803/true-cost-accounting-food-barbara-gemmill-herren-lauren-baker-paula-daniels">true cost accounting</a>, which examines the economic, environmental, social and health impacts of food production and consumption to produce a broader picture of its costs and benefits. </p>
<h2>Trillions of dollars in uncounted costs</h2>
<p>Every year since 1947, the United Nations Food and Agriculture Organization has released an important and widely read report called <a href="https://www.fao.org/publications/home/fao-flagship-publications/the-state-of-food-and-agriculture/en">The State of Food and Agriculture</a>, known in the food sector as SOFA. <a href="https://www.fao.org/publications/home/fao-flagship-publications/the-state-of-food-and-agriculture/en">SOFA 2023</a> examines how much more our food costs beyond what consumers pay at the grocery store. </p>
<p>Using true cost accounting, the report calculates that the global cost of the agrifood system in 2020 was up to US$12.7 trillion more than consumers paid at retail. That’s equivalent to about 10% of global gross domestic product, or $5 per person per day worldwide. </p>
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<figcaption><span class="caption">True cost accounting is designed to measure the full impacts of producing, transporting and consuming food.</span></figcaption>
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<p>In traditional economics-speak, hidden costs are <a href="https://www.investopedia.com/terms/e/externality.asp">known as externalities</a> – spillover effects from production that are caused by one party but paid for by another. Some externalities are positive. For example, birds, butterflies and insects pollinate crops at no charge, and everyone who eats those crops benefits. Others, such as pollution, are negative. Delivery trucks emit pollution, and everyone nearby breathes dirtier air. </p>
<p>True cost accounting seeks to make those externalities visible. To do this, scholars analyze data related to environmental, health, social and other costs and benefits, add them together and calculate a price tag that represents what food really costs. </p>
<p>The <a href="https://globalfutures.asu.edu/food/">Swette Center for Sustainable Food Systems</a> at Arizona State University, which I direct, recently conducted a <a href="https://cdn.globalfutures.asu.edu/food/wp-content/uploads/sites/14/2023/07/04252023-Unveiling-Hidden-Capitals_web.pdf">true cost accounting study</a> of <a href="https://www.ers.usda.gov/amber-waves/2011/june/beef-cow-calf-production/">cow-calf operations</a> in the Western U.S., in partnership with Colorado State University. It found that the climate costs of these operations are very high – but that solving for climate change alone could threaten the livelihoods of 70,000 ranchers and the rural communities in which they live. A true cost accounting approach can illuminate the need for multidimensional solutions. </p>
<p>I study <a href="https://scholar.google.com/citations?user=GRi_wHAAAAAJ&hl=en">sustainable food systems</a> and am one of 150 scholars across 33 countries who worked together over several years to <a href="https://teebweb.org/publications/teebagrifood/">design and test this new methodology</a>. Our work was led by the U.N. Environment Program and partially funded by the <a href="https://futureoffood.org/">Global Alliance for the Future of Food</a>, a coalition of philanthropic foundations. </p>
<p>In many ways, true cost accounting is a modern and <a href="https://www.taylorfrancis.com/chapters/oa-edit/10.4324/9781003050803-12/embedding-tca-within-us-regulatory-decision-making-kathleen-merrigan">improved version of cost-benefit analysis</a>, a method embedded in governmental decision-making in most advanced economies around the world. This approach <a href="https://www.investopedia.com/terms/c/cost-benefitanalysis.asp">quantifies expected rewards and costs</a> associated with taking a particular action and then compares them to see whether the action is likely to produce a net gain or loss for the public.</p>
<p>Advocates of true cost accounting assert that its <a href="https://www.fao.org/3/cc7724en/online/state-of-food-and-agriculture-2023/true-cost-accounting-assessment.html">more nuanced approach</a> will address shortcomings in traditional cost-benefit analysis – particularly, failing to consider social and health externalities in depth. The hope is that because these two methods have many similarities, it should be relatively easy for governments to upgrade to true cost accounting as it becomes more widely adopted. </p>
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<a href="https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Dozens of young pigs feed in pens inside a large modern barn." src="https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=377&fit=crop&dpr=1 600w, https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=377&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=377&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=474&fit=crop&dpr=1 754w, https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=474&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=474&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Large-scale livestock farms produce food efficiently at a low cost, but they generate odors and huge quantities of animal waste that can affect adjoining communities.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/FactoryFarmFuror/7e9ceabcae514e9e8111ee867ed05244/photo">AP Photo/Charlie Neibergall</a></span>
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<h2>True costs of food vary across countries</h2>
<p>The 2023 State of Food and Agriculture report <a href="https://www.fao.org/interactive/state-of-food-agriculture/en/">reveals some clear patterns</a>. Of the $12.7 trillion in worldwide hidden costs that it tallies, 39% are generated by upper-middle-income countries and 36% by high-income countries. </p>
<p>For wealthy countries, 84% of hidden costs derive from unhealthy dietary patterns, such as eating large quantities of red meat and heavily processed foods, which is associated with <a href="https://www.health.harvard.edu/staying-healthy/whats-the-beef-with-red-meat">elevated risk of heart disease, cancer and other illnesses</a>. Getting sick takes people away from work, so these health effects also reduce productivity, which affects the economy.</p>
<p>In contrast, 50% of the hidden costs of food in low-income countries are social costs that stem from poverty and undernourishment. SOFA 2023 estimates that incomes of poor people who produce food in low-income countries would need to increase by 57% for these workers to obtain sufficient revenue and calories for productive lives. </p>
<p>Food insecurity on farms is also an issue in the U.S., where the people who produce our food <a href="https://doi.org/10.1007/s10460-023-10448-0">sometimes go hungry themselves</a>. The food system’s reliance on <a href="https://www.ers.usda.gov/topics/farm-economy/farm-labor/#size">undocumented and low-paid workers</a> yields <a href="https://youthtoday.org/2022/10/youth-agricultural-workers-arent-protected-equally-under-u-s-labor-law/">undernourished children who often are unable to learn</a>. </p>
<p>The fact that many U.S. farmworkers lack access to health insurance also generates costs, since hospitals <a href="https://www.ppic.org/publication/health-care-access-among-californias-farmworkers/">treat them at public expense</a> when these workers fall sick or are injured. </p>
<p>Food production also has environmental costs. <a href="https://theconversation.com/a-few-heavy-storms-cause-a-big-chunk-of-nitrogen-pollution-from-midwest-farms-146980">Nitrogen runoff</a>, <a href="https://theconversation.com/epa-has-tightened-its-target-for-deadly-particle-pollution-states-need-more-tools-to-reach-it-223610">ammonia emissions</a>, <a href="https://theconversation.com/the-great-amazon-land-grab-how-brazils-government-is-clearing-the-way-for-deforestation-173416">deforestation</a>, <a href="https://theconversation.com/to-reduce-harmful-algal-blooms-and-dead-zones-the-us-needs-a-national-strategy-for-regulating-farm-pollution-186286">water pollution</a> and <a href="https://theconversation.com/food-production-generates-more-than-a-third-of-manmade-greenhouse-gas-emissions-a-new-framework-tells-us-how-much-comes-from-crops-countries-and-regions-167623">greenhouse gas emissions</a> combined represent about 20% of the global hidden costs of food production. Other environmental costs, such as those associated with species loss and pesticide exposure, are not included in the SOFA analysis. </p>
<h2>Should food cost more?</h2>
<p>The first question people ask me about true cost accounting is whether using it will make food more expensive. Some advocates do argue for pricing food at a level that internalizes its hidden costs. </p>
<p>For example, a Dutch organization called <a href="https://trueprice.org/">True Price</a> works with food companies to help them <a href="https://tonyschocolonely.com/us/en/our-mission/news/why-we-wont-stop-paying-a-higher-price-for-cocoa">charge more accurate prices</a>. The group operates a <a href="https://trueprice.org/supermarket-de-aanzet/">grocery store in Amsterdam</a> that charges conventional prices but provides receipts that also <a href="https://www.newyorker.com/business/currency/how-much-do-things-really-cost">display “true” prices</a>, reflecting the goods’ hidden costs. </p>
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<p>Consumers are encouraged to pay these higher prices. When they do, the store shares the proceeds with two nonprofit organizations that promote <a href="https://landandlife.foundation/">land and wildlife conservation</a> and <a href="https://www.givedirectly.org/">poverty reduction</a> in Africa. </p>
<p>Rather than raising prices, I believe the most effective way to address the hidden costs of food would be to change government policies that provide <a href="https://www.fao.org/3/cb6562en/cb6562en.pdf">$540 billion in agricultural subsidies</a> worldwide every year. Of this amount, 87% goes to support production systems that produce cheap food, fiber and biofuels but also generate social and environmental harms. Examples include subsides that promote chemical fertilizer and pesticide use, overuse of natural resources and cultivation of emission-intensive products such as rice. </p>
<p>U.N. agencies have urged world leaders to redirect these subsidies to reduce negative impacts – a strategy they call “<a href="https://www.unep.org/news-and-stories/press-release/un-report-calls-repurposing-usd-470-billion-agricultural-support">a multibillion-dollar opportunity to transform food systems</a>.” While it may seem that eliminating subsidies would raise retail prices, that’s not necessarily true – especially if they are repurposed to support sustainable, equitable and efficient production.</p>
<p>Using true cost accounting as a guide, policymakers could reallocate some of these vast sums of money toward production methods that deliver net-positive benefits, such as expanding <a href="https://theconversation.com/organic-food-has-become-mainstream-but-still-has-room-to-grow-164220">organic agriculture</a>, <a href="https://theconversation.com/trees-can-make-farms-more-sustainable-heres-how-to-help-farmers-plant-more-222030">agroforestry</a> and <a href="https://theconversation.com/the-information-age-is-starting-to-transform-fishing-worldwide-179352">sustainable fisheries</a>. They also could invest in training and supporting next-generation food and agriculture leaders.</p>
<p>By creating transparency, true cost accounting can help shift money away from harmful food production systems and toward alternatives that protect resources and rural communities. Doing so could reduce the hidden costs of feeding the world.</p><img src="https://counter.theconversation.com/content/217883/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kathleen Merrigan served as a reviewer for the SOFA 2023 report described in this article. She has received funding from the Global Alliance for the Future of Food.</span></em></p>A new UN report finds that the true global cost of producing food is $12.7 trillion more than consumers pay at the checkout counter. We pay those uncounted costs in other ways.Kathleen Merrigan, Executive Director, Swette Center for Sustainable Food Systems, Arizona State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2242322024-02-23T13:49:52Z2024-02-23T13:49:52ZLouisiana governor makes it easier for companies to receive lucrative tax breaks that take money away from cash-strapped schools<figure><img src="https://images.theconversation.com/files/577468/original/file-20240222-20-bvvxzi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">ExxonMobil has been granted nearly $580 million in tax abatements in Louisiana since 2000.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/oil-refinery-owned-by-exxon-mobil-is-the-second-largest-in-news-photo/1225711980">Barry Lewis/Getty Images</a></span></figcaption></figure><p>Louisiana Gov. Jeff Landry <a href="https://gov.louisiana.gov/assets/ExecutiveOrders/2024/JML-Executive-Order-23.pdf">signed an executive order</a> on Feb. 21, 2024, removing school boards’ veto power over corporate property tax breaks that take money away from schools. It also did away with a requirement that projects granted the tax breaks create jobs and retain jobs. </p>
<p>Now, companies that apply for Louisiana’s Industrial Tax Exemption Program, which can grant property tax breaks of 80% over 10 years, will go to a local industrial board, then a state industrial board, for approval. If the local and state boards disagree on whether to grant a tax break, the governor will be the tiebreaker.</p>
<p>The order nullified a previous governor’s 2016 order allowing schools to have more of a say in approving tax breaks that could harm their students.</p>
<p>We are a group of researchers who <a href="https://theconversation.com/students-lose-out-as-cities-and-states-give-billions-in-property-tax-breaks-to-businesses-draining-school-budgets-and-especially-hurting-the-poorest-students-222940">wrote for The Conversation</a> about the <a href="https://www.doi.org/10.1080/15575330.2022.2148171">billions of dollars</a> students and schools lose out on yearly when cities and states grant corporate property tax abatements.</p>
<p>Tax abatement programs have long been controversial, and their economic value is at best unclear: Studies show most companies <a href="https://research.upjohn.org/up_workingpapers/289/">would have made the same location decisions</a> without these taxpayer subsidies. Meanwhile, schools make up the largest cost item in these communities, meaning they suffer most when companies are granted breaks in property taxes.</p>
<p>One of the areas we focused on was East Baton Rouge Parish, Louisiana, which is facing budgetary woes including shortages of <a href="https://www.theadvocate.com/baton_rouge/news/education/baton-rouge-school-bus-crisis-could-lead-to-budget-crisis/article_a24d6502-5fdb-11ee-ad9c-c378e2276bbf.html">bus drivers</a> and <a href="https://www.wafb.com/2023/06/20/program-aimed-help-teacher-shortage/">teachers</a>.</p>
<p>Since 2000, Louisiana has granted a total of <a href="https://fastlaneng.louisianaeconomicdevelopment.com/public/reports">US$35 billion in corporate property tax breaks</a> for 12,590 projects.</p>
<p>Former Louisiana Gov. John Bel Edwards <a href="https://gov.louisiana.gov/assets/ExecutiveOrders/JBE16-26.pdf">signed the 2016 executive order</a> that gave local taxing bodies – such as school boards, sheriffs and parish or city councils – the ability to vote on their own individual portions of the tax exemptions.</p>
<p>In 2019, the East Baton Rouge Parish School Board <a href="https://www.theadvocate.com/baton_rouge/news/education/itep-critics-defeat-exxonmobil-tax-break-requests-at-school-board-here-are-next-steps/article_09cb2d54-1a68-11e9-a672-7f6ee09f1f74.html">exercised its power</a> to vote down an abatement. In 2022, a year where ExxonMobil made a record $55.7 billion in profit, the company asked for a tax break from the cash-starved East Baton Rouge school district. After a <a href="https://www.youtube.com/watch?v=E-9hbVfhZRQ">lively debate</a>, including comments from 49 citizens, the board voted to grant the tax rate.</p>
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<p>Throughout the U.S., <a href="https://doi.org/10.1080/15575330.2022.2148171">school boards’ power over the tax abatements</a> that affect their budgets vary, and in some states, including Georgia, Kansas, Nevada, New Jersey and South Carolina, school boards lack any formal ability to vote or comment on tax abatement deals that affect them.</p>
<p>Landry’s recent order added Louisiana to the list.</p>
<p><em>Read the full investigation here: <a href="https://theconversation.com/students-lose-out-as-cities-and-states-give-billions-in-property-tax-breaks-to-businesses-draining-school-budgets-and-especially-hurting-the-poorest-students-222940">Students lose out as cities and states give billions in property tax breaks to businesses − draining school budgets and especially hurting the poorest students</a></em></p><img src="https://counter.theconversation.com/content/224232/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christine Wen worked for the nonprofit organization Good Jobs First from June 2019 to May 2022 where she helped collect tax abatement data.</span></em></p><p class="fine-print"><em><span>Nathan Jensen has received funding from the John and Laura Arnold Foundation, the Smith Richardson Foundation, the Ewing Marion Kauffman Foundation and the Washington Center for Equitable Growth. He is a Senior Fellow at the Niskanen Center.</span></em></p><p class="fine-print"><em><span>Danielle McLean and Kevin Welner do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Louisiana’s governor made it easier for companies to receive property tax breaks – and schools will likely pay the price.Christine Wen, Assistant Professor of Landscape Architecture & Urban Planning, Texas A&M UniversityDanielle McLean, Freelance Reporter and Editor, The ConversationKevin Welner, Professor of Education Policy & Law; Director of the National Education Policy Center, University of Colorado BoulderNathan Jensen, Professor of Government, The University of Texas at AustinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2229402024-02-15T13:35:30Z2024-02-15T13:35:30ZStudents lose out as cities and states give billions in property tax breaks to businesses − draining school budgets and especially hurting the poorest students<figure><img src="https://images.theconversation.com/files/575520/original/file-20240214-20-j3e0d8.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C1684%2C678&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Exxon Mobil Corp.'s campus in East Baton Rouge Parish, left, received millions in tax abatements to the detriment of local schools, right.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/oil-refinery-owned-by-exxon-mobil-is-the-second-largest-in-news-photo/1225711980">Barry Lewis/Getty Images, Tjean314/Wikimedia</a></span></figcaption></figure><p>Built in 1910, James Elementary is a three-story brick school in Kansas City, Missouri’s historic Northeast neighborhood, with a bright blue front door framed by a sand-colored stone arch adorned with a gargoyle. As bustling students and teachers negotiate a maze of gray stairs with worn wooden handrails, Marjorie Mayes, the school’s principal, escorts a visitor across uneven blue tile floors on the ground floor to a classroom with exposed brick walls and pipes. Bubbling paint mars some walls, evidence of the water leaks spreading inside the aging building.</p>
<p>“It’s living history,” said Mayes during a mid-September tour of the building. “Not the kind of living history we want.”</p>
<p>The district would like to tackle the US$400 million in deferred maintenance needed to create a 21st century learning environment at its 35 schools – including James Elementary – but it can’t. It doesn’t have the money.</p>
<h2>Property tax redirect</h2>
<p>The lack of funds is a direct result of the property tax breaks that Kansas City lavishes on companies and developers that do business there. The program is supposed to bring in new jobs and business but instead has ended up draining civic coffers and starving schools. Between 2017 and 2023, the Kansas City school district lost $237.3 million through tax abatements.</p>
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<p>Kansas City is hardly an anomaly. An <a href="https://www.cambridge.org/core/books/incentives-to-pander/E0003C20215EDA5047EA0831FEEB6D92">estimated 95%</a> of U.S. cities provide economic development tax incentives to woo corporate investors. The upshot is that billions have been diverted from large urban school districts and from a growing number of small suburban and rural districts. The impact is seen in districts as diverse as Chicago and Cleveland, Hillsboro, Oregon, and Storey County, Nevada.</p>
<p>The result? A 2021 <a href="https://doi.org/10.1080/15575330.2022.2148171">review of 2,498 financial statements</a> from school districts across 27 states revealed that, in 2019 alone, at least $2.4 billion was diverted to fund tax incentives. Yet that substantial figure still downplays the magnitude of the problem, because three-quarters of the 10,370 districts analyzed did not provide any information on tax abatement agreements.</p>
<p>Tax abatement programs have long been controversial, pitting states and communities against one another in beggar-thy-neighbor contests. Their economic value is also, at best, unclear: Studies show most companies <a href="https://research.upjohn.org/up_workingpapers/289/">would have made the same location decision</a> without taxpayer subsidies. Meanwhile, schools make up the largest cost item in these communities, meaning they suffer most when companies are granted breaks in property taxes.</p>
<p>A three-month investigation by The Conversation and three scholars with expertise in <a href="https://scholar.google.com/citations?user=RO4oI-8AAAAJ&hl=en">economic development</a>, <a href="https://www.colorado.edu/education/kevin-welner">tax laws</a> and <a href="https://liberalarts.utexas.edu/government/faculty/nj4353">education policy</a> shows that the cash drain from these programs is not equally shared by schools in the same communities. At the local level, tax abatements and exemptions often come at the cost of <a href="https://www.schoolfinancedata.org/the-adequacy-and-fairness-of-state-school-finance-systems-2024/.">critical funding</a> for school districts that <a href="https://cdn.theconversation.com/static_files/files/3062/2024-01-31_Good_Jobs_First_Abating_Our_Future.pdf?1707953373">disproportionately serve</a>
students from low-income households and who are racial minorities.</p>
<p>In Missouri, for example, in 2022 <a href="https://www.kcpublicschools.org/about/tax-incentives-kcps#:%7E:text=As%20of%202022%2C%20nearly%20%241%2C700,%24500-%24900%20per%20pupil">nearly $1,700 per student was redirected</a> from Kansas City public and charter schools, while between $500 and $900 was redirected from wealthier, whiter Northland schools on the north side of the river in Kansas City and in the suburbs beyond. Other studies have found <a href="https://journals.sagepub.com/doi/abs/10.1177/08912424231174836">similar demographic trends elsewhere</a>, including <a href="https://goodjobsfirst.org/wp-content/uploads/2023/02/How-Tax-Abatements-Cost-New-York-Public-Schools.pdf">New York state</a>, <a href="https://goodjobsfirst.org/wp-content/uploads/2022/07/South-Carolinas-Corporate-Tax-Breaks-2022.pdf">South Carolina</a> and <a href="https://doi.org/10.1080/15575330.2023.2217899">Columbus, Ohio</a>.</p>
<p>The funding gaps produced by abated money often force schools to <a href="https://doi.org/10.2307/3325345">delay needed maintenance</a>, <a href="https://doi.org/10.1002/ets2.12098">increase class sizes</a>, <a href="https://districtadministration.com/teacher-layoffs-enter-k12-outlook-school-districts-budget-deficits/">lay off teachers</a> and support staff and even close outright. Schools also <a href="https://www.nytimes.com/2018/04/16/reader-center/us-public-schools-conditions.html">struggle to update or replace</a> outdated technology, books and other educational resources. And, amid a nationwide teacher shortage, schools under financial pressures sometimes turn to inexperienced teachers who are <a href="https://learningpolicyinstitute.org/product/state-teacher-shortages-vacancy-resource-tool">not fully certified</a> or <a href="https://www.dallasnews.com/news/education/2023/10/16/dallas-relies-on-international-teachers-more-than-any-other-school-district-in-the-us/">rely too heavily</a> on recruits from overseas who have been given special visa status.</p>
<p>Lost funding also prevents teachers and staff, who often feed, clothe and otherwise go above and beyond to help students in need, from <a href="https://worldpopulationreview.com/state-rankings/teacher-pay-by-state">earning a living wage</a>. All told, tax abatements can end up harming a community’s value, with constant funding shortfalls creating <a href="https://www.cbpp.org/research/a-punishing-decade-for-school-funding">a cycle of decline</a>.</p>
<h2>Incentives, payoffs and guarantees</h2>
<p>Perversely, some of the largest beneficiaries of tax abatements are the politicians who publicly boast of handing out the breaks despite the harm to poorer communities. Incumbent governors have used the incentives as a means of <a href="https://www.cambridge.org/core/books/incentives-to-pander/E0003C20215EDA5047EA0831FEEB6D92">taking credit for job creation</a>, even when the jobs were coming anyway.</p>
<p>“We know that subsidies don’t work,” said <a href="https://www.elizabethmarcello.com/">Elizabeth Marcello</a>, a doctoral lecturer at Hunter College who studies governmental planning and policy and the interactions between state and local governments. “But they are good political stories, and I think that’s why politicians love them so much.”</p>
<figure>
<iframe src="https://player.vimeo.com/video/272640138" width="500" height="281" frameborder="0" webkitallowfullscreen="" mozallowfullscreen="" allowfullscreen=""></iframe>
<figcaption><span class="caption">Academic research shows that economic development incentives are ineffective most of the time – and harm school systems.</span></figcaption>
</figure>
<p>While some voters may celebrate abatements, parents can recognize the disparities between school districts that are created by the tax breaks. Fairleigh Jackson pointed out that her daughter’s East Baton Rouge third grade class lacks access to playground equipment.</p>
<p>The class is attending school in a temporary building while their elementary school undergoes a two-year renovation.</p>
<p>The temporary site has some grass and a cement slab where kids can play, but no playground equipment, Jackson said. And parents needed to set up an Amazon wish list to purchase basic equipment such as balls, jump ropes and chalk for students to use. The district told parents there would be no playground equipment due to a lack of funds, then promised to install equipment, Jackson said, but months later, there is none.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/575426/original/file-20240213-28-rkjkme.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Cement surface surrounded by a fence with grass beyond. There's no playground equipment.." src="https://images.theconversation.com/files/575426/original/file-20240213-28-rkjkme.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/575426/original/file-20240213-28-rkjkme.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575426/original/file-20240213-28-rkjkme.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575426/original/file-20240213-28-rkjkme.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575426/original/file-20240213-28-rkjkme.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575426/original/file-20240213-28-rkjkme.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575426/original/file-20240213-28-rkjkme.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The temporary site where Fairleigh Jackson’s daughter goes to school in East Baton Rouge Parish lacks playground equipment.</span>
<span class="attribution"><span class="source">Fairleigh Jackson</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Jackson said it’s hard to complain when other schools in the district don’t even have needed security measures in place. “When I think about playground equipment, I think that’s a necessary piece of child development,” Jackson said. “Do we even advocate for something that should be a daily part of our kids’ experience when kids’ safety isn’t being funded?”</p>
<p>Meanwhile, the challenges facing administrators 500-odd miles away at Atlanta Public Schools are nothing if not formidable: The district is dealing with <a href="https://atlanta.capitalbnews.org/chronic-absenteeism-aps/">chronic absenteeism</a> among half of its Black students, many students <a href="https://atlantaciviccircle.org/2023/08/28/more-atlanta-students-homeless-this-school-year/">are experiencing homelessness</a>, and it’s facing a <a href="https://www.fox5atlanta.com/news/teacher-retention-an-issue-in-georgia-situation-could-get-worse">teacher shortage</a>.</p>
<p>At the same time, Atlanta is showering corporations with tax breaks. The city has two bodies that dole them out: the Development Authority of Fulton County, or DAFC, and Invest Atlanta, the city’s economic development agency. The deals handed out by the two agencies have drained $103.8 million from schools from fiscal 2017 to 2022, according to Atlanta school system financial statements.</p>
<p><iframe id="U7Z9R" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/U7Z9R/5/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>What exactly Atlanta and other cities and states are accomplishing with tax abatement programs is hard to discern. <a href="https://research.upjohn.org/up_workingpapers/289/">Fewer than a quarter</a> of companies that receive breaks in the U.S. needed an incentive to invest, according to a 2018 study by the Upjohn Institute for Employment Research, a nonprofit research organization. </p>
<p>This means that at least 75% of companies received tax abatements when they’re not needed – with communities paying a heavy price for economic development that sometimes provides little benefit.</p>
<p>In Kansas City, for example, there’s no guarantee that the businesses that do set up shop after receiving a tax abatement will remain there long term. That’s significant considering the historic border war between the Missouri and Kansas sides of Kansas City – a competition to be the most generous to the businesses, said Jason Roberts, president of the Kansas City Federation of Teachers and School-Related Personnel. Kansas City, Missouri, has a <a href="https://www.kcmo.gov/city-hall/departments/finance/earnings-tax">1% income tax</a> on people who work in the city, so it competes for as many workers as possible to secure that earnings tax, Roberts said.</p>
<p>Under city and state tax abatement programs, companies that used to be in Kansas City have since relocated. The AMC Theaters headquarters, for example, <a href="https://www.bizjournals.com/kansascity/news/2011/09/14/amc-entertainment-will-move-hq-to-ks.html">moved from the city’s downtown</a> to Leawood, Kansas, about a decade ago, garnering some $40 million in <a href="https://www.kansascommerce.gov/program/business-incentives-and-services/peak/">Promoting Employment Across Kansas</a> tax incentives.</p>
<p>Roberts said that when one side’s financial largesse runs out, companies often move across the state line – until both states decided in 2019 that <a href="https://www.kansascity.com/news/business/article233725152.html">enough was enough</a> and <a href="https://www.brookings.edu/articles/the-end-of-kansas-missouris-border-war-should-mark-a-new-chapter-for-both-states-economies/">declared a cease-fire</a>.</p>
<p>But tax breaks for other businesses continue. “Our mission is to grow the economy of Kansas City, and application of tools such as tax exemptions are vital to achieving that mission, said Jon Stephens, president and CEO of Port KC, the Kansas City Port Authority. The incentives speed development, and providing them "has resulted in growth choosing KC versus other markets,” he added.</p>
<p>In Atlanta, those tax breaks <a href="https://www.ajc.com/news/fulton-authority-gives-tax-breaks-to-projects-in-hot-markets-ajc-finds/PHR5H4SXNRAGRNWHBUUCIPHFQM/">are not going</a> to projects in neighborhoods that need help attracting development. They have largely been handed out to projects that are in high demand areas of the city, said Julian Bene, who served on Invest Atlanta’s board from 2010 to 2018. In 2019, for instance, the Fulton County development authority <a href="https://saportareport.com/fulton-agency-approves-nearly-100-million-in-property-tax-abatements/sections/reports/maggie/">approved a 10-year, $16 million tax abatement</a> for a 410-foot-tall, 27,000-square-foot tower in Atlanta’s vibrant Midtown business district. <a href="https://1105westpeachtree.com/">The project</a> included hotel space, retail space and office space that is now occupied by <a href="https://blog.google/inside-google/company-announcements/atlanta-office/">Google</a> and <a href="https://www.ajc.com/business/economy/invesco-plans-add-500-jobs-new-midtown/CX8ubABcCfK2IuqrJu5nMJ/">Invesco</a>.</p>
<p>In 2021, a developer in Atlanta <a href="https://www.wsbtv.com/news/local/ponce-city-market-developer-pulls-request-8-million-tax-break-its-expansion/DYWYAKHVTNH5PPVHFBD5QCZDXY/">pulled its request</a> for an $8 million tax break to expand its new massive, mixed-use Ponce City Market development in the trendy Beltline neighborhood with an office tower and apartment building. Because of community pushback, the developer knew it likely did not have enough votes from the commission for approval, Bene said. After a second try for $5 million in lower taxes was also rejected, the developer went ahead and <a href="https://poncecitymarket.com/directory-view-all">built the project</a> anyway.</p>
<p>Invest Atlanta has also turned down projects in the past, Bene said. Oftentimes, after getting rejected, the developer goes back to the landowner and asks for a better price to buy the property to make their numbers work, because it was overvalued at the start.</p>
<h2>Trouble in Philadelphia</h2>
<p>On Thursday, Oct. 26, 2023, an environmental team was preparing Southwark School in Philadelphia for the winter cold. While checking an attic fan, members of the team saw loose dust on top of flooring that contained asbestos. The dust that certainly was blowing into the floors below could contain the cancer-causing agent. Within a day, <a href="https://www.inquirer.com/education/philadelphia-school-asbestos-closed-southwark-20231027.html">Southwark was closed</a> – the seventh Philadelphia school temporarily shuttered since the previous academic year because of possible asbestos contamination.</p>
<p>A 2019 inspection of the John L Kinsey school in Philadelphia found <a href="https://www.philasd.org/capitalprograms/wp-content/uploads/sites/18/2019/11/6280_Building_21_@_John_L_Kinsey_School_2018_2019_3_Year_AHERA_Report.pdf">asbestos in plaster walls, floor tiles, radiator insulation and electrical panels</a>. Asbestos is <a href="https://www.inquirer.com/education/asbestos-closure-philadelphia-school-district-20231027.html">a major problem</a> for Philadelphia’s public schools. The district needs <a href="https://www.philasd.org/capitalprograms/wp-content/uploads/sites/18/2017/06/2015-FCA-Final-Report-1.pdf">$430 million</a> to clean up the asbestos, lead, and other environmental hazards that place the health of students, teachers and staff at risk. And that is on top of an additional <a href="https://www.philasd.org/capitalprograms/wp-content/uploads/sites/18/2017/06/2015-FCA-Final-Report-1.pdf">$2.4 billion</a> to fix failing and damaged buildings.</p>
<p>Yet the money is not available. Matthew Stem, a former district official, <a href="https://pubintlaw.org/wp-content/uploads/2023/02/02.07.23-Memorandum-Opinion-Filed-pubintlaw.pdf">testified in a 2023 lawsuit</a> about financing of Pennsylvania schools that the environmental health risks cannot be addressed until an emergency like at Southwark because “existing funding sources are not sufficient to remediate those types of issues.”</p>
<p>Meanwhile, the city keeps doling out abatements, draining money that could have gone toward making Philadelphia schools safer. In the <a href="https://www.documentcloud.org/documents/24362508-final-acfr-2022-with-artwork-as-of-022423">fiscal year ending June 2022</a>, such tax breaks cost the school district $118 million – more than 25% of the total amount needed to remove the asbestos and other health dangers. These abatements <a href="https://www.phila.gov/media/20180524153805/City-of-Philadelphia-2018-Abatement.pdf">take 31 years to break even</a>, according to the city’s own <a href="https://www.phila.gov/documents/property-tax-abatement-studies/">scenario impact analyses</a>.</p>
<p>Huge subsets of the community – primarily Black, Brown, poor or a combination – are being “drastically impacted” by the exemptions and funding shortfalls for the school district, said Kendra Brooks, a Philadelphia City Council member. Schools and students are affected by mold, asbestos and lead, and crumbling infrastructure, as well as teacher and staffing shortages – including support staff, social workers and psychologists.</p>
<p>More than half the district’s schools that lacked adequate air conditioning – 87 schools – had to <a href="https://whyy.org/articles/philadelphia-schools-early-dismissals-lack-air-conditioning-extreme-heat/">go to half days</a> during the first week of the 2023 school year because of extreme heat. Poor heating systems also leave the schools cold in the winter. And some schools are overcrowded, resulting in large class sizes, she said.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/575461/original/file-20240213-28-1b0wxq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Front of a four-story brick school building with tall windows, some with air-conditioners" src="https://images.theconversation.com/files/575461/original/file-20240213-28-1b0wxq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/575461/original/file-20240213-28-1b0wxq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575461/original/file-20240213-28-1b0wxq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575461/original/file-20240213-28-1b0wxq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575461/original/file-20240213-28-1b0wxq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575461/original/file-20240213-28-1b0wxq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575461/original/file-20240213-28-1b0wxq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Horace Furness High School in Philadelphia, where hot summers have temporarily closed schools that lack air conditioning.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Horace_Furness_High_School_1900_S_3rd_St_Philadelphia_PA_%28DSC_3038%29.jpg">Nick-philly/Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>Teachers and researchers agree that a lack of adequate funding undermines educational opportunities and outcomes. That’s especially true for children living in poverty. <a href="https://www.jstor.org/stable/26495136">A 2016 study</a> found that a 10% increase in per-pupil spending each year for all 12 years of public schooling results in nearly one-third of a year of more education, 7.7% higher wages and a 3.2% reduction in annual incidence of adult poverty. The study estimated that a 21.7% increase could eliminate the high school graduation gap faced by children from low-income families.</p>
<p>More money for schools leads to more education resources for students and their teachers. The same researchers found that spending increases were associated with reductions in student-to-teacher ratios, increases in teacher salaries and longer school years. Other studies <a href="https://hep.gse.harvard.edu/9781682532447/educational-inequality-and-school-finance/">yielded similar results</a>: <a href="https://www.nber.org/system/files/working_papers/w25368/w25368.pdf">School funding matters</a>, especially for children already suffering the harms of poverty.</p>
<p>While tax abatements themselves are generally linked to rising property values, the <a href="https://doi.org/10.1002/pam.21862">benefits are not evenly distributed</a>. In fact, any expansion of the tax base due to new property construction tends to be <a href="https://doi.org/10.1080/15575339809489773">outside of the county granting the tax abatement</a>. For families in school districts with the lost tax revenues, their neighbors’ good fortune likely comes as little solace. Meanwhile, a poorly funded education system is less likely to yield a <a href="https://nap.nationalacademies.org/catalog/13398/education-for-life-and-work-developing-transferable-knowledge-and-skills">skilled and competitive workforce</a>, creating <a href="https://doi.org/10.1093/acprof:oso/9780199982981.003.0014">longer-term economic costs</a> that make the region less attractive for businesses and residents.</p>
<p>“There’s a head-on collision here between private gain and the future quality of America’s workforce,” said Greg LeRoy, executive director at Good Jobs First, a Washington, D.C., advocacy group that’s critical of tax abatement and tracks the use of economic development subsidies.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/575449/original/file-20240213-26-7jhmm1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Three-story school building with police officers out front and traffic lights in the foreground" src="https://images.theconversation.com/files/575449/original/file-20240213-26-7jhmm1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/575449/original/file-20240213-26-7jhmm1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575449/original/file-20240213-26-7jhmm1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575449/original/file-20240213-26-7jhmm1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575449/original/file-20240213-26-7jhmm1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575449/original/file-20240213-26-7jhmm1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575449/original/file-20240213-26-7jhmm1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Roxborough High School in Philadelphia.</span>
<span class="attribution"><a class="source" href="https://drive.google.com/file/d/1X4dQQT50psqFFY1sPKeUz_wAk8eOtZ44/view?usp=sharing">AP Photo/Matt Rourke</a></span>
</figcaption>
</figure>
<p>As funding dwindles and educational quality declines, additional <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3739064">families with means often opt for</a> alternative educational avenues such as private schooling, home-schooling or moving to a different school district, further weakening the public school system.</p>
<p>Throughout the U.S., parents with the power to do so <a href="https://www.tandfonline.com/doi/full/10.1080/0161956X.2015.988536">demand special arrangements</a>, such as selective schools or high-track enclaves that <a href="https://www.nyulawreview.org/wp-content/uploads/2018/10/NYULawReview-93-4-Miller.pdf">hire experienced, fully prepared</a> teachers. If demands aren’t met, <a href="https://doi.org/10.1177/0895904818802106">they leave</a> the district’s public schools for private schools or for the suburbs. Some parents even <a href="https://doi.org/10.1111/j.1747-4469.2009.01166.x">organize to splinter</a> their more advantaged, and generally whiter, neighborhoods away from the larger urban school districts.</p>
<p>Those parental demands – known among scholars as “<a href="http://dx.doi.org/10.1596/978-0-8213-6991-3">opportunity hoarding</a>” – may seem unreasonable from the outside, but scarcity breeds very real fears about educational harms inflicted on one’s own children. Regardless of who’s to blame, the children who bear the heaviest burden of the nation’s concentrated poverty and racialized poverty again lose out.</p>
<h2>Rethinking in Philadelphia and Riverhead</h2>
<p>Americans also ask public schools to accomplish Herculean tasks that go <a href="https://www.tandfonline.com/doi/full/10.1080/15575330.2023.2217881">far beyond the education basics</a>, as many parents discovered at the onset of the pandemic when schools closed and their support for families largely disappeared.</p>
<p>A school serving students who endure housing and food insecurity must dedicate resources toward children’s basic needs and trauma. But districts serving more low-income students <a href="https://edtrust.org/resource/equal-is-not-good-enough/">spend less per student</a> on average, and almost half the states <a href="https://files.eric.ed.gov/fulltext/ED596199.pdf">have regressive funding structures</a>.</p>
<p>Facing dwindling resources for schools, several cities have begun to rethink their tax exemption programs.</p>
<p>The Philadelphia City Council recently passed a scale-back on a <a href="https://www.phila.gov/2018-05-24-city-releases-study-of-10-year-property-tax-abatement/">10-year property tax abatement</a> by decreasing the percentage of the subsidy over that time. But even with that change, millions will be lost to tax exemptions that could instead be invested in cash-depleted schools. “We could make major changes in our schools’ infrastructure, curriculum, staffing, staffing ratios, support staff, social workers, school psychologists – take your pick,” Brooks said.</p>
<p>Other cities looking to reform tax abatement programs are taking a different approach. In Riverhead, New York, on Long Island, developers or project owners can be granted exemptions on their property tax and allowed instead to shell out a far smaller “payment in lieu of taxes,” or PILOT. When the abatement ends, most commonly after 10 years, the businesses then will pay full property taxes.</p>
<p>At least, that’s the idea, but the system is <a href="https://nysfocus.com/2023/10/11/riverhead-ida-tax-breaks-aquarium-school">far from perfect</a>. Beneficiaries of the PILOT program have failed to pay on time, leaving the school board struggling to fill a budget hole. Also, the payments <a href="https://nysfocus.com/2023/10/11/riverhead-ida-tax-breaks-aquarium-school">are not equal</a> to the amount they would receive for property taxes, with millions of dollars in potential revenue over a decade being cut to as little as a few hundred thousand. On the back end, if a business that’s subsidized with tax breaks fails after 10 years, the projected benefits never emerge.</p>
<p>And when the time came to start paying taxes, developers have returned to the city’s Industrial Development Agency with hat in hand, asking for more tax breaks. A <a href="https://www.newsday.com/business/ida-tax-breaks-nestle-aquarium-steel-i30377">local for-profit aquarium</a>, for example, was granted a 10-year PILOT program break by Riverhead in 1999; it has received so many extensions that it is not scheduled to start paying full taxes until 2031 – 22 years after originally planned.</p>
<h2>Kansas City border politics</h2>
<p>Like many cities, Kansas City has a long history of segregation, white flight and racial redlining, said Kathleen Pointer, senior policy strategist for Kansas City Public Schools.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/575513/original/file-20240214-16-znl7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/575513/original/file-20240214-16-znl7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/575513/original/file-20240214-16-znl7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575513/original/file-20240214-16-znl7f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575513/original/file-20240214-16-znl7f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575513/original/file-20240214-16-znl7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575513/original/file-20240214-16-znl7f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575513/original/file-20240214-16-znl7f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">James Elementary in Kansas City, Mo.</span>
<span class="attribution"><span class="source">Danielle McLean</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Troost Avenue, where the Kansas City Public Schools administrative office is located, serves as the city’s <a href="https://www.nbcnews.com/news/us-news/decades-dividing-line-troost-avenue-kansas-city-mo-sees-new-n918851">historic racial dividing line</a>, with wealthier white families living in the west and more economically disadvantaged people of color in the east. Most of the district’s schools are located east of Troost, not west.</p>
<p>Students on the west side “pretty much automatically funnel into the college preparatory middle school and high schools,” said The Federation of Teachers’ Roberts. Those schools are considered signature schools that are selective and are better taken care of than the typical neighborhood schools, he added.</p>
<p>The school district’s tax levy was set by voters in 1969 at 3.75%. But successive attempts over the next few decades to increase the levy at the ballot box failed. During a decadeslong desegregation lawsuit that was eventually resolved through a settlement agreement in the 1990s, a court raised the district’s levy rate to 4.96% without voter approval. The levy has remained at the same 4.96% rate since.</p>
<p>Meanwhile, Kansas City is still distributing 20-year tax abatements to companies and developers for projects. The district calculated that about 92% of the money that was abated within the school district’s boundaries was for projects within the whiter west side of the city, Pointer said.</p>
<p>“Unfortunately, we can’t pick or choose where developers build,” said Meredith Hoenes, director of communications for Port KC. “We aren’t planning and zoning. Developers typically have plans in place when they knock on our door.”</p>
<p>In Kansas City, <a href="https://kcbeacon.org/stories/2021/11/29/kansas-city-tax-incentives/">several agencies administer tax incentives</a>, allowing developers to shop around to different bodies to receive one. Pointer said he believes the Port Authority is popular because they don’t do a third-party financial analysis to prove that the developers need the amount that they say they do.</p>
<p>With 20-year abatements, a child will start pre-K and graduate high school before seeing the benefits of a property being fully on the tax rolls, Pointer said. Developers, meanwhile, routinely threaten to build somewhere else if they don’t get the incentive, she said.</p>
<p>In 2020, BlueScope Construction, a company that had received tax incentives for nearly 20 years and was about to roll off its abatement, asked for another 13 years and <a href="https://www.kcur.org/news/2020-06-25/kansas-city-council-rejects-incentives-for-a-company-that-threatened-to-move-across-state-line">threatened to move</a> to another state if it didn’t get it. At the time, the U.S. was grappling with a racial reckoning following the murder of George Floyd, who was killed by a Minneapolis police officer.</p>
<p>“That was a moment for Kansas City Public Schools where we really drew a line in the sand and talked about incentives as an equity issue,” Pointer said.</p>
<p>After the district raised the issue – <a href="https://www.kansascity.com/news/business/development/article243798657.html">tying the incentives to systemic racism</a> – the City Council rejected BlueScope’s bid and, three years later, it’s still in Kansas City, fully on the tax rolls, she said. BlueScope did not return multiple requests for comment.</p>
<p>Recently, a <a href="https://kcbeacon.org/stories/2023/07/18/port-kc-waldo-plaza-tax-breaks/">multifamily housing project</a> was approved for a <a href="https://www.kcur.org/news/2023-08-30/port-kc-approves-20-year-tax-incentive-deal-for-plaza-apartments">20-year tax abatement</a> by the Port Authority of Kansas City at Country Club Plaza, an outdoor shopping center in an affluent part of the city. The housing project included no affordable units. “This project was approved without any independent financial analysis proving that it needed that subsidy,” Pointer said.</p>
<p>All told, the Kansas City Public Schools district faces several shortfalls beyond the $400 million in deferred maintenance, Superintendent Jennifer Collier said. There are staffing shortages at all positions: teachers, paraprofessionals and support staff. As in much of the U.S., the cost of housing is surging. New developments that are being built do not include affordable housing, or when they do, the units are still out of reach for teachers.</p>
<p>That’s making it harder for a district that already loses about 1 in 5 of its teachers each year to keep or recruit new ones, who earn an average of only $46,150 their first year on the job, Collier said.</p>
<h2>East Baton Rouge and the industrial corridor</h2>
<p>It’s impossible to miss the tanks, towers, pipes and industrial structures that incongruously line Baton Rouge’s Scenic Highway landscape. They’re part of Exxon Mobil Corp.’s campus, home of the oil giant’s refinery in addition to chemical and plastics plants.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/575171/original/file-20240213-20-ey3jk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Aerial view of industrial buildings along a river" src="https://images.theconversation.com/files/575171/original/file-20240213-20-ey3jk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/575171/original/file-20240213-20-ey3jk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575171/original/file-20240213-20-ey3jk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575171/original/file-20240213-20-ey3jk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575171/original/file-20240213-20-ey3jk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575171/original/file-20240213-20-ey3jk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575171/original/file-20240213-20-ey3jk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Exxon Mobil Corp.’s Baton Rouge campus occupies 3.28 square miles.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/3c6e5c10434a44c48929197377f7a717?ext=true">AP Photo/Gerald Herbert</a></span>
</figcaption>
</figure>
<p>Sitting along the Mississippi River, <a href="https://corporate.exxonmobil.com/locations/united-states/baton-rouge-area-operations-overview#Safetyhealthandenvironment">the campus</a> has been a staple of Louisiana’s capital for over 100 years. It’s where 6,000 employees and contractors who collectively earn over $400 million annually produce <a href="https://corporate.exxonmobil.com/-/media/global/files/locations/united-states-operations/baton-rouge/2022-brrf-fact-sheet.pdf">522,000 barrels</a> of crude oil per day when at full capacity, as well as the annual production and manufacture of <a href="https://corporate.exxonmobil.com/-/media/global/files/locations/united-states-operations/baton-rouge/2022-brpo-fact-sheet.pdf">3 billion pounds</a> of high-density polyethylene and polypropylene and <a href="https://corporate.exxonmobil.com/-/media/global/files/locations/united-states-operations/baton-rouge/2022-brcp-fact-sheet.pdf">6.6 billion pounds</a> of petrochemical products. The company posted a <a href="https://www.reuters.com/business/energy/exxon-smashes-western-oil-majors-earnings-record-with-59-billion-profit-2023-01-31/">record-breaking</a> <a href="https://corporate.exxonmobil.com/news/news-releases/2023/0131_exxonmobil-announces-full-year-2022-results">$55.7 billion</a> in profits in 2022 and <a href="https://corporate.exxonmobil.com/news/news-releases/2024/0202_exxonmobil-announces-2023-results">$36 billion</a> in 2023.</p>
<p>Across the street are empty fields and roads leading into neighborhoods that have been designated by the U.S. Department of Agriculture as a low-income <a href="https://www.ers.usda.gov/data-products/food-access-research-atlas/go-to-the-atlas/">food desert</a>. A mile drive down the street to Route 67 is a Dollar General, fast-food restaurants, and tiny, rundown food stores. A Hi Nabor Supermarket is 4 miles away.</p>
<p>East Baton Rouge Parish’s McKinley High School, a 12-minute drive from the refinery, serves a student body that is about 80% Black and 85% poor. The school, which boasts famous alums such as rapper Kevin Gates, former NBA player Tyrus Thomas and Presidential Medal of Freedom recipient Gardner C. Taylor, holds a special place in the community, but it has been beset by violence and tragedy lately. Its football team quarterback, <a href="https://bleacherreport.com/articles/2709703-mckinley-high-school-qb-bryant-lee-fatally-shot-days-before-graduation">who was killed</a> days before graduation in 2017, was among at least four of McKinley’s students who <a href="https://www.theadvocate.com/baton_rouge/news/crime_police/mckinley-high-student-shot-and-injured-near-baton-rouge-campus-school-placed-on-lockdown/article_f1025d24-2f07-11e9-9d4e-2789b90eae2f.html">have been shot</a> <a href="https://www.nola.com/archive/suspects-in-up-and-coming-baton-rouge-rappers-november-slaying-not-indicted-or-cleared/article_c18af908-164c-5c16-b871-55e7fbe3dbf8.html">or murdered</a> <a href="https://www.theadvocate.com/baton_rouge/news/crime_police/he-played-tuba-baseball-at-mckinley-and-dreamed-of-college-a-shooting-cut-it-all/article_0f5fa014-9e73-11ec-941e-0f819ca7bca1.html">over the past six years</a>.</p>
<p>The experience is starkly different at some of the district’s more advantaged schools, including its magnet programs open to high-performing students.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/575533/original/file-20240214-26-gvctzn.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Black-and-white outline of Louisiana showing the parishes, with one, near the bottom right, filled in red" src="https://images.theconversation.com/files/575533/original/file-20240214-26-gvctzn.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/575533/original/file-20240214-26-gvctzn.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=543&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575533/original/file-20240214-26-gvctzn.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=543&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575533/original/file-20240214-26-gvctzn.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=543&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575533/original/file-20240214-26-gvctzn.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=683&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575533/original/file-20240214-26-gvctzn.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=683&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575533/original/file-20240214-26-gvctzn.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=683&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">East Baton Rouge Parish, marked in red, includes an Exxon Mobil Corp. campus and the city of Baton Rouge.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Map_of_Louisiana_highlighting_East_Baton_Rouge_Parish.svg">David Benbennick/Wikimedia</a></span>
</figcaption>
</figure>
<p>Baton Rouge is a tale of two cities, with some of the worst outcomes in the state for education, income and mortality, and some of the best outcomes. “It was only separated by sometimes a few blocks,” said Edgar Cage, the lead organizer for the advocacy group Together Baton Rouge. Cage, who grew up in the city when it was segregated by Jim Crow laws, said the root cause of that disparity was racism.</p>
<p>“Underserved kids don’t have a path forward” in East Baton Rouge public schools, Cage said.</p>
<p>A <a href="https://urbanleaguela.org/wp-content/uploads/2019/10/BR-Equity-Report-Online.pdf">2019 report</a> from the Urban League of Louisiana found that economically disadvantaged African American and Hispanic students are not provided equitable access to high-quality education opportunities. That has contributed to those students underperforming on standardized state assessments, such as the LEAP exam, being unprepared to advance to higher grades and being excluded from high-quality curricula and instruction, as well as the highest-performing schools and magnet schools.</p>
<p>“Baton Rouge is home to some of the highest performing schools in the state,” according to the report. “Yet the highest performing schools and schools that have selective admissions policies often exclude disadvantaged students and African American and Hispanic students.”</p>
<p>Dawn Collins, who served on the district’s school board from 2016 to 2022, said that with more funding, the district could provide more targeted interventions for students who were struggling academically or additional support to staff so they can better assist students with greater needs.</p>
<p>But for decades, Louisiana’s <a href="https://www.opportunitylouisiana.gov/business-incentives/industrial-tax-exemption">Industrial Ad Valorem Tax Exemption</a> <a href="https://www.opportunitylouisiana.gov/business-incentives/industrial-tax-exemption">Program</a>, or ITEP, allowed for 100% property tax exemptions for industrial manufacturing facilities, said Erin Hansen, the statewide policy analyst at Together Louisiana, a network of 250 religious and civic organizations across the state that advocates for grassroots issues, including tax fairness.</p>
<p>The ITEP program was created in the 1930s through a state constitutional amendment, allowing companies to bypass a public vote and get approval for the exemption through the governor-appointed <a href="https://www.opportunitylouisiana.gov/boards-reports-and-rules/louisiana-board-of-commerce-and-industry">Board of Commerce and Industry</a>, Hansen said. For over 80 years, that board approved nearly all applications that it received, she said.</p>
<p>Since 2000, Louisiana has granted a total of <a href="https://fastlaneng.louisianaeconomicdevelopment.com/public/reports">$35 billion in corporate property tax breaks</a> for 12,590 projects. </p>
<h2>Louisiana’s executive order</h2>
<p>A few efforts to reform the program over the years have largely failed. But in 2016, Gov. John Bel Edwards <a href="https://gov.louisiana.gov/assets/ExecutiveOrders/JBE16-26.pdf">signed an executive order</a> that slightly but importantly tweaked the system. On top of the state board vote, the order gave local taxing bodies – such as school boards, sheriffs and parish or city councils – the ability to vote on their own individual portions of the tax exemptions. And in 2019 the East Baton Rouge Parish School Board <a href="https://www.theadvocate.com/baton_rouge/news/education/itep-critics-defeat-exxonmobil-tax-break-requests-at-school-board-here-are-next-steps/article_09cb2d54-1a68-11e9-a672-7f6ee09f1f74.html">exercised its power</a> to vote down an abatement.</p>
<p>Throughout the U.S., <a href="https://doi.org/10.1080/15575330.2022.2148171">school boards’ power over the tax abatements</a> that affect their budgets vary, and in some states, including Georgia, Kansas, Nevada, New Jersey and South Carolina, school boards lack any formal ability to vote or comment on tax abatement deals that affect them.</p>
<p>Edwards’ executive order also capped the maximum exemption at 80% and tightened the rules so routine capital investments and maintenance were no longer eligible, Hansen said. A requirement concerning job creation was also put in place.</p>
<p>Concerned residents and activists, led by Together Louisiana and sister group Together Baton Rouge, rallied around the new rules and <a href="https://www.nytimes.com/2019/02/05/us/louisiana-itep-exxon-mobil.html">pushed back</a> against the billion-dollar corporation taking more tax money from the schools. In 2019, the campaign worked: the school board rejected a $2.9 million property tax break bid by Exxon Mobil.</p>
<p>After the decision, Exxon Mobil reportedly described the city as “<a href="https://www.businessreport.com/business/exxonmobil-calls-baton-rouge-unpredictable-for-investment-after-itep-requests-rejected">unpredictable</a>.”</p>
<p>However, members of the business community have continued to lobby for the tax breaks, and they have pushed back against further rejections. In fact, according to Hansen, loopholes were created during the rulemaking process around the governor’s executive order that allowed companies to weaken its effectiveness.</p>
<p>In total, <a href="https://fastlaneng.louisianaeconomicdevelopment.com/public/reports">223 Exxon Mobil projects</a> worth nearly $580 million in tax abatements have been granted in the state of Louisiana under the ITEP program since 2000.</p>
<p>“ITEP is needed to compete with other states – and, in ExxonMobil’s case, other countries,” according to Exxon Mobil spokesperson Lauren Kight.</p>
<p>She pointed out that Exxon Mobil is the largest property taxpayer for the EBR school system, paying more than $46 million in property taxes in EBR parish in 2022 and another $34 million in sales taxes.</p>
<p>A new ITEP contract won’t decrease this existing tax revenue, Kight added. “Losing out on future projects absolutely will.”</p>
<p>The East Baton Rouge Parish School Board has continued to approve Exxon Mobil abatements, passing $46.9 million between 2020 and 2022. Between 2017 and 2023, the school district has lost $96.3 million.</p>
<p><iframe id="8PBGX" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/8PBGX/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>Taxes are highest when industrial buildings are first built. Industrial property comes onto the tax rolls at <a href="https://ascensionedc.com/local-incentives/#">40% to 50% of its original value</a> in Louisiana after the initial 10-year exemption, according to the Ascension Economic Development Corp.</p>
<p>Exxon Mobil received its latest tax exemption, $8.6 million over 10 years – an 80% break – in October 2023 for $250 million to install facilities at the Baton Rouge complex that purify isopropyl alcohol for microchip production and that create a new advanced recycling facility, allowing the company to address plastic waste. The project <a href="https://go.boarddocs.com/la/ebrp/Board.nsf/files/CV7LXR562D7C/$file/ITEP-Exxon%20Mobil%20Corporation%2020230071-ITE%20Application.pdf">created zero new jobs</a>.</p>
<p>The school board <a href="https://www.youtube.com/watch?v=k-Ry-veRlM4">approved it by a 7-2 vote</a> after a long and occasionally contentious board meeting.</p>
<p>“Does it make sense for Louisiana and other economically disadvantaged states to kind of compete with each other by providing tax incentives to mega corporations like Exxon Mobil?” said EBR School Board Vice President Patrick Martin, who voted for the abatement. “Probably, in a macro sense, it does not make a lot of sense. But it is the program that we have.”</p>
<p>Obviously, Exxon Mobil benefits, he said. “The company gets a benefit in reducing the property taxes that they would otherwise pay on their industrial activity that adds value to that property.” But the community benefits from the 20% of the property taxes that are not exempted, he said.</p>
<p>“I believe if we don’t pass it, over time the investments will not come and our district as a whole will have less money,” he added.</p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/E-9hbVfhZRQ?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">In 2022, a year when Exxon Mobil made a record $55.7 billion, the company asked for a 10-year, 80% property tax break from the cash-starved East Baton Rouge Parish school district. A lively debate ensued.</span></figcaption>
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<p>Meanwhile, the district’s budgetary woes are coming to a head. Bus drivers staged a sickout at the start of the school year, refusing to pick up students – in protest of low pay and not having buses equipped with air conditioning amid a heat wave. The district was forced to release students early, leaving kids stranded without a ride to school, before it acquiesced and provided the drivers and other staff <a href="https://www.theadvocate.com/baton_rouge/news/education/lost-class-time-due-to-baton-rouge-bus-crisis-to-be-made-up/article_f5666e24-4694-11ee-8f5d-87183159ce0e.html">one-time stipends</a> and purchased new buses with air conditioning.</p>
<p>The district also agreed to reestablish transfer points as a temporary response to the shortages. But that transfer-point plan has historically resulted in students riding on the bus for hours and occasionally missing breakfast when the bus arrives late, according to Angela Reams-Brown, president of the East Baton Rouge Federation of Teachers. The district plans to purchase or lease over 160 buses and solve its bus driver shortage next year, but the plan could lead to <a href="https://www.theadvocate.com/baton_rouge/news/education/baton-rouge-school-bus-crisis-could-lead-to-budget-crisis/article_a24d6502-5fdb-11ee-ad9c-c378e2276bbf.html">a budget crisis</a>.</p>
<p>A <a href="https://www.wafb.com/2023/06/20/program-aimed-help-teacher-shortage/">teacher shortage looms</a> as well, because the district is paying teachers below the regional average. At the school board meeting, <a href="https://www.youtube.com/watch?v=k-Ry-veRlM4">Laverne Simoneaux</a>, an ELL specialist at East Baton Rouge’s Woodlawn Elementary, said she was informed that her job was not guaranteed next year since she’s being paid through federal COVID-19 relief funds. By receiving tax exemptions, Exxon Mobil was taking money from her salary to deepen their pockets, she said.</p>
<p>A young student in the district told the school board that the money could provide better internet access or be used to hire someone to pick up the glass and barbed wire in the playground. But at least they have a playground – Hayden Crockett, a seventh grader at Sherwood Middle Academic Magnet School, noted that his sister’s elementary school lacked one.</p>
<p>“If it wasn’t in the budget to fund playground equipment, how can it also be in the budget to give one of the most powerful corporations in the world a tax break?” Crockett said. “The math just ain’t mathing.”</p><img src="https://counter.theconversation.com/content/222940/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christine Wen worked for the nonprofit organization Good Jobs First from June 2019 to May 2022 where she helped collect tax abatement data. </span></em></p><p class="fine-print"><em><span>Nathan Jensen has received funding from the John and Laura Arnold Foundation, the Smith Richardson Foundation, the Ewing Marion Kauffman Foundation and the Washington Center for Equitable Growth. He is a Senior Fellow at the Niskanen Center.
</span></em></p><p class="fine-print"><em><span>Danielle McLean and Kevin Welner do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>An estimated 95% of US cities provide economic development tax incentives to woo corporate investors, taking billions away from schools.Christine Wen, Assistant Professor of Landscape Architecture & Urban Planning, Texas A&M UniversityDanielle McLean, Freelance Reporter and Editor, The ConversationKevin Welner, Professor of Education Policy & Law; Director of the National Education Policy Center, University of Colorado BoulderNathan Jensen, Professor of Government, The University of Texas at AustinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2225112024-02-02T11:04:44Z2024-02-02T11:04:44ZGovernments spend US$22 billion a year helping the fishing industry empty our oceans. This injustice must end<figure><img src="https://images.theconversation.com/files/572830/original/file-20240201-27-sdoziy.jpg?ixlib=rb-1.1.0&rect=2%2C0%2C1370%2C770&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.pexels.com/photo/drone-view-of-fishing-trawler-on-sea-5829126/">Pok Rie/Pexel</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Overfishing has dire consequences for ocean health and for the millions of people who depend on fish for food and wellbeing. Globally, catch has been steadily <a href="https://www.nature.com/articles/ncomms10244">declining</a> since the 1990s. It’s a trend that’s likely to continue if we fail to act now.</p>
<p>Nearly all governments, including Australia’s, subsidise their fishing industries. Financial support comes in many forms, from taxpayer-funded fuel to reduced boat-building costs. These subsidies are harmful because they encourage overfishing. Some of the most environmentally damaging and least efficient fishing activities, such as <a href="https://www.sciencedirect.com/science/article/abs/pii/S0308597X09001663">bottom trawling</a> and <a href="https://www.science.org/doi/full/10.1126/sciadv.aat2504">distant water fishing</a>, would become unprofitable and cease without government <a href="https://archives.nereusprogram.org/ask-an-expert-why-is-the-global-fishing-industry-given-35-billion-in-subsidies-each-year/">subsidies</a>. </p>
<p>Scientists worldwide are rallying for stringent regulations to eliminate harmful fisheries subsidies, which totalled a whopping <a href="https://www.sciencedirect.com/science/article/pii/S0308597X19303677">US$22 billion</a> in 2018. Safeguarding the ocean will strengthen food security and allow more equitable distribution of marine resources.</p>
<p>Trade ministers from around the world are set to convene later this month in Abu Dhabi at a key meeting of the World Trade Organization (WTO). In an <a href="https://www.nature.com/articles/s44183-024-00042-0">open letter</a> published today, we are among 36 marine experts calling on the WTO to adopt ambitious regulations promoting fisheries sustainability and equity, and to eliminate harmful fisheries subsidies.</p>
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Read more:
<a href="https://theconversation.com/putting-an-end-to-billions-in-fishing-subsidies-could-improve-fish-stocks-and-ocean-health-163470">Putting an end to billions in fishing subsidies could improve fish stocks and ocean health</a>
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<h2>A long-awaited agreement</h2>
<p>International pressure from scientists helped to broker an earlier agreement on fishing subsidies, which is yet to be ratified. </p>
<p>In October 2021, 300 experts published an <a href="https://www.science.org/doi/10.1126/science.abm1680">article in Nature</a> calling for an end to harmful subsidies in the fishing sector. </p>
<p>After decades of fruitless negotiations, the WTO finally reached an <a href="https://www.wto.org/english/tratop_e/rulesneg_e/fish_e/fish_factsheet_e.pdf">agreement on fisheries subsidies</a> in June 2022. </p>
<p>Once ratified by two-thirds of WTO members, this agreement will partially address the United Nations <a href="https://indicators.report/targets/14-6/">Sustainable Development Goal Target 14.6</a> to eliminate harmful subsidies.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/572831/original/file-20240201-17-tiyvdp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A man in a suit brings down the gavel after agreement was reached on fisheries subsidies at the WTO meeting in 2022." src="https://images.theconversation.com/files/572831/original/file-20240201-17-tiyvdp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/572831/original/file-20240201-17-tiyvdp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/572831/original/file-20240201-17-tiyvdp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/572831/original/file-20240201-17-tiyvdp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/572831/original/file-20240201-17-tiyvdp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/572831/original/file-20240201-17-tiyvdp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/572831/original/file-20240201-17-tiyvdp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The gavel goes down after members reached an agreement on fisheries subsidies, Geneva, 17 June 2022.</span>
<span class="attribution"><a class="source" href="https://www.wto.org/english/thewto_e/minist_e/mc12_e/photos_e.htm">WTO/Jay Louvion</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<p>Unfortunately, while this agreement is historic, it is narrow. It only prohibits member governments from financing illegal fishing activities and the exploitation of already overfished stocks. But it’s obvious illegal fishing should be banned and the focus on overfished stocks is too little, too late. </p>
<p>Experts argue the agreement fails to specifically address harmful subsidies across global fisheries and as such only affects a <a href="https://oceana.org/blog/the-wto-agreement-saves-face-but-does-it-save-fish/">trivial component</a> of subsidy-driven exploitation. The subsidies that reduce operating costs and increase fishing capacity, allowing vessels to travel further and remain at sea longer, remain in place. </p>
<h2>Fisheries subsidies affect more than just fish</h2>
<p>Scientists have been <a href="https://www.nature.com/articles/s43016-021-00451-1">sounding the alarm</a> for decades. Many published studies document the <a href="https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0020239">destabilising effects</a> of fisheries subsidies on ecosystems. In addition to impacting biodiversity and ecosystems, subsidies also increase the <a href="https://www.sciencedirect.com/science/article/abs/pii/S0921800921001154">CO₂ emissions</a> that contribute to climate change.</p>
<p>More recently, studies have also applied a social perspective to this issue. Seafood lifts millions of people out of hunger, malnutrition and poverty. Yet more people will lose a secure <a href="https://www.nature.com/articles/534317a">source of food and nutrients</a> if fish stocks continue to decline due to industrial overfishing. </p>
<p>Research shedding light on the concept of “<a href="https://www.sciencedirect.com/science/article/pii/S0308597X20302529">equity</a>” shows subsidies don’t just harm the ocean, they also affect human <a href="https://www.worldwildlife.org/stories/5-ways-harmful-fisheries-subsidies-impact-coastal-communities">communities</a>. These communities are largely in developing countries which are rarely the source of harmful fisheries subsidies. Rather, their waters are exploited by <a href="https://oceana.org/wp-content/uploads/sites/18/OceanaDWF_FinalReport.pdf">foreign vessels</a> supported by wealthy governments’ fisheries subsidies.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/572832/original/file-20240201-25-bknp4o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Person wearing gloves, bending down to handle drying squid on a fish net" src="https://images.theconversation.com/files/572832/original/file-20240201-25-bknp4o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/572832/original/file-20240201-25-bknp4o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/572832/original/file-20240201-25-bknp4o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/572832/original/file-20240201-25-bknp4o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/572832/original/file-20240201-25-bknp4o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/572832/original/file-20240201-25-bknp4o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/572832/original/file-20240201-25-bknp4o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Fisheries contribute to livelihoods and food security of millions of people.</span>
<span class="attribution"><a class="source" href="https://www.pexels.com/photo/person-drying-squid-on-fishnet-13243896/">Jimmy Liao/Pexel</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<p>Fisheries subsidies foster unfair competition not only among countries but also between industrial and community led fishing fleets. In the <a href="https://www.nature.com/articles/s44183-023-00031-9">Indian Ocean</a>, the level of subsidies provided to industrial fisheries corresponds to the amount of seafood exported to international markets, largely supplying rich and food-secure countries. This shows governments are deliberately empowering their industrial fleets to fish for seafood largely exported and consumed elsewhere, instead of sustaining fisheries providing food for locals. </p>
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Read more:
<a href="https://theconversation.com/fisheries-subsidies-fuel-ocean-depletion-and-hurt-coastal-communities-142260">Fisheries subsidies fuel ocean depletion and hurt coastal communities</a>
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<h2>The good, the bad and the ugly</h2>
<p>While most nations contribute to harmful subsidies, <a href="https://oceana.org/wp-content/uploads/sites/18/994812/Oceana_Summary6-22.pdf">ten nations</a> are responsible for 70% of this unsustainable financing. Chief among them are China, Japan and the European Union, reflecting the significant size of their distant water fishing fleets that typically access the resources of less-developed nations.</p>
<p>In contrast, <a href="https://www.sciencedirect.com/science/article/pii/S0308597X19303677?via%3Dihub">Australia</a> contributes only 0.1% of global harmful subsidies. Only 6% of Australia’s annual US$400 million in fisheries subsidies is considered harmful. While Australia should give attention to its ongoing annual taxpayer contribution of US$25 million to the fishing sector, it is well placed to demonstrate global leadership on how fishing can deliver sustainable and equitable outcomes without harmful subsidies.</p>
<h2>An essential opportunity</h2>
<p>A <a href="https://www.wto.org/english/thewto_e/minist_e/mc13_e/mc13_e.htm">second wave</a> of negotiations on fisheries subsidies is expected during the WTO Ministerial Conference this February in Abu Dhabi. This conference represents an invaluable opportunity to better protect the ocean. </p>
<p>In anticipation of this meeting, <a href="https://www.nature.com/articles/s44183-024-00042-0">we are urging nations</a> to adopt more ambitious regulations that eliminate harmful subsidies, prioritising fisheries sustainability and ocean equity. </p>
<p>Harmful fisheries subsidies are not only unsustainable but profoundly unfair. Based on the extensive body of evidence, the WTO should agree to eliminate harmful subsidies once and for all.</p><img src="https://counter.theconversation.com/content/222511/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vania Andreoli received funding for her PhD research from the Australian Government Research Training Program Scholarship and The Jock Clough Marine Foundation through the Oceans Institute Robson and Robertson Award. </span></em></p><p class="fine-print"><em><span>Dirk Zeller supervises Vania Andreoli’s PhD, so his lab has indirectly received funding for this doctoral research from the Australian Government and the Jock Clough Marine Foundation.</span></em></p><p class="fine-print"><em><span>Jessica Meeuwig supervises Vania Andreoli's PhD so her lab has indirectly received funding for this doctoral research from the Australian Government and the Jock Clough Marine Foundation. </span></em></p>Governments all over the world are propping up overfishing. Now scientists have penned an open letter calling on trade ministers to implement stricter regulations against harmful fisheries subsidies.Vania Andreoli, PhD Candidate, The University of Western AustraliaDirk Zeller, Professor & Director, Sea Around Us - Indian Ocean, The University of Western AustraliaJessica Meeuwig, Wen Family Chair in Conservation, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2214642024-01-19T16:54:17Z2024-01-19T16:54:17ZGermany’s economy must be fixed – here are three top priorities<p>The <a href="https://www.ft.com/content/792a1a09-701c-4c9d-aa77-0d9575d5bda9">latest figures</a> on German gross domestic product (GDP) are far from reassuring. Output was 0.3% lower in 2023 than the year before, turning Germany into the worst-performing large economy in the world.</p>
<p>By comparison, the International Monetary Fund (IMF)‘s <a href="https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD">latest calculations</a> show the US economy growing 2.1% in 2023 and China 5%. The European Union as a whole achieved 0.7%, dragged down by Germany, its largest contributor. </p>
<p>Germany has been hit hard by the rise in energy costs, especially having relied almost entirely on cheap Russian energy until Russia’s invasion of Ukraine in 2022. Sizeable inflationary pressures have put pressure on German companies’ production processes, which are optimised for efficiency.</p>
<p>Rising interest rates have made it harder for German companies to secure financing, as well as increasing their operating costs and weakening domestic and foreign demand. </p>
<p>And China has slowed down and also started to invest in self-sufficiency, reducing its dependence on foreign technology and the import of foreign products and services. This is clearly a problem for German companies that have <a href="https://www.nytimes.com/2023/07/06/world/europe/germany-china-business-economy.html">relied massively</a> on the Chinese market over the past two decades.</p>
<p><a href="https://www.unido.org/news/germany-worlds-leading-manufacturer-according-unidos-cip-index">According to</a> the UNIDO Competitive Industrial Performance (CIP) Index, Germany remains the world’s leading manufacturer, having maintained the top rank since 2001. Yet China has entirely filled the gap over the past years, as illustrated below. </p>
<p><strong>German vs Chinese manufacturing</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/570323/original/file-20240119-25-vrg2ix.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Chart comparing German and Chinese manufacturing" src="https://images.theconversation.com/files/570323/original/file-20240119-25-vrg2ix.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/570323/original/file-20240119-25-vrg2ix.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/570323/original/file-20240119-25-vrg2ix.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/570323/original/file-20240119-25-vrg2ix.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/570323/original/file-20240119-25-vrg2ix.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/570323/original/file-20240119-25-vrg2ix.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/570323/original/file-20240119-25-vrg2ix.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The UNIDO index measures countries’ capacity to produce/export manufactured goods, technological progress and global influence on manufacturing.</span>
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<p>The results of the <a href="https://www.imd.org/centers/wcc/world-competitiveness-center/rankings/world-competitiveness-ranking/">IMD World Competitiveness Ranking</a> confirm that Germany has been losing ground among top economies. Ranked 15th overall in 2022, it dropped seven positions in 2023, deteriorating across all the dimensions considered in the ranking: economic performance, business efficiency, government efficiency and infrastructure.</p>
<p>So what can be done for Germany, at a time of huge geopolitical friction and with many countries <a href="https://www.fdiintelligence.com/content/news/industrial-policies-are-mostly-motivated-by-protectionism-not-geopolitics-83358">adopting industrial policies</a> to distort and limit trade to protect local industries? Three strategic priorities stand out:</p>
<h2>1. Diversify, diversify, diversify</h2>
<p>Germany must fix its over-reliance on China as its biggest trading partner. <a href="https://www.reuters.com/markets/china-remains-germanys-main-trading-partner-seventh-year-2023-02-08/">China has been</a> Germany’s most important trading partner since 2015, and trade between the two countries rose to a record level in 2022. </p>
<p>Berlin has recognised its excessive dependence on China for some time, but manufacturing footprints take time to change, and it can’t be done without a fallout in terms of economic performance.</p>
<p>Take Volkswagen. <a href="https://www.cnbc.com/2023/11/17/volkswagen-nissan-and-hyundai-on-track-for-worst-china-sales-in-years.html">It remains</a> a major player in China with around 3 million vehicles sold a year, but it was selling over 4 million units as recently as 2018. This is because China’s swift transition to electric cars has benefited local players like BYD. </p>
<p>The <a href="https://www.ft.com/content/1386906c-5dd1-4167-bc96-72940fc473bf">market share</a> of foreign cars in China has fallen from 64% in 2020 to 44% in 2023. The challenge for German companies like Volkswagen is to transform this into an opportunity for greater diversification.</p>
<p>Diversifying while maintaining existing trade and investments in China will be difficult, however, as we should expect the Asian country to charge a higher price to foreign companies for the access to its domestic market. Yet at such a time of geopolitical uncertainty, diversification must be the first strategic priority. </p>
<p>A <a href="https://www.ifw-kiel.de/publications/news/cost-of-decoupling-from-china-for-german-economy-severe-but-not-devastating/">recent study</a> from the German-based Kiel Institute for the World Economy suggests that if there was an abrupt halt to trade with China, it would cause Germany’s economy to shrink by 5% – a slump comparable to the global financial crisis or the COVID-19 pandemic. </p>
<h2>2. Borrow to invest</h2>
<p>In 2009, Germany added a “<a href="https://en.wikipedia.org/wiki/Debt_brake_(Germany)">debt brake</a>” to its constitution. <a href="https://www.dw.com/en/what-is-germanys-debt-brake/a-67587332">The rule</a>, which severely restricts Germany’s ability to borrow and run deficits, was seen as incentivising sensible spending and ensuring that the public finances would remain healthy.</p>
<p>This became the mantra used by Angela Merkel and the so-called <a href="https://en.wikipedia.org/wiki/Troika_(European_group)">Troika</a> of the European Commission, European Central Bank and IMF in the years following the global financial crisis as Greece and other countries struggled with their debts. </p>
<p>The landscape has now fundamentally changed, however. Germany’s constitutional court <a href="https://www.reuters.com/world/europe/german-court-make-key-ruling-budget-manoeuvre-2023-11-15/#:%7E:text=BERLIN%2C%20Nov%2015%20(Reuters),billion)%20hole%20in%20its%20finances.">recently blocked</a> the transfer of €60 billion (£51 billion) from a pandemic budget to a climate fund precisely because of the “debt brake” clause. This has led to a <a href="https://www.ft.com/content/60674329-5be3-4802-a05a-851ee2990efd">budget crisis</a> that is yet to be resolved. </p>
<p>More generally the debt brake has become a major challenge because Germany, and the EU as a whole, are competing against other countries that are subsidising their companies. For instance, <a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_23_4752">Brussels recently launched</a> an investigation on the likely presence of major market distortions resulting from Chinese state subsidies in the automotive sector. </p>
<p>The only way forward for Germany is to invest heavily in infrastructure, research & development (R&D), and more efficient state operations to help companies transform themselves and stay competitive globally. To finance this, greater reliance on debt is unavoidable. </p>
<h2>3. Attract investments from abroad, bet on Europe to innovate</h2>
<p>Recent <a href="https://www.reuters.com/markets/europe/foreign-direct-investment-germany-dives-35-bln-euros-h1-2023-09-12/">Bundesbank figures</a> show that foreign direct investment in Germany decreased to €3.5 billion in the first half of 2023 from €34.1 billion in the same period in 2022. This is a dramatic fall and the lowest inflow figure in almost 20 years. It calls for careful reflection on Germany’s loss of competitiveness and its ability to attract foreign investment.</p>
<p>The only way to fix this downtrend is to bet on innovation driven by EU-led R&D investments. Innovation has long been the engine of German (and EU) economic performance. Germany is <a href="https://sciencebusiness.net/news-byte/horizon-europe/eu-rd-intensity-falls-2022-despite-increased-spending">one of the</a> highest spenders on R&D in the bloc, at slightly over 3% of GDP per year. </p>
<p>Yet this is in the same ballpark as a decade ago, while the US and Japan now invest close to 3.5% of GDP. Stepping up R&D and keeping pace with the latest technological developments is a must for Germany (and the EU).</p>
<p>In a world where countries from China to the US are increasingly subsidising their corporations, and enacting policies to protect their local economies, Germany must make long-term investments in infrastructure, government efficiency and stimulating corporate ecosystems. This will attract greater investment from abroad, which will be crucial for Germany and its EU counterparts to innovate and thus stay competitive in the global arena.</p><img src="https://counter.theconversation.com/content/221464/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Niccolò Pisani does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The EU’s biggest economy is on its uppers. Turning it around may involve additional pain in the short term.Niccolò Pisani, Professor of Strategy and International Business, International Institute for Management Development (IMD)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2077052023-07-04T12:08:52Z2023-07-04T12:08:52ZHow childcare subsidies can reduce the gap between mothers’ and fathers’ career paths – for this generation and the next<figure><img src="https://images.theconversation.com/files/532764/original/file-20230619-22241-jgac0n.jpg?ixlib=rb-1.1.0&rect=0%2C80%2C6649%2C4386&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Making quality childcare more accessible will help generations of mothers.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/mother-entering-kindergarten-yard-her-preschooler-2100589987">Dusan Petkovic/Shutterstock</a></span></figcaption></figure><p>More than 80% of women in England and Wales will become mothers at some point during their working lives, <a href="https://www.oecd.org/els/family/SF_2-5-Childlessness.pdf">according to OECD figures</a>. Most of these women will have two children around two or three years apart, <a href="https://www.bristol.ac.uk/efm/media/workingpapers/working_papers/pdffiles/dp22769.pdf">spending at least 20 years of their adult lives</a> with a child under 18 and creating significant childcare needs for some of this time. </p>
<p>The current <a href="https://www.familyandchildcaretrust.org/sites/default/files/Resource%20Library/Childcare%20Survey%202023_Coram%20Family%20and%20Childcare.pdf">price of childcare</a> is high, averaging £149 per week in Great Britain for 25 hours of care for a child under two years old. This represents about 60% of the minimum wage earnings of someone working part-time (around 25 hours per week), and 25% of the median full-time earnings for a woman in Great Britain. </p>
<p>Availability is also a problem. Only 57% of local authorities <a href="https://www.familyandchildcaretrust.org/chancellor-urged-use-budget-help-parents-hit-rising-childcare-costs-and-sharp-drop-availability">report having enough childcare places</a> for children under the age of two.</p>
<p>Career breaks during motherhood <a href="https://www.aeaweb.org/articles?id=10.1257/pandp.20191078">are a major driver</a> of the increase in the gender pay gap over the child-bearing years. Mothers’ earnings ten and even 20 years after the birth of a first child are about 20% lower than a similar childless woman. Fathers’ earnings over the same life stages do not show any evidence of these “child penalties”. </p>
<p>Having children creates a double hurdle when a mother is deciding whether and how much to work. First, childcare fees substantially reduce take-home pay. But also, time is valued differently. When not at work, it changes from leisure time to time spent with your child (and a little leisure too, of course).</p>
<p>Both hurdles reduce the attractiveness of work. But while the latter reflects a combination of individual preferences and social norms, the former – childcare costs – can be overcome with the right policies. If these policies do not alleviate childcare costs and give parents (affordable) ways to work, mothers will lose out in the long term – but so will the wider economy. </p>
<p>On an individual level, wage growth is affected by the decision to work part time or not at all because only full-time employment <a href="http://www.gustavoventura.com/uploads/3/4/2/2/34223650/gkv-childtransfers-october30-2018-revised.pdf">typically leads to wage progression</a>. The relative penalties of choosing a part-time job or no work are <a href="https://ifs.org.uk/sites/default/files/output_url_files/MCD_RJ_FP_GenderPayGap.pdf">particularly marked for graduates</a>.</p>
<p>Lower wages will also have a negative impact on both women’s independence and on their productivity, feeding into the economy. Low wages and hours worked by mothers, combined with parents’ separation are <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachm%20ent_data/file/285389/Cm_8781_Child_Poverty_Evidence_Review_Print.pdf">an important source of child poverty</a>. In less educated families, women’s employment is the most effective measure against the incidence of child poverty.</p>
<h2>Creating better childcare subsidies</h2>
<p><a href="https://docs.iza.org/dp15312.pdf">Research shows</a> that childcare subsidies are the most effective policy for raising mothers’ labour supply, particularly among low-skill households. Unsurprisingly, subsidies conditional on work are a more effective incentive to get people to seek or remain in employment than unconditional child credits, which can reduce the attractiveness of work. </p>
<p>Research also shows that childcare subsidies can be partly self-financing over the long term. If mothers work more now and then enjoy more wage growth over time, they are more likely to continue to work and earn more in the future. This means they will pay more income tax, which <a href="https://congress-files.s3.amazonaws.com/2022-07/childcare_EEA_2022.pdf">could offset</a> some of the initial government spending on childcare subsidies.</p>
<p>But designing childcare subsidies should not just be about cost and the average price per hour of care for young children. Research on <a href="https://ideas.repec.org/a/aea/aecrev/v110y2020i1p162-99.html">what other countries do</a> shows there are <a href="https://congress-files.s3.amazonaws.com/2022-07/childcare_EEA_2022.pdf">four dimensions</a> that typically affect families’ choices:</p>
<ul>
<li>the amount of time during the day that childcare is available – if not enough, this can lead to mothers choosing part-time jobs</li>
<li>how fees vary with income – making childcare fees more expensive for better-off families may be a good tool to redistribute opportunities, while low-income households may be more responsive to and benefit more from low childcare prices</li>
<li>whether childcare subsidies are conditional on work – this could boost labour supply</li>
<li>quality provision – this will encourage parents to delegate some childcare to providers.</li>
</ul>
<figure class="align-center ">
<img alt="From behind: young girl holding hands with two adults, bright sky and trees in the background." src="https://images.theconversation.com/files/532763/original/file-20230619-17-ocrc7g.jpg?ixlib=rb-1.1.0&rect=11%2C0%2C3822%2C2155&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/532763/original/file-20230619-17-ocrc7g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/532763/original/file-20230619-17-ocrc7g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/532763/original/file-20230619-17-ocrc7g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/532763/original/file-20230619-17-ocrc7g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/532763/original/file-20230619-17-ocrc7g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/532763/original/file-20230619-17-ocrc7g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The right childcare policies can help women’s careers for generations.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/perfect-family-holding-hands-adopted-child-1142016011">Motortion Films/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Social norms about childcare and work</h2>
<p>One factor that tends to limit the power of such policies is the strength of prevailing social norms. Public opinion (and academic literature) on the role of mothers, fathers and childcare providers in the wellbeing and development of young children has evolved over past decades. It is now <a href="https://academic.oup.com/restud/article-abstract/87/5/2290/5809564?redirectedFrom=fulltext">much more socially acceptable</a> for mothers to work and fathers to be more involved in childcare.</p>
<p>Such thinking also affects government choices when it comes to developing policies to support families. Individual perceptions on the role of mothers as the primary caregiver <a href="https://www.jstor.org/stable/27648258">have been found to drive</a> both mothers’ labour force participation and their decision to have children in cross-country comparisons. These social preferences will also drive political support for childcare policies and hence policymakers’ choices.</p>
<p>In the medium term, childcare subsidies can reduce the gap between mothers’ and fathers’ career paths, and increase mothers’ economic value in the working world. But beyond this, higher rates of employment among mothers in this generation <a href="https://www.nber.org/papers/w25524">will also influence</a> the next generation’s perceptions about the compatibility of career and motherhood. </p>
<p>By helping to shape future social norms, childcare subsidies could offer more choices to mothers – not only today, but even more so for the next generation of women.</p><img src="https://counter.theconversation.com/content/207705/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Helene Turon does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Childcare subsidies give mothers the choice to work and help reduce the earnings gap between mothers and fathers. In time, it may lead to greater acceptance of working mothers for future generations.Helene Turon, Professor of Economics, University of BristolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2054832023-05-15T11:47:05Z2023-05-15T11:47:05ZThe UK needs a new industrial strategy or it will lose the global green subsidy race<figure><img src="https://images.theconversation.com/files/525653/original/file-20230511-12302-f4puke.jpg?ixlib=rb-1.1.0&rect=17%2C11%2C980%2C652&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Making industry greener -- and stronger</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/concept-environmentally-friendly-production-pond-shaped-2044948658">petrmalinak/Shutterstock</a></span></figcaption></figure><p>UK businesses have criticised the government for the lack of a clear industrial policy. Industry body Make UK has warned the country “<a href="https://www.makeuk.org/insights/reports/industrial-strategy-a-manufacturing-ambition">risks being squeezed</a>” by US and EU green subsidy packages.</p>
<p>Outside the UK, industrial policy <a href="https://theconversation.com/industrial-policy-is-back-on-the-agenda-and-its-never-been-needed-more-than-it-is-now-119120">is back</a> – and in a big way. Around the world, there has been a noticeable shift towards greater government intervention in the economy. </p>
<p>Recent shocks such as the COVID pandemic and the energy price spike arising from the Ukrainian war, have <a href="https://www.weforum.org/agenda/2022/07/supply-chain-disruptions/">led to breakdowns in global supply chains</a> and high inflation. In Europe and the US they also exposed fragility and a lack of resilience – especially in key areas such as <a href="https://theconversation.com/energy-price-freezes-and-business-support-are-sticking-plasters-heres-how-to-protect-uk-families-and-companies-from-future-crises-189406">energy security</a> and the supply of <a href="https://www.somatechnology.com/blog/in-the-news/medical-supply-chain-challenges-and-its-effects-on-healthcare-industries/">medical equipment</a>.</p>
<p>These governments seem to recognise the role of industrial policy in supporting domestic manufacturing to safeguard against future crises, reduce reliance upon Chinese imports, and in dealing with the <a href="https://en.wikipedia.org/wiki/Climate_emergency_declaration">climate emergency</a>. They are also promoting industrial policies to enhance competitiveness, productivity and economic growth.</p>
<h2>New industrial policies</h2>
<p>The US has been the most prominent flag-bearer for these new industrial policies. President Joe Biden’s 2022 <a href="https://www.bbc.co.uk/news/world-us-canada-62457386">Inflation Reduction Act (IRA)</a> allocates <a href="https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf">almost US$700 billion (£555 billion) of federal funding over the next decade</a> to support US industries, particularly healthcare, renewables and clean-tech sectors. </p>
<p>This includes subsidies and tax breaks to US manufacturers and consumers to encourage investment in, and use of, low carbon technologies (such as electric vehicles, heat pumps and carbon capture), as well as semiconductors. There are also new rules to encourage the use of local supplies to support US manufacturing.</p>
<p>The US has also recently enacted the <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/06/fact-sheet-the-bipartisan-infrastructure-deal/">Bipartisan Infrastructure Deal</a> and the <a href="https://www.ft.com/content/d1e5bb5d-da09-488b-8430-a05d8016a95f">Chips and Science Act</a> to boost transport and communication networks, and promote R&D, especially in regional high-tech hubs. Over the next decade, these three packages are expected to total over <a href="https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it">US$2 trillion of industrial policy</a> support for US businesses.</p>
<p>Yet, there are concerns that these interventions are protectionist and <a href="https://www.ft.com/content/de1ec769-a76c-474a-927c-b7e5aeff7d9e">violate rules set by the World Trade Organisation (WTO)</a> – the global body that oversees trade between countries – on procurement and subsidies by unduly favouring US firms. The EU has spoken out about the possible impact of the IRA on its own clean-tech industries, particularly in terms of harming its exports and diverting investment away from Europe. </p>
<p>The EU has also questioned <a href="https://www.ft.com/content/9bfe7e7e-83b7-47f2-8d59-e180215d534a">China’s industrial subsidies</a>, possible infringements of intellectual property rights by Chinese companies, and the difficulties European businesses face in operating in China. </p>
<p>To combat these issues, the EU announced its own €250 billion (£217 billion) <a href="https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/green-deal-industrial-plan_en">Green Deal Industrial Plan</a> in February. This includes relaxing EU state aid rules to allow member states to fast-track investment in green sectors. The emphasis is on support for skills and supply chains, alongside smarter and simpler regulation. </p>
<p>A <a href="https://www.euractiv.com/section/economy-jobs/news/commission-president-eu-sovereignty-fund-will-be-proposed-in-summer/">European Sovereignty Fund</a> is also expected to offer subsidies for clean-tech innovation and infrastructure, while net-zero industry academies will train European workers for the green transition.</p>
<h2>What about the UK?</h2>
<p>One argument put forward for Brexit was that EU state aid rules <a href="https://ukandeu.ac.uk/state-aid-after-brexit/">stifle the ability of the UK to support its industries</a>. But, post-Brexit, how has the UK responded? Its <a href="https://www.independent.co.uk/independentpremium/news-analysis/industrial-strategy-council-government-b1814698.html">industrial strategy was scrapped</a> under the Johnson government. And so far, there has been no policy response to either the US or EU packages. </p>
<p>Indeed, the UK’s net zero initiatives to date have generally <a href="https://acss.org.uk/levelling-up-an-industrial-strategy-perspective/">lacked sufficient funding</a>. The <a href="https://green-alliance.org.uk/wp-content/uploads/2021/11/Getting_the_building_blocks_right.pdf">Green Alliance think tank</a> believes there is a £14.1 billion shortfall in low carbon infrastructure investment in the UK. </p>
<p>The UK’s haphazard approach to net zero has also sometimes conflicted with other policies. For instance, the <a href="https://www.theguardian.com/business/2023/jan/30/eu-plans-to-loosen-state-aid-rules-renewables-investment-tax-credits-biden-green-subsidy">windfall tax on North Sea oil and gas firms</a> applies to some wind and solar electricity generators, discouraging investment in renewables. </p>
<p>At the end of March, Jeremy Hunt said he would <a href="https://www.standard.co.uk/news/politics/government-uk-government-budget-climate-jeremy-hunt-b1070844.html">wait and see what the EU will do</a> on its green industrial policy. It seems the UK position has been to watch as the action unfolds elsewhere – for example on attracting investment to build <a href="https://ukandeu.ac.uk/the-race-for-electric-vehicle-battery-making-is-well-underway-and-the-uk-is-barely-off-the-starting-grid/">battery giga-factories</a>. This is in stark contrast to the US and EU.</p>
<p>The Labour Party has promised to invest £28 billion a year through a dedicated green investment fund and transition programme. This proposal has been <a href="https://www.theguardian.com/politics/2021/oct/01/climate-experts-give-cautious-welcome-to-labours-green-policies">cautiously welcomed by climate experts</a>. But doubts remain about whether the speed and nature of Labour’s proposals will be sufficient for a successful UK <a href="https://www.wwf.org.uk/green-transition">green transition</a>. </p>
<p>Labour has also discussed a <a href="https://www.independent.co.uk/business/labour-plan-to-buy-british-not-about-slapping-a-flag-on-procurement-reeves-b1877867.html">“Buy British” procurement</a> policy. But this approach is also likely to fall foul of existing WTO rules and possibly the <a href="https://commission.europa.eu/strategy-and-policy/relations-non-eu-countries/relations-united-kingdom/eu-uk-trade-and-cooperation-agreement_en#:%7E:text=The%20EU-UK%20Trade%20and%20Cooperation%20Agreement%20concluded%20between,matters%2C%20thematic%20cooperation%20and%20participation%20in%20Union%20programmes">EU-UK Trade and Co-operation Agreement</a>. </p>
<figure class="align-center ">
<img alt="Parcel Boxes with a flag of United Kingdom in a mini shopping cart on a laptop." src="https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=425&fit=crop&dpr=1 754w, https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=425&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=425&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Encouraging British businesses to source parts and services domestically would boost UK industry.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/parcel-boxes-flag-united-kingdom-shopping-1298645047">Fevziie/Shutterstock</a></span>
</figcaption>
</figure>
<h2>The green subsidy race</h2>
<p>The UK needs to get serious about its own “<a href="https://neweconomics.org/about/our-missions/green-new-deal">Green New Deal</a>” if it is to meet its net zero commitments, build low-carbon resilience in its energy supply, and compete with the US, EU and China.</p>
<p>Both the US and EU subsidy schemes should help to accelerate a much needed green transition. They will help to reduce barriers to clean-tech investment and innovation, create new jobs and generate greener growth in those regions. At a global level, this should accelerate decarbonisation and the move to net-zero.</p>
<p>They could also create a <a href="https://www.weforum.org/agenda/2023/03/inflation-reduction-act-eu-green-deal-subsidy-race-consequences/">green subsidy race</a> – with UK not yet even at the starting line.
There is a risk these subsidy schemes will stifle competition, raise global trade tensions and reduce opportunities for developing economies to grow their own clean-tech sectors. </p>
<p>They will also challenge the existing <a href="https://www.wto.org/english/thewto_e/thewto_e.htm">WTO framework</a> and its rules to promote fair and free trade. This could lead to a major reset for the WTO. It may need to adopt a wider remit that aligns global co-operation on free and fair trade with that on climate action. Doing so would enhance the prospects of all countries in this race in delivering sustainable, inclusive and green growth.</p><img src="https://counter.theconversation.com/content/205483/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Phil Tomlinson receives funding from the Engineering and Physical Sciences Research Council (EPSRC) for Made Smarter Innovation: Centre for People-Led Digitalisation, and the Economic and Social Research Council (ESRC) for an Interact project on UK co-working spaces and manufacturing.</span></em></p><p class="fine-print"><em><span>David Bailey receives funding from the ESRC’s UK in a Changing Europe programme.</span></em></p>Can UK business compete in an international green subsidy race?Phil Tomlinson, Professor of Industrial Strategy, Co-Director Centre for Governance, Regulation and Industrial Strategy (CGR&IS), University of BathDavid Bailey, Professor of Business Economics, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2025552023-05-08T12:19:43Z2023-05-08T12:19:43ZThese four challenges will shape the next farm bill – and how the US eats<figure><img src="https://images.theconversation.com/files/524429/original/file-20230504-15-4xz4fi.jpg?ixlib=rb-1.1.0&rect=31%2C15%2C5161%2C3425&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Small-scale farmers, organic producers and local markets receive a tiny fraction of farm bill funding.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/fresh-produce-at-the-waverly-market-baltimore-maryland-news-photo/1296520990">Edwin Remsberg/VWPics/Universal Images Group/Getty Images</a></span></figcaption></figure><p>For the 20th time since 1933, Congress is writing a multiyear farm bill that will shape what kind of food U.S. farmers grow, how they raise it and how it gets to consumers. These measures are large, complex and expensive: The next farm bill is projected to cost taxpayers <a href="https://farmdocdaily.illinois.edu/2023/02/a-view-of-the-2023-farm-bill-from-the-cbo-baseline.html">US$1.5 trillion</a> over 10 years. </p>
<p>Modern farm bills address many things besides food, from rural broadband access to biofuels and even help for small towns to buy police cars. These measures bring out a dizzying range of interest groups with diverse agendas.</p>
<p>Umbrella organizations like the <a href="https://www.fb.org/files/2023-Farm-Bill-Priorities-FINAL-23.0119.pdf">American Farm Bureau Federation</a> and the <a href="https://nfu.org/wp-content/uploads/2023/03/2023-NFU-Special-Order-of-Business-Farm-Bill.pdf">National Farmers Union</a> typically focus on farm subsidies and crop insurance. The <a href="https://sustainableagriculture.net/wp-content/uploads/2022/11/2023-Farm-Bill-Platform.pdf">National Sustainable Agriculture Coalition</a> advocates for small farmers and ranchers. Industry-specific groups, such as <a href="https://www.ncba.org/Media/NCBAorg/Docs/jan-2023-farm-bill-one-pager.pdf">cattlemen</a>, <a href="https://www.wga.com/wp-content/uploads/d7files/Farm%20Bill%20Cover%20Letter-Formatted%20v2.pdf">fruit and vegetable growers</a> and <a href="https://ota.com/sites/default/files/indexed_files/2023%20Farm%20Bill%20Platform%20Priorities.pdf">organic producers</a>, all have their own interests. </p>
<p><a href="https://files.worldwildlife.org/wwfcmsprod/files/Publication/file/4ts36tbe1v_Farm_Bill_Recommendations_Final.pdf?_ga=2.63891951.1986224278.1680824658-413312318.1680545091">Environmental</a> and <a href="https://farmland.org/wp-content/uploads/2022/10/AFT_2023_Farm_Bill_Recommendations_Summary.pdf">conservation groups</a> seek to influence policies that affect land use and sustainable farming practices. <a href="https://www.cspinet.org/sites/default/files/2023-01/NANA%20Combined%20Farm%20Bill%20Priorities.pdf">Hunger and nutrition groups</a> target the bill’s sections on food aid. <a href="https://www.naco.org/resources/2023-farm-bill-primer">Rural counties</a>, <a href="https://www.trcp.org/wp-content/uploads/2023/02/TRCP-AWWG-2023-FB-Platform_1-31-23.pdf">hunters and anglers</a>, <a href="https://www.aba.com/-/media/documents/testimonies-and-speeches/aba-statement-for-the-record-farm-bill-2023.pdf?rev=c490c77291fb4781b4e999b4d127e1de">bankers</a> and dozens of other organizations have their own wish lists.</p>
<p>As a <a href="https://sustainability-innovation.asu.edu/person/kathleen-merrigan/">former Senate aide and senior official</a> at the U.S. Department of Agriculture, I’ve seen this intricate process from all sides. In my view, with the challenges in this round so complex and with critical 2024 elections looming, it could take Congress until 2025 to craft and enact a bill. Here are four key issues shaping the next farm bill, and through it, the future of the U.S. food system. </p>
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<h2>The price tag</h2>
<p>Farm bills always are controversial because of their high cost, but this year the timing is especially tricky. In the past two years, Congress has enacted major bills to <a href="https://www.whitehouse.gov/american-rescue-plan/">provide economic relief from the COVID-19 pandemic</a>, <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/15/by-the-numbers-the-inflation-reduction-act/">counter inflation</a>, <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/06/fact-sheet-the-bipartisan-infrastructure-deal/">invest in infrastructure</a> and <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/">boost domestic manufacturing</a>. </p>
<p>These measures follow <a href="https://www.politico.com/news/2020/07/14/donald-trump-coronavirus-farmer-bailouts-359932">unprecedented spending</a> for farm support during the Trump administration. Now legislators are jockeying over <a href="https://theconversation.com/why-america-has-a-debt-ceiling-5-questions-answered-164977">raising the debt ceiling</a>, which limits how much the federal government can borrow to pay its bills.</p>
<p><a href="https://fj-corp-pub.s3.us-east-2.amazonaws.com/inline-files/FY24%20Views%20and%20Estimates%20Letter%20-%20final.pdf">Agriculture Committee leaders</a> and <a href="https://soygrowers.com/wp-content/uploads/2023/03/Farm-Bill-Budget-Letter-3-14-2023-FINAL.pdf">farm groups</a> argue that more money is necessary to strengthen the food and farm sector. If they have their way, the price tag for the next farm bill would increase significantly from current projections. </p>
<p>On the other side, <a href="https://www.rstreet.org/research/the-shaky-foundations-of-modern-farm-policy/">reformers argue</a> for <a href="https://www.ewg.org/research/updated-ewg-farm-subsidy-database-shows-largest-producers-reap-billions-despite-climate">capping payments to farmers</a>, which The Washington Post recently described as an “expensive <a href="https://www.washingtonpost.com/opinions/2023/05/05/congress-farm-bill-subsidies-debt/">agricultural safety net</a>,” and restricting payment eligibility. In their view, too much money goes to very large farms that produce <a href="https://www.fao.org/3/w3240e/w3240e06.htm">commodity crops</a> like wheat, corn, soybeans and rice, while small and medium-size producers receive far less support.</p>
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<h2>Food aid is the key fight</h2>
<p>Many people are surprised to learn that nutrition assistance – mainly through the <a href="https://www.fns.usda.gov/snap/supplemental-nutrition-assistance-program">Supplemental Nutrition Assistance Program</a>, formerly known as food stamps – is where most farm bill money is spent. Back in the 1970s, Congress began including nutrition assistance in the farm bill to secure votes from an increasingly urban nation. </p>
<p>Today, <a href="https://www.cbpp.org/research/food-assistance/the-supplemental-nutrition-assistance-program-snap">over 42 million Americans depend on SNAP</a>, including nearly 1 in every 4 children. Along with a few smaller programs, SNAP will likely consume 80% of the money in the new farm bill, up from <a href="https://www.ers.usda.gov/agriculture-improvement-act-of-2018-highlights-and-implications/">76% in 2018</a>. </p>
<p>Why have SNAP costs grown? During the pandemic, SNAP benefits were increased on an emergency basis, but that temporary arrangement <a href="https://theconversation.com/extra-snap-benefits-are-ending-as-us-lawmakers-resume-battle-over-program-that-helps-low-income-americans-buy-food-199929">expired in March 2023</a>. Also, in response to a directive included in the 2018 farm bill, the Department of Agriculture recalculated what it takes to afford a healthy diet, known as the <a href="https://www.fns.usda.gov/snap/thriftyfoodplan">Thrifty Food Plan</a>, and determined that it required an additional $12-$16 per month per recipient, or 40 cents per meal. </p>
<p>Because it’s such a large target, SNAP is where much of the budget battle will play out. Most Republicans typically seek to rein in SNAP; most Democrats usually support expanding it.</p>
<p>Anti-hunger advocates are lobbying to make the increased pandemic benefits permanent and defend the revised Thrifty Food Plan. In contrast, Republicans are calling for SNAP reductions, and are particularly focused on expanding <a href="https://georgiarecorder.com/2023/03/28/usda-secretary-battles-with-u-s-house-republicans-over-costs-of-federal-nutrition-programs/">work requirements</a> for recipients. </p>
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<a href="https://images.theconversation.com/files/524514/original/file-20230504-19-qqkzt9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Groceries on a kitchen counter." src="https://images.theconversation.com/files/524514/original/file-20230504-19-qqkzt9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/524514/original/file-20230504-19-qqkzt9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/524514/original/file-20230504-19-qqkzt9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/524514/original/file-20230504-19-qqkzt9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/524514/original/file-20230504-19-qqkzt9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/524514/original/file-20230504-19-qqkzt9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/524514/original/file-20230504-19-qqkzt9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Jaqueline Benitez puts away groceries at her home in Bellflower, Calif., Feb. 13, 2023. Benitez, 21, works as a preschool teacher and depends on SNAP benefits to help pay for food.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/FoodStamps/95413d28987347f09dfc93598e7dbb45/photo">AP Photo/Allison Dinner</a></span>
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<h2>Debating climate solutions</h2>
<p>The 2022 <a href="https://www.scientificamerican.com/article/biden-signs-historic-climate-bill-as-scientists-applaud/">Inflation Reduction Act</a> provided $19.5 billion to the Department of Agriculture for programs that address climate change. Environmentalists and farmers alike <a href="https://www.farmanddairy.com/news/farm-conservation-groups-applaud-climate-ag-funding/730970.html">applauded this investment</a>, which is intended to help the agriculture sector embrace climate-smart farming practices and move toward markets that reward carbon sequestration and other ecosystem services. </p>
<p>This big pot of money has become a prime target for members of Congress who are <a href="https://www.agriculture.com/news/business/gop-senators-eye-climate-bill-funding-as-way-to-fatten-farm-bill-accounts">looking for more farm bill funding</a>. On the other side, conservation advocates, sustainable farmers and progressive businesses oppose diverting climate funds for other purposes. </p>
<p>There also is growing demand for Congress to require USDA to develop better standards for measuring, reporting and verifying actions designed to <a href="https://www.fsa.usda.gov/news-room/news-releases/2021/usda-announces-new-initiative-to-quantify-climate-benefits-of-conservation-reserve-program">protect or increase soil carbon</a>. Interest is rising in “<a href="https://www.spglobal.com/esg/insights/topics/carbon-farming-opportunities-for-agriculture-and-farmers-to-gain-from-decarbonization">carbon farming</a>” – paying farmers for practices such as <a href="https://theconversation.com/restoring-soil-can-help-address-climate-change-121733">no-till agriculture and planting cover crops</a>, which some studies indicate can <a href="https://rodaleinstitute.org/why-organic/issues-and-priorities/carbon-sequestration/">increase carbon storage in soil</a>. </p>
<p>But without more research and standards, observers worry that investments in climate-smart agriculture will support <a href="https://www.fastcompany.com/90796487/is-regenerative-agriculture-the-future-of-farming-or-the-next-greenwashing-fad">greenwashing</a> – misleading claims about environmental benefits – rather than a fundamentally different system of production. <a href="https://thefern.org/2022/12/a-pillar-of-the-climate-smart-agriculture-movement-is-on-shaky-ground/">Mixed research results</a> have raised questions as to whether establishing carbon markets based on such practices is premature. </p>
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<h2>A complex bill and inexperienced legislators</h2>
<p>Understanding farm bills requires highly specialized knowledge about issues ranging from crop insurance to nutrition to forestry. Nearly one-third of current members of Congress were first elected after the 2018 farm bill was enacted, so this is their first farm bill cycle. </p>
<p>I expect that, as often occurs in Congress, new members will follow more senior legislators’ cues and go along with traditional decision making. This will make it easier for entrenched interests, like the American Farm Bureau Federation and major commodity groups, to maintain support for <a href="https://www.ers.usda.gov/topics/farm-economy/farm-commodity-policy/title-i-crop-commodity-program-provisions/">Title I programs</a>, which provide revenue support for major commodity crops like corn, wheat and soybeans. These programs are complex, cost billions of dollars and go mainly to large-scale operations.</p>
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<figcaption><span class="caption">How the U.S. became a corn superpower.</span></figcaption>
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<p>Agriculture Secretary Tom Vilsack’s current stump speech spotlights the fact that 89% of U.S. farmers <a href="https://civileats.com/2022/06/02/field-report-tom-vilsack-usda-food-system-transformation-climate-equity-justice/">failed to make a livable profit</a> in 2022, even though total farm income <a href="https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/highlights-from-the-farm-income-forecast">set a record at $162 billion</a>. Vilsack asserts that less-profitable operations should be the focus of this farm bill – but when pressed, he appears <a href="https://thehill.com/policy/equilibrium-sustainability/3903829-support-for-small-farms-wont-hurt-big-ones-vilsack-tells-lawmakers/">unwilling to concede</a> that support for large-scale operations should be changed in any way. </p>
<p>When I served as deputy secretary of agriculture from 2009 to 2011, I oversaw the department’s budget process and learned that investing in one thing often requires defunding another. My dream farm bill would invest in three priorities: <a href="https://www.nrdc.org/resources/grow-organic-climate-health-and-economic-case-expanding-organic-agriculture">organic agriculture as a climate solution</a>; infrastructure to support vibrant local and regional markets and shift away from an agricultural economy dependent on exporting low-value crops; and agricultural science and technology research aimed at reducing labor and <a href="https://theconversation.com/fertilizer-prices-are-soaring-and-thats-an-opportunity-to-promote-more-sustainable-ways-of-growing-crops-183418">chemical inputs</a> and providing new solutions for sustainable livestock production. </p>
<p>In my view, it is time for tough policy choices, and it won’t be possible to fund everything. Congress’ response will show whether it supports business as usual in agriculture, or a more diverse and sustainable U.S. farm system.</p><img src="https://counter.theconversation.com/content/202555/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kathleen Merrigan is a former Deputy Secretary of the US Department of Agriculture</span></em></p>Even if you don’t live near farm country, you’ve got a stake in the upcoming farm bill – including what kind of farms your tax dollars support.Kathleen Merrigan, Executive Director, Swette Center for Sustainable Food Systems, Arizona State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1990522023-03-02T13:25:16Z2023-03-02T13:25:16ZWhy the humble city bus is the key to improving US public transit<figure><img src="https://images.theconversation.com/files/512930/original/file-20230301-18-707tmn.jpeg?ixlib=rb-1.1.0&rect=27%2C10%2C3629%2C2730&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Indianapolis debuted a bus rapid transit system with 60-foot articulated electric buses in 2019.</span> <span class="attribution"><a class="source" href="https://upload.wikimedia.org/wikipedia/commons/2/22/IndyGo_Red_Line_BRT.jpg">Momoneymoproblemz/Wikipedia</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Public transit in the U.S. is in a sorry state – <a href="https://infrastructurereportcard.org/cat-item/transit-infrastructure/">aging, underfunded and losing riders</a>, especially since the COVID-19 pandemic. Many proposed solutions focus on new technologies, like <a href="https://www.cnbc.com/2022/05/21/why-the-first-autonomous-vehicles-winners-wont-be-in-your-driveway.html">self-driving cars</a> and <a href="https://www.thezebra.com/resources/driving/future-transportation/">flying taxis</a>. But as a <a href="https://scholar.google.com/citations?user=1I-ZPh8AAAAJ&hl=en">researcher in urban policy and planning</a>, I see more near-term promise in a mode that’s been around for a century: the city bus. </p>
<p>Today, buses in many parts of the U.S. are old and don’t run often enough or serve all the places where people need to go. But this doesn’t reflect the bus’s true capability. Instead, as I see it, it’s the result of cities, states and federal leaders failing to subsidize a quality public service. </p>
<p>As I show in <a href="https://press.uchicago.edu/ucp/books/book/chicago/G/bo191431990.html#anchor-awards">my new book</a>, “The Great American Transit Disaster: A Century of Austerity, Auto-Centric Planning, and White Flight,” few U.S. politicians have focused on bus riders’ experiences over the past half-century. And many executives have lavished precious federal capital dollars on building new <a href="https://www.metrostlouis.org/wp-content/uploads/2022/12/OP220484-MetroLink-System-Map.pdf">light</a>, <a href="https://www.metrostlouis.org/wp-content/uploads/2022/12/OP220484-MetroLink-System-Map.pdf">rapid</a> and commuter rail lines, in hope of attracting suburban riders back to city centers and mass transit. </p>
<p>This was never a great strategy to begin with, and the pandemic-era flight of knowledge workers to home offices and hybrid schedules has left little to show for decades of rail-centric efforts. Meanwhile, countries in Europe and Latin America have out-innovated the U.S. in providing quality bus service. </p>
<p>But it doesn’t have to be this way. Many U.S. cities are coming around to the idea that buses are the future of public transit and are working to make that vision real. And the Bipartisan Infrastructure Law enacted in 2021 is providing <a href="https://www.transportation.gov/briefing-room/president-biden-and-us-department-transportation-announce-409-million-70">billions of dollars</a> for new buses and related facilities.</p>
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<figcaption><span class="caption">The car-centered U.S. transportation system has impoverished public transit and left many people’s transit needs unmet.</span></figcaption>
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<h2>Buses as disruptors</h2>
<p>A century ago, motorized buses were the technological wonder of their day. Rolling fast on tires over newly paved streets, buses upended urban rail transit by freeing riders from aging, crowded, screeching streetcars. In 1922, American buses carried 404 million passengers; by 1930, they were carrying 2.5 billion yearly. </p>
<p>At that time, transit lines were mostly privately owned. But this model was failing as riders became car drivers, new zoning laws prioritized car-friendly single-family housing and government regulators battled transit companies over fares and taxes. </p>
<p>Transit executives trying to eke out a profit saw buses as a way to reduce spending on track maintenance and labor costs for “two man” operated streetcars. City leaders and planners also embraced buses, which helped them justify removing streetcar tracks to make streets more navigable for cars. From the 1920s through the 1960s, nearly all U.S. streetcar lines were replaced with buses powered by either internal combustion engines or electric overhead wires. </p>
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<a href="https://images.theconversation.com/files/512943/original/file-20230301-1565-c5g4xm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Two red double-decker buses pass each other along Whitehall in central London." src="https://images.theconversation.com/files/512943/original/file-20230301-1565-c5g4xm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/512943/original/file-20230301-1565-c5g4xm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/512943/original/file-20230301-1565-c5g4xm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/512943/original/file-20230301-1565-c5g4xm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/512943/original/file-20230301-1565-c5g4xm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/512943/original/file-20230301-1565-c5g4xm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/512943/original/file-20230301-1565-c5g4xm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">London’s signature red buses cover the entire city, with 24-hour service on many lines.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/red-double-decker-buses-pass-along-whitehall-on-11th-july-news-photo/1241871118">Mark Kerrison/In Pictures via Getty Images</a></span>
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<p>This wasn’t just a U.S. trend. Toronto massively extended bus service across a vast metropolitan area between <a href="https://transittoronto.ca/archives/maps/guide1954f.gif">1954</a> and <a href="https://transittoronto.ca/archives/maps/ttc-system-map-19740330.png">1974</a>, using buses to feed suburban riders to a new subway system and a few remaining streetcar lines. By 1952, London’s managers had replaced streetcars with the city’s signature fleet of double-decker buses, which complemented its legendary Underground service. </p>
<p>Across Europe, cities relied on buses to support and complement their modernizing tram or subway networks. Political leaders provided deep subsidies to deliver better bus and rail service. </p>
<h2>The auto-centric US path</h2>
<p>In the U.S., however, federal investments in the same time frame focused on building a national highway system to serve private automobiles. Lacking tax subsidies, bus networks could not compete with cheap cars and government-funded highways. Aging buses and infrequent service became the default postwar reality – and those buses had to travel on local streets crowded with private cars. </p>
<p>Between 1945 and 1960, U.S. transit companies and agencies typically lost half or more of their riders as white Americans moved to urban fringes or suburbs and became car commuters. Bus service remained concentrated in older, central-city neighborhoods, serving a disproportionately nonwhite, low-income ridership. </p>
<p>Many public systems had to cut bus service year after year to balance their books. Only a few cities that were willing to provide significant operating subsidies, including <a href="https://www.youtube.com/watch?v=35ea36ZfMPE">San Francisco</a> and Boston, were able to maintain better bus networks and some trolleybuses. </p>
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<figcaption><span class="caption">Los Angeles once had a high-quality public transit system, centered on streetcars.</span></figcaption>
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<h2>New, better buses</h2>
<p>Today, there’s renewed interest in improving bus service in the U.S., inspired by innovations around the globe. The Brazilian <a href="https://www.youtube.com/watch?v=vJR9uCSyGKM">city of Curitiba</a>, which is well known for its innovations in urban planning, set a model in the 1970s when it adopted <a href="https://www.transit.dot.gov/research-innovation/bus-rapid-transit">bus rapid transit</a> – buses that run in dedicated lanes, with streamlined boarding systems and priority at traffic signals. </p>
<p>Curitiba helped popularize <a href="https://www.busworldlatinamerica.org/en/news/30-years-have-passed-appearance-bi-articulated-buses">bi-articulated buses</a>, which are extra-long with flexible connectors that let the buses bend around corners. These buses, which can carry large numbers of passengers, now are in wide use in Europe, Latin America and Asia. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/512960/original/file-20230301-26-bbgohx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A green bus with several segments connected by flexible panels." src="https://images.theconversation.com/files/512960/original/file-20230301-26-bbgohx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/512960/original/file-20230301-26-bbgohx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/512960/original/file-20230301-26-bbgohx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/512960/original/file-20230301-26-bbgohx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/512960/original/file-20230301-26-bbgohx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/512960/original/file-20230301-26-bbgohx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/512960/original/file-20230301-26-bbgohx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A bi-articulated bus in Metz, France.</span>
<span class="attribution"><a class="source" href="https://en.wikipedia.org/wiki/Bi-articulated_bus#/media/File:Van_Hool_ExquiCity_24_METTIS_n%C2%B01315_P+R_Woippy.jpg">Florian Fèvre/Wikipedia</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>Cities across the globe, led by London, have also aggressively expanded contactless payment systems, which speed up the boarding process. Advanced bus systems and new technologies like these flourish in regions where politicians strongly support transit as a public service. </p>
<p>In my view, buses are the most likely option for substantially expanding public transit ridership in the U.S. Millions of Americans need affordable public mobility for work, study, recreation and shopping. Car ownership is a <a href="https://www.planetizen.com/blogs/111535-automobile-dependency-unequal-burden">financial burden </a> that can be as serious for low-income families as the shortage of affordable housing. </p>
<p>The <a href="https://newsroom.aaa.com/2022/08/annual-cost-of-new-car-ownership-crosses-10k-mark/">average yearly cost</a> for U.S. households to own and operate a new car reached US$10,728 in 2022. Nor are used cars the bargain they once were. <a href="https://www.jpmorgan.com/insights/research/when-will-car-prices-drop">Used car prices are high</a>, financing is often subprime and older vehicles require expensive maintenance. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1630948021495119872"}"></div></p>
<p>Rapidly extending bus networks would be the speediest and most economical way to serve these families and grow transit ridership in the sprawling landscape of American metros. U.S. roads and highways are already maintained by the government, eliminating the need to build and maintain expensive rail lines. </p>
<p>There are promising domestic models even amid the pandemic ridership crisis. In the past two decades, Seattle’s <a href="https://mass.streetsblog.org/2019/11/25/five-lessons-from-seattles-successful-crusade-against-driving/">Sound Transit</a> has upgraded its bus network, aligning these improvements with increased residential density, low fares and a carefully considered light rail expansion. <a href="https://www.sfchronicle.com/sf/article/S-F-s-Van-Ness-BRT-created-a-ridership-boom-17556984.php">San Francisco</a> and <a href="https://www.nyc.gov/html/brt/html/routes/14th-street.shtml">New York</a> have developed exclusive bus lanes that move riders along popular routes at higher speeds. <a href="https://www.linkedin.com/feed/update/urn:li:activity:7031287651110379521/">Indianapolis</a> is expanding an effective bus rapid transit system. Many cities, including <a href="https://www.cpr.org/2022/07/26/rtd-new-bus-network/">Denver</a> and <a href="https://www.mbta.com/projects/better-bus-project">Boston</a>, are investing in “better bus” upgrades that emphasize frequent service, easy transfers and better geographic coverage.</p>
<p>Innovations like these will only succeed long term with sufficient subsidies to maintain innovative services at reliable levels. The history of bus transit is littered with pilot programs that were abandoned on cost grounds just as they were gaining popularity. As I see it, buses don’t need to be faster or more convenient than cars to attract and retain riders – but they need to be, and can be, much better transit options than they are today.</p><img src="https://counter.theconversation.com/content/199052/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nicholas Dagen Bloom does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>High-quality bus service is the fastest route to rapid, comprehensive public transit in the United States. This country was once a leader in bus transit, and with adequate funding, it could be again.Nicholas Dagen Bloom, Professor of Urban Policy and Planning, Hunter CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1997152023-02-21T18:11:56Z2023-02-21T18:11:56ZEU poised to copy US subsidies for green technology – new evidence from China shows how it could backfire<figure><img src="https://images.theconversation.com/files/511174/original/file-20230220-18-uo54av.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There's a reason why the west has long avoided state aid. </span> <span class="attribution"><a class="source" href="https://unsplash.com/s/photos/wind-turbine">Shaun Dakin/Unsplash</a></span></figcaption></figure><p>The EU <a href="https://www.ft.com/content/9bfe7e7e-83b7-47f2-8d59-e180215d534a">is preparing</a> to abandon its longstanding restrictions on state aid to take on US and Chinese subsidies over green technologies. European Commission president Ursula von der Leyen is spearheading a new commitment from EU leaders to “act decisively to ensure its long-term competitiveness, prosperity and role on the global stage”.</p>
<p>She has talked about the need to counter hidden subsidies from the Chinese, both in green tech and in other sectors, though <a href="https://www.cnbc.com/2023/02/02/bidens-ira-has-left-europe-blind-sided-and-playing-catchup-could-lead-to-2-big-mistakes.html">the trigger</a> for the EU’s new approach is really President Joe Biden’s <a href="https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it">Inflation Reduction Act (IRA)</a>. This has committed the US to a record US$369 billion (£305 billion) to green its economy, including using tax breaks and subsidies. </p>
<p>It effectively tears up the international consensus around not using state aid, embracing what the US has railed against for years. <a href="https://www.economist.com/leaders/2023/01/12/the-destructive-new-logic-that-threatens-globalisation">The Economist</a> has said that globalisation is no longer about racing, but racing and tripping others. </p>
<p>The EU is now proposing to introduce its own tax credits and subsidies for cleantech companies, as well as fast-tracking regulation in this area. </p>
<p>Meanwhile, the UK has been <a href="https://www.politico.eu/article/uk-calls-out-biden-over-electric-vehicle-subsidies/">coming under pressure</a> from the likes of car manufacturers to respond. So far, it has been trying to find exemptions to the US’s general approach of only offering incentives to products made in America, while <a href="https://www.bloomberg.com/news/articles/2023-01-27/uk-sees-no-need-for-subsidies-in-us-eu-green-technology-battle?leadSource=uverify%20wall">also claiming</a> the UK has no need to subsidise these kinds of areas because it is already ahead. </p>
<p>The economics of this drift to protectionism are worrying. Our <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/caje.12644">recent research</a> on the effects of state subsidies in China suggest that such policies could do the US and EU economies more harm than good overall. </p>
<h2>What the research says</h2>
<p>Since the dawn of the industrial revolution, states have played <a href="https://www.cambridge.org/core/books/bringing-the-state-back-in/629F1D194C7E4FC19CF5208F345D6AD8">a significant role</a> in developing their economies. <a href="https://hbr.org/2013/04/how-chinese-subsidies-changed">China is</a> the recent prime example, where the use of subsidies to develop particular industries such as electric cars or solar panels has been highly visible. </p>
<p><a href="https://timesofindia.indiatimes.com/city/bengaluru/govt-to-offer-up-to-50-of-project-cost-to-cos-setting-up-chip-plant/articleshow/88463324.cms">India seems</a> to be <a href="https://www.indiaglobalbusiness.com/igb-archive/5-ways-india-can-attract-companies-moving-out-of-china">moving</a> in the same direction. The government is paying half of the cost of making computer chips, among a variety of incentives to <a href="https://www.economist.com/briefing/2023/01/12/globalisation-already-slowing-is-suffering-a-new-assault">encourage investment</a> in different sectors. </p>
<p>Equally, in the developed world, government procurement has driven many <a href="https://www.project-syndicate.org/onpoint/innovation-technological-and-market-risk-key-role-of-the-state-by-william-h-janeway-2023-01?utm_source=Project+Syndicate+Newsletter&utm_campaign=63657e1de4-op_newsletter_01_20_2023&utm_medium=email&utm_term=0_73bad5b7d8-63657e1de4-105526401&mc_cid=63657e1de4&mc_eid=b4a93ff839">world-changing innovations</a>. Whole sectors such as <a href="https://www.project-syndicate.org/onpoint/innovation-technological-and-market-risk-key-role-of-the-state-by-william-h-janeway-2023-01?utm_source=Project+Syndicate+Newsletter&utm_campaign=63657e1de4-op_newsletter_01_20_2023&utm_medium=email&utm_term=0_73bad5b7d8-63657e1de4-105526401&mc_cid=63657e1de4&mc_eid=b4a93ff839">biotech and information technology</a> relied on government procurement to get started. America’s Silicon Valley <a href="https://www.ft.com/content/8c0152d2-d0f2-11e2-be7b-00144feab7de">originally grew</a> on the back of military contracts, for instance. </p>
<p><a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-6419.00079?casa_token=aq2hewEcQeMAAAAA:o-YjKMyBz7cDoPYcAzdqiDPL10ETLkEgkIHFyNlAXuSxjoRqDksex6BMl9uN02Z-Snbj0jxupLCzYtVX">Research</a> in this area does acknowledge a case for subsidising infant industries in which a country wants to specialise. China’s state subsidies in the steel and solar panel industries would be a good example. </p>
<p>Yet there is a price to be paid: the money a government spends means that less will be available for helping its citizens in other ways. <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-6419.00079?casa_token=aq2hewEcQeMAAAAA:o-YjKMyBz7cDoPYcAzdqiDPL10ETLkEgkIHFyNlAXuSxjoRqDksex6BMl9uN02Z-Snbj0jxupLCzYtVX">For example</a> Brazil’s wheat-industry subsidies in the 1980s were estimated to have produced a net loss of 15% to welfare spending. </p>
<p><a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-6419.00079?casa_token=aq2hewEcQeMAAAAA:o-YjKMyBz7cDoPYcAzdqiDPL10ETLkEgkIHFyNlAXuSxjoRqDksex6BMl9uN02Z-Snbj0jxupLCzYtVX">Around the same time</a>, it was estimated that if the EU removed the common agricultural policy, the extra money available for government spending could increase real incomes by between 0.3% and 3.5% as a proportion of GDP. Findings like these probably explain why the World Trade Organization has discouraged state aid for decades. </p>
<h2>Consequences</h2>
<p>The new green subsidies will create winners and losers at different levels. Within the EU, for example, it will un-level the playing field between member states. Those that can afford to spend more on their green tech industries will potentially crowd out those with less. </p>
<p>Even within a country, there’s unlikely to be a win-win. Our research team has <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/caje.12644">recently published</a> a paper about China’s subsidies, using a new approach that makes it possible to estimate the direct and indirect effects on subsidised and non-subsidised firms at the same time. </p>
<p>This is the first time anyone has looked at subsidies in this way. Our project looked at 1998-2007, since those were the years where the necessary data was available. </p>
<p>We found that subsidised firms become relatively more productive, thus making them more competitive. Yet firms that are not subsidised can see their productivity growth reduced. </p>
<p>The determining factor is whether they operate in a geographical cluster alongside subsidised firms. When more than a quarter of firms in a cluster in China were being subsidised, the remainder suffered. </p>
<p>Those losing out were typically foreign-owned firms and those owned by the Chinese state, while private Chinese firms were the beneficiaries. </p>
<p>When we aggregated all the data, it showed that this negative indirect effect tends to dominate. In other words, subsidies produce unintended losers and make the market less competitive and more inefficient as a whole. </p>
<p>The bottom line is, subsidies are not without problems, even for China. In the last decade we have seen what “losers” can do to an economy, or a society - think of movements towards populism and autocracy in many places. </p>
<p>Therefore, there needs to be a more thorough debate about the benefits and costs of subsidies before states apply them, and some carefully designed policies to prepare for the potential losers.</p><img src="https://counter.theconversation.com/content/199715/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Just because the US is tearing up the international consensus against state aid doesn’t meant the likes of the EU and UK should follow suit.Jun Du, Professor of Economics, Centre Director of Centre for Business Prosperity (CBP), Aston UniversityHolger Görg, Acting President, Kiel Institute for the World EconomyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1916352022-11-21T13:15:25Z2022-11-21T13:15:25ZHow to design clean energy subsidies that work – without wasting money on free riders<figure><img src="https://images.theconversation.com/files/495284/original/file-20221115-12-i6n3tg.jpg?ixlib=rb-1.1.0&rect=0%2C32%2C5464%2C3599&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">How long should a solar subsidies, or any subsidy, last?</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/aerial-view-of-electric-car-parking-in-charging-royalty-free-image/1390861566">Artur Debat/Moment via Getty Images</a></span></figcaption></figure><p>The planet is heating up as greenhouse gas emissions rise, contributing to <a href="https://theconversation.com/if-you-thought-this-summers-heat-waves-were-bad-a-new-study-has-some-disturbing-news-about-dangerous-heat-in-the-future-189370">extreme heat waves</a> and <a href="https://news.climate.columbia.edu/2022/09/12/the-flood-seen-from-space-pakistans-apocalyptic-crisis/">once-unimaginable</a> <a href="https://www.science.org/content/article/europe-s-deadly-floods-leave-scientists-stunned">flooding</a>. Yet despite the risks, countries’ policies are <a href="https://www.unep.org/resources/emissions-gap-report-2022">not on</a> <a href="https://unfccc.int/news/climate-plans-remain-insufficient-more-ambitious-action-needed-now">track</a> to keep global warming in check.</p>
<p>The problem isn’t a lack of technology. The International Energy Agency recently released a detailed analysis of the <a href="https://www.iea.org/reports/world-energy-outlook-2022/executive-summary">clean energy technology needed</a> to lower greenhouse gas emissions to net zero globally by 2050. What’s needed, the IEA says, is significant government support to boost solar and wind power, electric vehicles, heat pumps and a variety of other technologies for a rapid energy transition.</p>
<p>One politically popular tool for providing that government support is the subsidy. The U.S. government’s new <a href="https://www.congress.gov/bill/117th-congress/house-bill/5376/text">Inflation Reduction Act</a> is a <a href="https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it">multibillion-dollar example</a>, packed with financial incentives to encourage people to buy electric vehicles, solar panels and more. </p>
<p>But just how big do governments’ clean energy subsidies need to be to meet their goals, and how long are they needed?</p>
<p>Our research points to three important answers for any government considering clean energy subsidies – and for citizens keeping an eye on their progress.</p>
<h2>Why subsidize at all?</h2>
<p>An obvious first question is: Why should governments subsidize clean energy at all?</p>
<p>The most direct answer is that <a href="https://rhg.com/research/climate-clean-energy-inflation-reduction-act/">clean energy helps to reduce harmful emissions</a> – both of gases that cause local pollution and of those that warm the planet.</p>
<p>Reducing emissions helps to lower both public health costs and damage from climate change, which justifies government spending. Reports have estimated that the U.S. <a href="https://www.nrdc.org/sites/default/files/costs-inaction-burden-health-report.pdf">spends US$820 billion</a> a year just on health costs associated with air pollution and climate change. Globally, the World Health Organization estimated that the costs reached <a href="https://www.who.int/news/item/05-12-2018-health-benefits-far-outweigh-the-costs-of-meeting-climate-change-goals">$5.1 trillion</a> in 2018. Taxing and regulating polluting industries can also cut emissions, but carrots are often more politically popular than sticks.</p>
<figure class="align-center ">
<img alt="A female scientist holds a solar cell between tweezers" src="https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Subsidies helped launch the solar industry. Buyers today can get a 30% tax credit for home solar installations.</span>
<span class="attribution"><a class="source" href="https://images.nrel.gov/MX/Profiles/en/default/#/main/gallery/2e49a09c-181d-4712-8d08-4751fa1c25e3">Joe DelNero/NREL</a></span>
</figcaption>
</figure>
<p>A less obvious reason for subsidies is that government support can help a new and initially expensive technology become competitive in the market.</p>
<p>Governments have been central to the development of many technologies that are pervasive today, including microchips, the internet, solar panels and GPS. Microchips were <a href="https://slate.com/culture/2009/06/1959-when-america-first-met-the-microchip.html">fantastically expensive</a> when first developed in the 1950s. Demand from the U.S. military and NASA, which could pay the high price, fueled the growth of the industry, and costs eventually dropped enough that they’re now found in everything from cars to toasters.</p>
<p>Government <a href="https://www.seia.org/initiatives/solar-investment-tax-credit-itc">support</a> has also helped to bring down the cost of solar power. Rooftop solar system costs <a href="https://www.nrel.gov/news/program/2021/documenting-a-decade-of-cost-declines-for-pv-systems.html">fell 64%</a> from 2010 to 2020 in the U.S. because cells became more efficient and higher volumes drove prices down.</p>
<h2>How much money?</h2>
<p>So, subsidies can work, but what’s the right amount?</p>
<p>Too low, and a subsidy has no effect. Giving everyone a coupon for $1 off an electric car won’t change anyone’s buying plans. But subsidies can also be set too high. </p>
<p>The government doesn’t need to spend money persuading consumers who already plan to buy an electric car and can afford one, yet studies show clean energy subsidies disproportionately go to <a href="https://doi.org/10.1086/685597">richer people</a>. When people who would have purchased the item anyway receive subsidies, they’re known as “<a href="https://www.jstor.org/stable/44075502">free riders</a>.”</p>
<p>The ideal subsidy attracts new buyers while avoiding free riders and overspending on people who are already convinced. The subsidy can only work when it convinces a previously uninterested consumer to buy a product.</p>
<figure class="align-center ">
<img alt="Chart shows costs falling as solar purchases rise." src="https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=417&fit=crop&dpr=1 600w, https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=417&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=417&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=524&fit=crop&dpr=1 754w, https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=524&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=524&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Between 2009 and 2017, solar prices fell 50% and solar purchases increased tenfold with the help of subsidies. Lower cost makes a technology more attractive, while a growing solar industry is able to produce panels at lower cost.</span>
<span class="attribution"><a class="source" href="https://doi.org/10.2172/1820126">Barbose et al., 2021; Solar Market Insight Report/SEIA</a></span>
</figcaption>
</figure>
<h2>How long should subsidies last?</h2>
<p>Timing is also important when thinking about the size of subsidies. When a promising technology is new and expensive, free riders are less of an issue. A large subsidy may be needed to attract even a few buyers, build out the emerging market and support the industry’s growth. </p>
<p>Solar power is a good example: In 2005, solar was several times more expensive than traditional electricity sources. Subsidies, like the 30% <a href="https://www.seia.org/sites/default/files/resources/History%20of%20ITC%20Slides.pdf">Investment Tax Credit</a> established that year, helped lower the cost, and today’s solar is <a href="https://ourworldindata.org/grapher/solar-pv-prices">about one-tenth the price</a> and <a href="https://ourworldindata.org/grapher/levelized-cost-of-energy">cost-competitive</a> with other electricity sources.</p>
<p>Once a clean technology is competitive, subsidies can still play an important role in speeding up the energy transition, but at a lower level than in the past.</p>
<p>In <a href="https://doi.org/10.1016/j.enpol.2021.112326">our research</a> on residential solar panels, we estimate that the ideal subsidy for rooftop solar should have been initially higher than the actual <a href="https://www.energy.gov/eere/solar/homeowners-guide-federal-tax-credit-solar-photovoltaics">federal tax credit</a> but fall more quickly, declining to zero after 14 years from its start date. </p>
<p>By starting the subsidy about 20% higher, our models found that it would have boosted production faster, which would cut costs faster and reduce the need for high future subsidies. </p>
<h2>Should subsidies eventually disappear?</h2>
<p>It makes sense for subsidies to disappear altogether once a technology is sufficiently cost-competitive. However, even if a technology is competitive, it might be worth further subsidy if the speed of adoption is important. </p>
<p>The argument for continuing a subsidy depends on whether the additional adoption it stimulates is cost-effective in reducing emissions. Wind power is cheaper than fossil fuel power in many parts of the country. Even so, we <a href="https://doi.org/10.1016/j.techfore.2022.121840">found</a> that continuing subsidies for wind power would lead to valuable emission benefits. </p>
<p>That said, sometimes subsidies stick around when they shouldn’t. </p>
<p>Fossil fuels have been heavily subsidized for decades, despite their harm to human health, the environment and the climate, all of which raise public costs. Governments globally spent <a href="https://www.iisd.org/system/files/2022-08/background-note-fossil-fuel-subsidy-reform.pdf">almost $700 billion</a> on fossil fuel subsidies in 2021. The U.S. government, in recent years, has spent more on renewable energy tax credits than <a href="https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/52521-energytestimony.pdf">fossil fuels, which is a promising transition of government support</a>.</p>
<h2>Global impact</h2>
<p>While the U.S. was the <a href="https://doi.org/10.1016/j.enpol.2021.112326">focus of our solar subsidy research</a>, this way of thinking – balancing the costs and benefits of subsidies – can be applied in other nations to design better subsidies for clean energy technologies. </p>
<p>The subsidy is just one policy tool, but it is an important one for both stimulating early-stage technologies and accelerating deployment of more competitive options. As the world attempts the fastest energy transition in history, today’s energy subsidy decisions will affect its ability to succeed.</p><img src="https://counter.theconversation.com/content/191635/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eric Hittinger receives funding from the U.S. National Science Foundation. He is affiliated with with the U.S. Association for Energy Economics.</span></em></p><p class="fine-print"><em><span>Eric Williams receives funding from the U.S. National Science Foundation.</span></em></p><p class="fine-print"><em><span>Qing Miao receives funding from NSF. </span></em></p><p class="fine-print"><em><span>Tiruwork B. Tibebu receives funding from NSF. </span></em></p>Start high, drop fast and avoid the free-riders: How to design subsidies that can boost clean energy in the US and elsewhere.Eric Hittinger, Associate Professor of Public Policy, Rochester Institute of TechnologyEric Williams, Professor of Sustainability, Rochester Institute of TechnologyQing Miao, Associate Professor of Public Policy, Rochester Institute of TechnologyTiruwork B. Tibebu, Ph.D. Student, Rochester Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1763722022-10-21T02:03:01Z2022-10-21T02:03:01ZNot keeping up with the Joneses: the one factor that makes us less likely to emulate our neighbours on climate action<figure><img src="https://images.theconversation.com/files/490760/original/file-20221020-19-pm17qv.jpg?ixlib=rb-1.1.0&rect=294%2C638%2C5313%2C2513&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>About 30% of Australian homes have rooftop solar panels installed – the highest uptake of any nation. Their popularity has been helped along by government subsidies that reduce the upfront costs of the technology.</p>
<p>But these subsidies may not always have a positive climate impact. While people like to “keep up with the Joneses” on climate action, my <a href="https://direct.mit.edu/rest/article-abstract/doi/10.1162/rest_a_01124/107654/Motivation-Crowding-in-Peer-Effects-The-Effect-of?redirectedFrom=fulltext">recent research</a> suggests this is not always the case when large solar subsidies are being offered.</p>
<p>It found if someone is perceived as having installed solar panels primarily for a financial benefit, their non-solar neighbours may actually be deterred from reducing their own climate impact – such as by signing up for so-called “green” retail electricity schemes.</p>
<p>Subsidies are often a policy go-to for governments wanting to encourage more climate-friendly behaviours. But my findings indicate they should be used with caution.</p>
<figure class="align-center ">
<img alt="man in high-vis installs solar panel" src="https://images.theconversation.com/files/490764/original/file-20221020-26-s2feja.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/490764/original/file-20221020-26-s2feja.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/490764/original/file-20221020-26-s2feja.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/490764/original/file-20221020-26-s2feja.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/490764/original/file-20221020-26-s2feja.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/490764/original/file-20221020-26-s2feja.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/490764/original/file-20221020-26-s2feja.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Solar subsidies may not always have a positive climate impact.</span>
<span class="attribution"><span class="source">Lucy Hughes Jones/AAP</span></span>
</figcaption>
</figure>
<h2>A spotlight on buyer behaviour</h2>
<p>Examining subsidies for rooftop solar systems is valuable because it can tell us about consumer behaviour more broadly. </p>
<p>For the past 20 years or so, state and federal governments have subsidised the cost of installing rooftop solar by offering a range of rebates and other financial incentives to consumers. In recent years these subsidies have fallen, in part because the cost of the technology has become so cheap that consumers can recoup the cost fairly quickly through reduced power bills.</p>
<p>But some subsidies for <a href="https://www.solar.vic.gov.au/solar-panel-rebate">rooftop solar and home batteries</a> still exist. Some governments also apply them to energy efficiency measures and <a href="https://business.gov.au/grants-and-programs/incentives-for-electric-vehicles-sa">electric vehicles</a>. </p>
<p>Such subsidies come at great cost to the public purse. So will they help Australia reach its emissions reduction targets? My research suggests in some cases, they can be counterproductive.</p>
<hr>
<p>
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Read more:
<a href="https://theconversation.com/heat-pumps-can-cut-your-energy-costs-by-up-to-90-its-not-magic-just-a-smart-use-of-the-laws-of-physics-185711">Heat pumps can cut your energy costs by up to 90%. It’s not magic, just a smart use of the laws of physics</a>
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<figure class="align-center ">
<img alt="rooftops with solar panels" src="https://images.theconversation.com/files/490767/original/file-20221020-17-zjh6s5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/490767/original/file-20221020-17-zjh6s5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/490767/original/file-20221020-17-zjh6s5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/490767/original/file-20221020-17-zjh6s5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/490767/original/file-20221020-17-zjh6s5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/490767/original/file-20221020-17-zjh6s5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/490767/original/file-20221020-17-zjh6s5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Solar subsidies have fallen in recent years.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Signing up for GreenPower</h2>
<p>Neighbours influence each other’s behaviour. Living near lots of homes with solar panels can <a href="https://link.springer.com/article/10.1007/s10640-019-00374-3">change people’s beliefs</a> about the science of climate change. It also makes people <a href="https://pubsonline.informs.org/doi/10.1287/mksc.1120.0727">more likely</a> to install solar panels on their own home. </p>
<p>However, <a href="https://www.aeaweb.org/articles?id=10.1257/pol.20180559">research</a> focused on water conservation suggests the “peer pressure” effect is muted if the behaviour change doesn’t also come with a financial benefit.</p>
<p>There remain <a href="https://www.nature.com/articles/s41560-019-0541-9">gaps in our understanding</a> of how neighbours influence each others’ energy use. For example, we don’t know if installing solar panels influences the energy behaviours of people who can’t install panels because, say, they live in an apartment.</p>
<p><a href="https://direct.mit.edu/rest/article-abstract/doi/10.1162/rest_a_01124/107654/Motivation-Crowding-in-Peer-Effects-The-Effect-of?redirectedFrom=fulltext">My research</a> examined the uptake of GreenPower to help us close that knowledge gap. </p>
<p><a href="https://www.greenpower.gov.au/">GreenPower</a> is government-accredited electricity generated by renewable sources and offered for sale to consumers. </p>
<p>Like installing solar panels, GreenPower can be considered a “public good” in that it helps tackle climate change. But GreenPower is not subsidised and is not visible to neighbours. And users also don’t get the financial benefit of selling surplus electricity from rooftop solar back to the grid. </p>
<p>The number of GreenPower users in Australia has <a href="https://www.greenpower.gov.au/sites/default/files/2020-08/GreenPower%20-%20Program%20Review%2C%20Final%20Report%20%28JUNE-2015%29.pdf">fallen dramatically</a> in recent years: from about 1 million customers in <a href="https://www.greenpower.gov.au/sites/default/files/2020-09/GreenPower%20-%20Quarterly%20Report%20Q3%202009.pdf">2009</a> to 100,000 in <a href="https://www.greenpower.gov.au/sites/default/files/2020-08/GreenPower%20-%20Quarterly%20Report%20Q4%202019-v1.2.pdf">2019</a>.</p>
<p>Much of this may be explained by people switching to rooftop solar during that period. But it was also possible that rooftop solar installations were influencing decisions by non-solar neighbours of whether to sign up to GreenPower schemes. My research aimed to distinguish between these possibilities. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/small-communities-could-be-buying-selling-and-saving-money-on-electric-power-right-now-heres-how-190740">Small communities could be buying, selling and saving money on electric power right now – here’s how</a>
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<figure class="align-center ">
<img alt="wind turbines" src="https://images.theconversation.com/files/490768/original/file-20221020-17-aw3wct.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/490768/original/file-20221020-17-aw3wct.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/490768/original/file-20221020-17-aw3wct.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/490768/original/file-20221020-17-aw3wct.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/490768/original/file-20221020-17-aw3wct.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/490768/original/file-20221020-17-aw3wct.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/490768/original/file-20221020-17-aw3wct.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">GreenPower is government-accredited electricity generated by renewable sources.</span>
<span class="attribution"><span class="source">Russell Freeman/AAP</span></span>
</figcaption>
</figure>
<h2>What the research found</h2>
<p>I studied the electricity plan choices of about 300,000 customers in Victoria from 2009-2016. I matched each contract to the number of solar panels installed in that postcode in the quarter the contract was signed. </p>
<p>I found on average, solar panel installation increases the number of non-solar homes purchasing GreenPower. But economic incentives – like subsidies – actually reduced the peer effect.</p>
<p>During periods of high solar subsidies, an additional 1,000 homes with solar panels reduced the share of GreenPower contracts by 0.08 – or 400 for every 5,000 new electricity contracts taken out by non-solar customers. </p>
<p>During periods of low solar subsidies, an additional 1,000 homes with solar panels increased the share of GreenPower contracts by 0.02, or 100 for every 5,000 new electricity contracts. </p>
<p>This suggests economic incentives compromise the signal that a neighbour is acting in the public good – and so reduces pressure on neighbours to follow their lead.</p>
<p>This may then mean neighbours feel less pressure to address their own electricity-related greenhouse emissions by purchasing GreenPower, or taking other climate-friendly measures.</p>
<p>Other factors are also likely to have contributed to the decline in the popularity of GreenPower. These include its cost relative to electricity from other sources, and debate around the introduction and removal of Australia’s carbon price. </p>
<hr>
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<figure class="align-center ">
<img alt="solar panels in low light" src="https://images.theconversation.com/files/490769/original/file-20221020-23-zjh6s5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/490769/original/file-20221020-23-zjh6s5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/490769/original/file-20221020-23-zjh6s5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/490769/original/file-20221020-23-zjh6s5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/490769/original/file-20221020-23-zjh6s5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/490769/original/file-20221020-23-zjh6s5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/490769/original/file-20221020-23-zjh6s5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Economic incentives interacted with the peer effect of solar panel installation.</span>
<span class="attribution"><span class="source">Dan Himbrechts/AAP</span></span>
</figcaption>
</figure>
<h2>Proceed with care</h2>
<p>Subsidies affect technology adoption, and subsidies for “green” technologies such as solar panels do lower carbon emissions. </p>
<p>But subsidies also have indirect effects that must be considered when thinking about the costs and benefits of various policy options. </p>
<p>Alternatives to these subsidies exist. These include an economy-wide price on carbon, <a href="https://theconversation.com/most-australian-households-are-well-positioned-for-electric-vehicles-and-an-emissions-ceiling-would-help-172694">emissions ceilings on vehicles</a>, and mandatory renewable energy targets. These policy options could avoid the downsides of subsidies to consumers.</p><img src="https://counter.theconversation.com/content/176372/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrea La Nauze has received funding from the Australian Research Council. </span></em></p>Subsidies are often a policy go-to for governments wanting to encourage more climate-friendly behaviours. But they should be used with caution.Andrea La Nauze, Lecturer, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1904042022-09-27T12:28:31Z2022-09-27T12:28:31ZPeople of color are as interested in buying electric cars as white consumers – the biggest obstacle is access to charging<figure><img src="https://images.theconversation.com/files/486393/original/file-20220925-388-a390p5.jpg?ixlib=rb-1.1.0&rect=49%2C24%2C8194%2C5450&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">More EV charging hookups in public locations like garages and parking lots would prompt more drivers of color to buy EVs.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/power-supply-box-in-an-electric-vehicle-charging-royalty-free-image/1073405402">Extreme Media via Getty Images</a></span></figcaption></figure><p>A <a href="https://www.greenlatinos.org/_files/ugd/a42c65_5fff34fba11748138063dbf9d8d80363.pdf">nationally representative survey of 8,027 Americans</a> shows that across all racial demographics, overall interest in purchasing electric vehicles is high. Among those surveyed, 33% of white respondents, 38% of Black respondents, 43% of Latinos and 52% of Asian Americans say they would “definitely” or “seriously consider” purchasing or leasing an EV as their next vehicle. </p>
<p>The survey was conducted by <a href="https://www.consumerreports.org/">Consumer Reports</a>, with input from the nonprofit advocacy groups <a href="https://www.greenlatinos.org/">GreenLatinos</a>, the <a href="https://www.ucsusa.org/">Union of Concerned Scientists</a> and <a href="https://www.evnoire.com/">EVNoire</a> and administered between Jan. 27 and Feb. 18, 2022, <a href="https://www.norc.org/About/Pages/default.aspx">by NORC at the University of Chicago</a>, an objective, nonpartisan research organization.</p>
<p>Electric vehicles are critical for reducing transportation emissions, but communities of color currently adopt this key technology at <a href="https://escholarship.org/content/qt0tn4m2tx/qt0tn4m2tx_noSplash_36244609f162444f3e55c550dfc22cad.pdf">lower rates than white drivers</a>. This survey, for which I was an adviser, helps to shed light on some of the reasons for this disparity. </p>
<h2>Cleaner air for all</h2>
<p>Air pollution in the U.S. <a href="https://doi.org/10.1021/acs.estlett.1c01012">disproportionately affects communities of color</a>. To take just one statistic, Latino children are about <a href="https://doi.org/10.1016/j.pedhc.2006.12.005">three times more likely</a> than non-Hispanic white children to live in a county where air pollution levels exceed federal air quality standards.</p>
<p>Transportation is a major source of harmful air pollutants, particularly <a href="https://www.epa.gov/transportation-air-pollution-and-climate-change/smog-soot-and-other-air-pollution-transportation">nitrogen oxides</a>. These compounds contribute to the formation of <a href="https://www.epa.gov/mobile-source-pollution/how-mobile-source-pollution-affects-your-health">ground-level ozone and smog</a>, which can cause or worsen many types of respiratory diseases.</p>
<p>Motor vehicles also emit <a href="https://www.epa.gov/transportation-air-pollution-and-climate-change/smog-soot-and-other-air-pollution-transportation">soot and toxic compounds</a>. Because of these pollutants, people who live near roadways are at <a href="https://www.epa.gov/mobile-source-pollution/how-mobile-source-pollution-affects-your-health">elevated risk</a> of ailments including heart disease, impaired lung development in children, preterm and low-birthweight infants, childhood leukemia and premature death.</p>
<p>Transportation is also the <a href="https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks">largest source of global warming emissions</a> in the United States. Light-duty passenger cars and trucks <a href="https://www.c2es.org/content/regulating-transportation-sector-carbon-emissions/">contribute 58%</a> of transportation’s greenhouse gas emissions. Weather-related events such as heat waves, air pollution and flooding <a href="https://theconversation.com/looking-back-on-americas-summer-of-heat-floods-and-climate-change-welcome-to-the-new-abnormal-190636">can be exacerbated by climate change</a> and <a href="https://www.epa.gov/newsreleases/epa-report-shows-disproportionate-impacts-climate-change-socially-vulnerable">disproportionately harm U.S. communities of color</a>.</p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/oUGAF7Vm3PE?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Climate change is taking a disproportionate toll on low-income and minority communities across the U.S.</span></figcaption>
</figure>
<h2>Where can we plug in?</h2>
<p>Ours was the first consumer-oriented survey to analyze barriers to EV adoption along racial demographic lines. The goal is to help policymakers and advocates better understand why Black and Latino consumers are buying fewer EVs than white consumers and what concerns explain this gap.</p>
<p>We found that charging EVs at home – the most affordable way to charge EVs today – is not an equally viable option for all communities, particularly those with higher proportions of renters or multifamily dwellings. People who own their homes can much more easily have EV charging equipment installed on the premises and use it to charge their cars safely and conveniently overnight.</p>
<p>In our survey, nearly 75% of white respondents owned their homes, compared with fewer than 50% of Black respondents and slightly over 50% of Latino respondents. Multi-unit dwellings, such as apartment buildings, <a href="https://www.forbes.com/sites/forbesbusinesscouncil/2021/02/25/bringing-electric-vehicle-charging-to-multifamily-housing">often do not offer EV charging</a> for residents. We found that increasing affordable, accessible and reliable public EV charging infrastructure in safe locations would address all of these groups’ biggest concerns about EV charging. </p>
<p>The survey findings also suggest that improving access to financing and incentives for both new and used EVs would help to accelerate EV adoption.</p>
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<h2>Getting the message out</h2>
<p>Our results show that increasing access to EVs is a key way to educate communities about the benefits of driving them. But it’s not clear yet how to create education and engagement initiatives that focus on Black and Latino consumers and target their specific needs and concerns. </p>
<p>Finding better ways to include Black and Latino communities in the EV transition is important because it can help to address gaps and mitigate systemic barriers to adoption and achieve environmental justice.</p>
<p>Providing help and incentives for apartments and condominiums to install EV chargers will help reduce barriers to widespread EV adoption. Our survey showed that Black and Latino drivers are more likely to use public or on-street parking, so incentives to support the build-out of publicly accessible charging infrastructure are also critical.</p>
<p>Purchase incentives that are more accessible and target buyers at more income levels will bring EVs within reach for more people. For example, tax credits could be made refundable, allowing people without sufficient tax liability to still take advantage of the credit, or incentives could be made available at the point of sale.</p>
<p>We plan further research that can identify ways to overcome the barriers spotlighted in this survey and help create a just and clean transportation future for all.</p><img src="https://counter.theconversation.com/content/190404/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrea Marpillero-Colomina is the Sustainable Communities Program Director at GreenLatinos, which contributed to the survey discussed in this article.</span></em></p>Reducing air pollution from cars and light trucks would pay big health dividends for low-income and minority communities. A new survey shows how to get more drivers of color into electric vehicles.Andrea Marpillero-Colomina, Adjunct Lecturer in Urban Studies, The New SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1886932022-08-19T07:31:54Z2022-08-19T07:31:54ZBig new incentives for clean energy aren’t enough – the Inflation Reduction Act was just the first step, now the hard work begins<figure><img src="https://images.theconversation.com/files/480001/original/file-20220819-22-99ur2t.jpg?ixlib=rb-1.1.0&rect=0%2C37%2C5000%2C3285&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">More wind turbines can increase renewable energy, but transmission lines are crucial, too.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/some-wind-power-plants-and-a-high-voltage-powerline-in-news-photo/1089383274">Frank Bienewald/LightRocket via Getty Images</a></span></figcaption></figure><p>The new <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/15/by-the-numbers-the-inflation-reduction-act/">Inflation Reduction Act</a> is stuffed with subsidies for everything from electric vehicles to heat pumps, and incentives for just about every form of clean energy. But pouring money into technology is just one step toward solving the climate change problem.</p>
<p>Wind and solar farms won’t be built without enough power lines to connect their electricity to customers. Captured carbon and clean hydrogen won’t get far without pipelines. Too few contractors are trained to install heat pumps. And EV buyers will think twice if there aren’t enough charging stations.</p>
<p>In my new <a href="https://yalebooks.yale.edu/book/9780300251678/confronting-climate-gridlock/">book about climate solutions</a>, I discuss these and other obstacles standing in the way of a clean energy transition. Surmounting them is the next step as the country figures out how to turn the goals of the most ambitious climate legislation Congress has ever passed into reality.</p>
<p>Two outcomes matter: how deeply U.S. actions slash emissions domestically, and how effectively they cut the costs of clean technologies so that <a href="https://www.globalcarbonproject.org/carbonbudget/21/files/GCP_CarbonBudget_2021.pdf">other countries can slash their emissions</a> too.</p>
<h2>Infrastructure and obstacles</h2>
<p>Various <a href="https://repeatproject.org/docs/REPEAT_IRA_Prelminary_Report_2022-08-04.pdf">studies</a> <a href="https://rhg.com/research/inflation-reduction-act/">predict</a> <a href="https://energyinnovation.org/wp-content/uploads/2022/08/Modeling-the-Inflation-Reduction-Act-with-the-US-Energy-Policy-Simulator_August.pdf">that</a> the Inflation Reduction Act will cut U.S. greenhouse gas emissions to around 40% below their 2005 levels by 2030. That’s a cut of roughly 1 billion tons per year, far more than any other U.S. legislation has achieved. </p>
<p>But it still leaves a roughly 10 percentage point gap from President Joe Biden’s <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/">target</a> of at least a 50% reduction in emissions by 2030.</p>
<p><iframe id="wBF3a" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/wBF3a/7/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>What will it take to close that gap? </p>
<p>The Inflation Reduction Act’s subsidies will make clean technologies cheaper, but the biggest need domestically is for more infrastructure and stricter environmental regulations.</p>
<p>For infrastructure, tax credits for electric cars will do little good without enough publicly available chargers. The U.S. has <a href="https://www.axios.com/2022/07/15/gas-stations-prices-closing">around 145,000 gas stations</a>, but only about <a href="https://afdc.energy.gov/fuels/electricity_locations.html#/find/nearest?fuel=ELEC&ev_levels=dc_fast&country=US">6,500 fast-charging</a> stations that can power up a battery quickly for a driver on the go.</p>
<p>Over 1,300 gigawatts of wind, solar and battery projects – several times the existing capacity – are already waiting to be <a href="https://emp.lbl.gov/queues">built</a>, but they’ve been delayed for years by a lack of grid connections and backlogged approval processes by regional grid operators.</p>
<p>The <a href="https://www.congress.gov/bill/117th-congress/house-bill/3684/text">Infrastructure Investment and Jobs Act</a> passed by Congress last year provides some funding for chargers, power lines and pipelines, but nowhere near enough. For example, it sets aside only a few billion dollars for high-voltage <a href="https://www.canarymedia.com/articles/transmission/infrastructure-bill-contains-less-transmission-funding-than-advertised">power lines</a>, a tiny share of the hundreds of billions of dollars <a href="https://www.greentechmedia.com/articles/read/princeton-study-charts-a-2.5t-pathway-to-a-net-zero-carbon-u.s">needed</a> to chart a path toward net-zero emissions. Its $7.5 billion for chargers is just a third of what electric car advocates project will be <a href="https://www.autoweek.com/news/a37372003/federal-money-for-ev-charging-wont-be-enough/">needed</a>.</p>
<figure class="align-center ">
<img alt="Map of US EV charging stations show large numbers in the Northeast and West Coast and US cities, but far fewer in less populated regions." src="https://images.theconversation.com/files/480037/original/file-20220819-24-whcepg.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/480037/original/file-20220819-24-whcepg.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=426&fit=crop&dpr=1 600w, https://images.theconversation.com/files/480037/original/file-20220819-24-whcepg.PNG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=426&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/480037/original/file-20220819-24-whcepg.PNG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=426&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/480037/original/file-20220819-24-whcepg.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=535&fit=crop&dpr=1 754w, https://images.theconversation.com/files/480037/original/file-20220819-24-whcepg.PNG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=535&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/480037/original/file-20220819-24-whcepg.PNG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=535&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://afdc.energy.gov/fuels/electricity_locations.html#/find/nearest?fuel=ELEC&ev_levels=dc_fast&country=US">DOE Alternative Fuels Data Center • Data as of August 2022</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Even more important is to clear the regulatory obstacles to building clean energy infrastructure.</p>
<p>Democratic leaders of the Senate and House have <a href="https://www.democrats.senate.gov/newsroom/press-releases/senate-majority-leader-chuck-schumer-d-ny-and-sen-joe-manchin-d-wv-on-wednesday-announced-that-they-have-struck-a-long-awaited-deal-on-legislation-that-aims-to-reform-the-tax-code-fight-climate-change-and-cut-health-care-costs">pledged to pass</a> legislation to make it easier to obtain permits for power lines and pipelines, but doing so would require bipartisan support, and that <a href="https://www.eenews.net/articles/lets-get-real-gop-doubts-permitting-deal-will-pass/">remains in doubt</a>.</p>
<p>State and local governments and regional grid operators also play pivotal roles in approving new infrastructure and clean energy projects. They must overcome not-in-my-backyard opposition – some of it from policymakers themselves – to the power lines, pipelines and facilities that will be needed for clean energy, and simplify approval processes for rooftop solar panels. </p>
<h2>It can’t all be carrots: Sticks are needed, too</h2>
<p>We’ll also need regulatory sticks to supplement the Inflation Reduction Act’s carrot cake buffet.</p>
<p>By tightening emissions limits for greenhouse gases and other air pollutants under its Clean Air Act authority, the Environmental Protection Agency can spur the closure of old fossil-fueled power plants, require carbon capture at new ones and drive emissions reductions across a range of industries.</p>
<figure class="align-center ">
<img alt="Biden sits at a desk signing the legislation. Sens. Joe Manchin (D-WV.) and Chuck Schumer (D-NY) and Reps. James Clyburn (D-SC), Rep. Frank Pallone (D-NJ) and Rep. Kathy Catsor (D-FL) look over his shoulder." src="https://images.theconversation.com/files/479981/original/file-20220818-6276-r9s5tp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/479981/original/file-20220818-6276-r9s5tp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/479981/original/file-20220818-6276-r9s5tp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/479981/original/file-20220818-6276-r9s5tp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/479981/original/file-20220818-6276-r9s5tp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/479981/original/file-20220818-6276-r9s5tp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/479981/original/file-20220818-6276-r9s5tp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">President Joe Biden signed the Inflation Reduction Act, the nation’s most ambitious climate investment yet, on Aug. 16, 2022.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/president-joe-biden-signs-the-inflation-reduction-act-with-news-photo/1415247940">Drew Angerer/Getty Images</a></span>
</figcaption>
</figure>
<p>Stricter emissions limits could force gasoline and diesel vehicles to become more efficient and accelerate the adoption of electric ones. Tougher reporting rules and better monitoring of methane leaks will be needed to back up the one stick in the Inflation Reduction Act – its tax on methane emissions.</p>
<p>States wield powerful regulatory sticks too. Ten states have already set 100% clean or renewable electricity <a href="https://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx">standards</a>. <a href="https://ww2.arb.ca.gov/our-work/programs/low-carbon-fuel-standard">California</a> and <a href="https://www.oregon.gov/deq/ghgp/cfp/Pages/CFP-Overview.aspx">Oregon</a> have set requirements for cleaner fuels, and states like <a href="https://climate.ny.gov/">New York</a> and <a href="https://www.governor.wa.gov/issues/issues/energy-environment">Washington</a> are implementing comprehensive climate strategies. The more states follow their lead, the more quickly emissions can be cut. The new federal subsidies will ease the path to doing so. </p>
<h2>Ramping up research and global impact</h2>
<p>All the new spending has the potential to achieve deep emissions cuts domestically, but they will have little impact abroad without further action.</p>
<p>Other countries will only adopt clean technologies if they’re affordable, but the Inflation Reduction Act’s subsidy buffet is only available to U.S. citizens and companies. Its rewards for domestic solar manufacturers may help them gain market share in the U.S., but they’ll likely do little to reduce prices in markets <a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/a-decade-into-tariffs-us-solar-manufacturing-is-still-deep-in-asia-s-shadow-70236202">dominated</a> by low-cost Asian manufacturers.</p>
<p>More progress abroad may be driven in future decades by the boosts in funding for emerging technologies. For example, the Inflation Reduction Act provides billions of dollars for clean hydrogen and carbon capture technologies that are not yet commercially viable but could become so with greater deployment. Carbon capture should be targeted toward locking up carbon from difficult-to-decarbonize industries like <a href="https://doi.org/10.1073/pnas.1719695115">biofuel production</a>, rather than to prolong the use of coal power plants or subsidize oil and gas <a href="https://www.nytimes.com/2022/08/16/opinion/climate-inflation-reduction-act.html">production</a>.</p>
<p>The <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/">CHIPS and Science Act</a> Biden signed in early August 2022 authorizes <a href="https://www.theatlantic.com/science/archive/2022/08/chips-act-climate-bill-biden/671095/">$67 billion</a> in funding for zero-carbon industries and climate research, although subsequent legislation will be needed to ensure that those funds are actually appropriated.</p>
<p>It would double the budget for the Department of Energy’s <a href="https://arpa-e.energy.gov/">ARPA-E program</a>, which funds research into the most cutting-edge energy technologies. As I discuss in my book, that could be especially important for making clean <a href="https://www.energy.gov/eere/fuelcells/hydrogen-shot">hydrogen</a> cheap, making <a href="https://www.energy.gov/eere/geothermal/geovision">geothermal</a> viable in more places, and developing new forms of energy <a href="https://arpa-e.energy.gov/technologies/programs/days">storage</a>. Together with the subsidies provided by the Inflation Reduction Act, that could jump-start the research, development and deployment needed to make these technologies affordable worldwide in the decades ahead.</p>
<p>After years of gridlock, there’s reason to celebrate Congress passing three bills that will do more to cut U.S. emissions than any legislation in history. But much more will be needed to reach the nation’s climate goals and to make clean energy more affordable at home and abroad.</p><img src="https://counter.theconversation.com/content/188693/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Daniel Cohan does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>To put the $370 billion in subsidies to work, the US needs to build new infrastructure and manage a lot of regulatory hurdles.Daniel Cohan, Associate Professor of Civil and Environmental Engineering, Rice UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1878322022-08-04T12:20:16Z2022-08-04T12:20:16ZWho benefits from renewable energy subsidies? In Texas, it’s often fossil fuel companies that are fighting clean energy elsewhere<figure><img src="https://images.theconversation.com/files/476975/original/file-20220801-83105-wdx2ee.jpg?ixlib=rb-1.1.0&rect=4%2C4%2C2931%2C1914&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Texas is the No. 1 wind power producer in the U.S.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/delaware-mountain-wind-farm-photo-by-greg-smith-corbis-saba-news-photo/526768758">Greg Smith/Corbis SABA via Getty Images</a></span></figcaption></figure><p>Texas is known for fiercely promoting its oil and gas industries, but it’s also the <a href="https://www.globaltrademag.com/states-with-the-largest-increase-in-renewable-energy-production/%22%22">No. 2 renewable energy producer</a> in the country after California. In fact, more than a quarter of all the wind power produced in the United States in 2021 was generated in Texas.</p>
<p>These projects benefit from a lucrative state tax incentive program called <a href="https://comptroller.texas.gov/economy/fiscal-notes/2016/april/chap313.php">Chapter 313</a>. That incentive program expires on Dec. 31, 2022, and the rush of applications for wind and solar energy projects to secure incentives before the deadline is providing a rare window into a notoriously opaque industry.</p>
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<iframe id="noa-web-audio-player" style="border: none" src="https://embed-player.newsoveraudio.com/v4?key=x84olp&id=https://theconversation.com/who-benefits-from-renewable-energy-subsidies-in-texas-its-often-fossil-fuel-companies-that-are-fighting-clean-energy-elsewhere-187832&bgColor=F5F5F5&color=D8352A&playColor=D8352A" width="100%" height="110px"></iframe>
<p><em>You can listen to more articles from The Conversation, narrated by Noa, <a href="https://theconversation.com/us/topics/audio-narrated-99682">here</a>.</em></p>
<hr>
<p>By reviewing the applications and ownership documents, we were able to track who actually builds and owns a large portion of the nation’s renewable energy, when and how those assets change hands, and who ultimately benefits from the tax incentives.</p>
<p>The results might surprise you. The majority of utility-scale solar and wind energy projects in Texas aren’t owned by companies focused on renewable energy – they’re owned by energy companies or utilities that are better known for fossil fuels, including some that have <a href="https://www.orlandosentinel.com/news/os-ne-matrix-llc-fpl-utilities-climate-change-20220727-y3ava6jmzzar3ep6a67jcgg3gu-story.html">aggressively opposed renewable energy</a> and climate policies in other states and nationally.</p>
<p>The policy implications of these findings are complex. While these subsidies might lead some energy companies to reduce their greenhouse gas emissions, they also can allow energy companies to continue polluting from existing fossil fuel assets while collecting the subsidy benefits. </p>
<h2>A subsidy program that saves companies billions</h2>
<p>Chapter 313 limits how much companies have to pay in property taxes for schools if those companies build infrastructure and agree to create jobs. The Texas Legislature passed it in 2001 when a number of large companies, including Intel and Boeing, were considering Texas for an investment location. </p>
<p>Companies using this program can <a href="https://www.texastribune.org/2021/04/29/texas-legislature-chapter-313/">save billions of dollars</a> in local property taxes. However, <a href="https://www.houstonchronicle.com/news/investigations/unfair-burden/article/unfair-burden-part-2-tax-program-costs-spiral-16164758.php">investigations have revealed</a> high costs per job and minimal requirements for companies. The <a href="https://www.texastribune.org/2019/02/15/texas-school-funding-how-it-works/">state’s school funding system</a> also suffered.</p>
<p>The program wasn’t renewed, but companies that applied for the incentive by Aug. 1, 2022, could grandfather in their investments for 10 years of tax benefits. That led to the <a href="https://www.kvue.com/article/money/economy/boomtown-2040/chapter-313-expire-tax-break-benefits-nxp-samsung-school-district-isd/269-3c3cfe26-189c-43c1-a86e-b2acf2ed2e3e">rush of applications</a>, including for wind and solar projects.</p>
<h2>Who’s proposing renewable energy projects?</h2>
<p>We reviewed 191 <a href="https://comptroller.texas.gov/economy/local/ch313/agreement-docs.php">wind and solar project applications</a> filed in 2022. If built, these projects would almost double <a href="https://comptroller.texas.gov/economy/docs/96-1359-2021.pdf">the number of renewable energy projects in Texas</a>.</p>
<p>It is notoriously difficult to track the owners of renewable energy projects in the U.S., because most are structured as <a href="https://www.investopedia.com/terms/l/llc.asp">limited liability companies</a>, or LLCs. However, the application for Texas incentives requires not only information on the owner, but also a signature of an individual representative of the owners. That provides a glimpse into the impact that subsidies can have and who benefits.</p>
<p><iframe id="qwtO6" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/qwtO6/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>We found that just over a third – 69 out of 191 proposed projects – are owned by renewable energy companies, such as Danish company Ørsted and Recurrent Energy, owned by Canadian Solar.</p>
<p>Over half the proposals – 101 – were submitted by energy companies known more for oil and gas, or utilities with fossil fuel assets. This includes the renewable energy subsidiaries of oil supermajors such as Total and BP, and utility owners including EDF, AES and Engie, all of which are major global players. </p>
<p>Some project applications came from investment groups such as DeShaw Group, Cardinal Investment Group and Horus Capital. Apex Clean Energy, a renewable energy subsidiary of the major investment manager Ares Management, frequently showed up in applications. </p>
<h2>New owners take over</h2>
<p>The proposed projects provide a snapshot of the renewable energy projects’ developers – but what happens after these projects are built?</p>
<p>To figure that out, we also looked at all renewable energy projects completed in 2020 and 2021 that participated in the Chapter 313 incentive program.</p>
<p><iframe id="4r60P" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/4r60P/4/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>To our surprise, almost half of the projects built in 2020 or 2021 had changed hands by 2022. Some were due to company acquisitions. Many other projects were sold.</p>
<p>This changed the composition of owners. While renewable energy companies owned roughly half the projects at the application stage, by 2022, two-thirds of the projects were owned by utilities and energy companies with fossil fuel assets.</p>
<p>The original developers may have benefited from the first year or so of the tax break, but the new owners are poised to reap the majority of the remaining years of the 10-year property tax incentive.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/476594/original/file-20220728-26301-6zgwcf.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/476594/original/file-20220728-26301-6zgwcf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/476594/original/file-20220728-26301-6zgwcf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=593&fit=crop&dpr=1 600w, https://images.theconversation.com/files/476594/original/file-20220728-26301-6zgwcf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=593&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/476594/original/file-20220728-26301-6zgwcf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=593&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/476594/original/file-20220728-26301-6zgwcf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=745&fit=crop&dpr=1 754w, https://images.theconversation.com/files/476594/original/file-20220728-26301-6zgwcf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=745&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/476594/original/file-20220728-26301-6zgwcf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=745&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>The most common pattern of sales was a renewable energy developer selling a project to an energy company or utility. For example, Duke Energy purchased a solar project originally owned by Recurrent Energy, and Alpin Sun sold a solar project to BP.</p>
<p>We found that ownership by self-described “venture capitalists” and other investors was rare before 2022. The lucrative and expiring incentive program likely led to a gold rush of applications, including by some companies with limited experience in renewable energy.</p>
<h2>When renewable incentives become subsidies to fossil fuel companies</h2>
<p>Many of the owners benefiting from these subsidies have parent companies with <a href="https://www.theguardian.com/environment/2019/oct/09/revealed-20-firms-third-carbon-emissions">high carbon emissions</a> and a <a href="https://doi.org/10.1016/j.gloenvcha.2021.102386">history of fighting climate policies</a>.</p>
<p>For example, the company with the most renewable energy projects subsidized under Chapter 313 from 2020 to 2022 is NextEra. NextEra is also the parent company of <a href="https://www.orlandosentinel.com/news/os-ne-matrix-llc-fpl-utilities-climate-change-20220727-y3ava6jmzzar3ep6a67jcgg3gu-story.html">Florida Power and Light</a>, a utility that has campaigned against <a href="https://www.tampabay.com/news/florida-politics/2021/12/20/floridas-largest-electric-utility-conspired-against-solar-power-documents-show/">rooftop solar in Florida</a> and <a href="https://www.utilitydive.com/news/massachusetts-top-court-denies-nextera-bid-to-block-states-ppas-with-hydro/584721/">sued</a> to block hydropower imports in Massachusetts. In Texas, however, NextEra lobbied for a continuation of Chapter 313 incentives.</p>
<p><iframe id="b4eO2" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/b4eO2/8/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>Other major energy companies in the owner list include France’s Total Energy, BP, Duke Energy and Savion, which is owned by Shell.</p>
<p>The data suggests some possible tensions within green energy policy.</p>
<p>Environmentalists have long argued for federal and state subsidies for renewable energy as a means of combating climate change, including in the <a href="https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_of_2022.pdf">climate- and inflation-focused bill currently in Congress</a>. </p>
<p>However, as our data analysis shows, the owners who benefit from renewable energy incentives can in some cases be the same fossil fuel companies that actively oppose a green energy transition. <a href="https://doi.org/10.1080/09692290.2021.1946708">The results of a 2021 study</a>, using data released by energy companies on earnings calls, also suggest that energy company investments in renewable energy projects are often simply diversification strategies – they aren’t replacing fossil fuels.</p>
<p>Our analysis is based on one program in Texas, but with the size of the Texas renewable energy sector, and the companies involved, it can offer insights for broader renewable energy policies. </p>
<p>Key to any subsidy program is clearly articulating the goals and tracking success in meeting them. If the goal is to reduce greenhouse as emissions, that means examining who is benefiting and determining if the subsidies are actually leading to a transition away from fossil fuels. </p>
<p>Our data begins to shine a light on the answer.</p><img src="https://counter.theconversation.com/content/187832/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nathan Jensen previously received funding from John and Laura Arnold Foundation for peer-reviewed research on the Texas Chapter 313 Program. </span></em></p><p class="fine-print"><em><span>Isabella Steinhauer does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While Congress considers new renewable energy incentives, Texas’ sprawling wind farms tell a story about renewable energy ownership in the US – and who benefits from subsidies.Nathan Jensen, Professor of Government, The University of Texas at AustinIsabella Steinhauer, Master of Public Affairs Candidate and Graduate Research Assistant, The University of Texas at AustinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1871572022-07-31T20:05:26Z2022-07-31T20:05:26ZAfter floods will come droughts (again). Better indicators will help us respond<p>Since late 2020, the <a href="http://www.bom.gov.au/climate/updates/articles/a020.shtml">La Niña</a> climate pattern has led to two years of above-average rainfall across much of Australia, and severe floods in parts of the country.</p>
<p>In areas spared the flooding, this rainfall has been good news for farmers, with improved conditions and high prices driving production and profits to record highs. </p>
<p>But the next drought is rarely too far away. For a reminder, we only need to look overseas, where the same La Niña weather system is combining with climate change to produce severe droughts in the <a href="https://theconversation.com/grim-2022-drought-outlook-for-western-us-offers-warnings-for-the-future-as-climate-change-brings-a-hotter-thirstier-atmosphere-182640">United States</a>, <a href="https://theconversation.com/is-eastern-africas-drought-the-worst-in-recent-history-and-are-worse-yet-to-come-185327">eastern Africa</a> and <a href="https://www.theguardian.com/world/2022/jun/01/chiles-water-crisis-megadrought-reaching-breaking-point">South America</a>.</p>
<p>Unfortunately, drought can be difficult to define and measure. Determining whether a region or farm is “in drought” is a longstanding and complex problem, which remains important to our future drought response. </p>
<h2>Drought is about more than rainfall</h2>
<p>For a long time, Australia’s standard measure of drought has been rainfall. But while rainfall indicators are easy to produce and interpret, they can be a poor measure of a farm’s prospects.</p>
<p>For one thing, the impact of drought depends on the timing of rain. </p>
<p>Even when the year’s total rainfall is okay, if most of it arrives at the wrong time of year (such as outside the crop season) it can have the same impact as a drought.</p>
<p>Temperatures are also increasingly important, with record heat waves having an important effect in recent years.</p>
<p>The story gets more complicated still when droughts affect the prices of inputs to farms. For example, during the 2018-19 drought many dairy farms were impacted by high hay and water prices, even where they received rain.</p>
<h2>Measuring farm impacts</h2>
<p>In response, researchers including myself at the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) have developed a new drought indicator based on <a href="https://www.sciencedirect.com/science/article/pii/S2212096322000274">predictions of farm financial outcomes</a>, with some advantages over measures based on only rain.</p>
<p>In some cases it presents a very different picture. </p>
<p>In the example below, for 2018-19, the indicator shows more severe impacts in parts of New South Wales than the rainfall model (because low rainfall was compounded by high temperatures and input prices), and less severe impacts in Western Australia (partly because of high grain prices resulting from shortages on the east coast).</p>
<hr>
<p><strong>Rain-based indicator:</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/475550/original/file-20220722-18-n82idy.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/475550/original/file-20220722-18-n82idy.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/475550/original/file-20220722-18-n82idy.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=563&fit=crop&dpr=1 600w, https://images.theconversation.com/files/475550/original/file-20220722-18-n82idy.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=563&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/475550/original/file-20220722-18-n82idy.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=563&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/475550/original/file-20220722-18-n82idy.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=707&fit=crop&dpr=1 754w, https://images.theconversation.com/files/475550/original/file-20220722-18-n82idy.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=707&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/475550/original/file-20220722-18-n82idy.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=707&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Colours show percentiles. 90-100 = top 10%</span>
<span class="attribution"><a class="source" href="https://www.sciencedirect.com/science/article/pii/S2212096322000274">ABARES</a></span>
</figcaption>
</figure>
<p><strong>Model-based indicator:</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/475549/original/file-20220722-16-u5n9jn.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/475549/original/file-20220722-16-u5n9jn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/475549/original/file-20220722-16-u5n9jn.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=569&fit=crop&dpr=1 600w, https://images.theconversation.com/files/475549/original/file-20220722-16-u5n9jn.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=569&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/475549/original/file-20220722-16-u5n9jn.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=569&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/475549/original/file-20220722-16-u5n9jn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=715&fit=crop&dpr=1 754w, https://images.theconversation.com/files/475549/original/file-20220722-16-u5n9jn.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=715&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/475549/original/file-20220722-16-u5n9jn.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=715&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Colours show percentiles. 90-100 = top 10%</span>
<span class="attribution"><a class="source" href="https://www.sciencedirect.com/science/article/pii/S2212096322000274">ABARES</a></span>
</figcaption>
</figure>
<hr>
<h2>Drought declarations are mattering less</h2>
<p>Since the early 2000s, drought policy has evolved away from in-drought support of farm businesses to an approach that emphasises preparedness and resilience, making explicit drought “declarations” less common.</p>
<p>While this change has been welcome, it also led to a reduced focus on drought impact measurement (with the exception of some <a href="https://edis.dpi.nsw.gov.au/">state-level systems</a>).</p>
<p>But as recent droughts have shown, information on the extent and severity of drought impacts is still very important.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/helping-farmers-in-drought-distress-doesnt-help-them-be-the-best-105281">Helping farmers in drought distress doesn't help them be the best</a>
</strong>
</em>
</p>
<hr>
<p>For one, it can help governments anticipate and prepare for increased demand for farm programs such as the Farm Household Allowance or the Rural Financial Counselling Service. </p>
<p>It can also help to better target resources for community, animal welfare or mental health drought impacts.</p>
<p>Better indicators can also support the development of new insurance products such as <a href="https://theconversation.com/better-data-would-help-crack-the-drought-insurance-problem-106154">index-based weather insurance</a>. </p>
<p>Such products are more likely to take off where indexes (and therefore payouts) can closely match real-world outcomes.</p>
<h2>Early warnings are mattering more</h2>
<p>While there is <a href="https://theconversation.com/the-science-of-drought-is-complex-but-the-message-on-climate-change-is-clear-125941">some evidence</a> climate change has exacerbated recent droughts in Australia, there remains much uncertainty over the longer term effects. </p>
<p>Regardless, the potential for more extreme weather events is generally increasing the importance of early warning systems.</p>
<p>ABARES is working with the CSIRO and the Bureau of Meteorology to develop a <a href="https://www.agriculture.gov.au/abares/research-topics/climate/drought-early-warning-system-project">Drought Early Warning System</a> that will use this new indicator and a range of other tools to translate weather data into estimates of likely farm impacts. </p>
<p>Predicting these impacts remains very difficult, with challenges both in weather forecasting (particularly on monthly or longer time scales), and in translating these forecasts into agricultural outcomes. </p>
<p>But any improvements we can make will help us better respond to what the future has in store.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/farms-are-adapting-well-to-climate-change-but-theres-work-ahead-164860">Farms are adapting well to climate change, but there's work ahead</a>
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</em>
</p>
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<img src="https://counter.theconversation.com/content/187157/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Neal Hughes is a Senior Economist at the Australian Bureau of Agricultural and Resource Economics and Sciences</span></em></p>Determining whether a region or farm is “in drought” is a longstanding and complex problem which remains important to our future drought response.Neal Hughes, Adjunct Associate Professor, Centre for Regional and Rural Futures, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1855672022-07-18T15:08:50Z2022-07-18T15:08:50ZWe have a deal. Can we now talk about some not-so-harmful fisheries subsidies?<figure><img src="https://images.theconversation.com/files/472975/original/file-20220707-22-wx1ev1.jpg?ixlib=rb-1.1.0&rect=0%2C59%2C4992%2C3263&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The World Trade Organization reached an agreement on fisheries subsidies, prohibiting member countries from funding illegal fishing and fishing of overexploited stocks at the 12th WTO Ministerial Conference in Geneva on June 17. </span> <span class="attribution"><span class="source">(Fabrice Coffrini/Pool Photo/Keystone via AP)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/we-have-a-deal--can-we-now-talk-about-some-not-so-harmful-fisheries-subsidies" width="100%" height="400"></iframe>
<p>The World Trade Organization reached an <a href="https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/W22.pdf&Open=True">agreement on fisheries subsidies</a> on June 17, prohibiting member countries from funding illegal fishing and fishing of overexploited stocks. </p>
<p>After decades of failed negotiations, this new agreement is a massive step toward achieving the United Nations Sustainable Development Goal 14 — <a href="https://www.globalgoals.org/goals/14-life-below-water/">Life Below Water</a>. While this new agreement fails to address the “harmful” subsidies that fund overfishing, the <a href="https://www.wto.org/english/news_e/spno_e/spno28_e.htm">WTO is committed to continuing its negotiation</a> to restrict these programs.</p>
<p>This idea of “harmful” subsidies, however, overlooks the diverse conditions of fisheries worldwide. It ignores the important role government interventions play in the economic security and <a href="https://pubs.iied.org/sites/default/files/pdfs/migrate/16647IIED.pdf">livelihood of coastal communities</a>. </p>
<p>Using oversimplified terms, like harmful, to define subsidies can have real-life consequences. Ignoring the nuances of fisheries under the guise of “illegal, unreported and unregulated fishing,” for example, has already led to <a href="https://doi.org/10.1111/faf.12462">the criminalization of small-scale fishers</a>.</p>
<p>As a fisheries economist involved in the 2011 WTO negotiations, and who has followed this issue since then, I believe we need to have more nuanced discussions about the role of fisheries subsidies — even the nominally harmful ones — to avoid further marginalization of small-scale fishers.</p>
<h2>‘Harmful’ subsidies are not always harmful</h2>
<p><a href="https://doi.org/10.1016/j.marpol.2019.103695">Harmful subsidies</a> are government programs that reduce the operating costs of fishing, and leads to excessive fishing and overexploitation. </p>
<p>The notion of “harm” is focused primarily on overfishing. However, this description ignores how subsidies can be used as key policy tools that address fisheries-related social issues.</p>
<figure class="align-center ">
<img alt="A worker stands near a large trawl with fish on the deck of a ship" src="https://images.theconversation.com/files/473967/original/file-20220713-9428-g1of2l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/473967/original/file-20220713-9428-g1of2l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/473967/original/file-20220713-9428-g1of2l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/473967/original/file-20220713-9428-g1of2l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/473967/original/file-20220713-9428-g1of2l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/473967/original/file-20220713-9428-g1of2l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/473967/original/file-20220713-9428-g1of2l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Harmful fishing subsidies focus on one potential environmental outcome — overfishing.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>Such subsidies include providing <a href="https://doi.org/10.1016/S0277-5395(00)00090-X">public employment insurance</a> that considers the seasonal nature of fishing, government-backed loans for independent harvesters when <a href="https://doi.org/10.1016/j.marpol.2020.103982">private loans are not enough</a>, <a href="https://www.canada.ca/en/fisheries-oceans/news/2022/02/government-of-canada-invests-118-million-in-indigenous-fisheries-opportunities-in-bc.html">infrastructure support in underserved communities</a> and <a href="https://repositorio.cepal.org/handle/11362/45984">emergency relief funds</a>. </p>
<p>Because these programs are cost-reducing and have potential environmental impacts, they are considered harmful. But this is an inaccurate descriptor because these kinds of subsidies don’t impose a choice between addressing social or environmental concerns. </p>
<p>The link between subsidies and overexploitation can be <a href="https://doi.org/10.1787/bd9b0dc3-en">mitigated by better fisheries management programs</a>, such as caps on fishing effort or limits on catch.</p>
<h2>Addressing neoliberalism’s legacy</h2>
<p>Leading up to the recent rounds of WTO negotiations, harmful subsidies were argued to be a source of inequity for two reasons. </p>
<p>First, industrialized nations were found <a href="https://oceana.org/wp-content/uploads/sites/18/OceanaDWF_FinalReport.pdf">to spend more than others on subsidies</a>. Second, the majority of the public funds allotted to fishing sectors were <a href="https://doi.org/10.3389/fmars.2020.539214">captured by industrial fleets</a> instead of small-scale fishers. </p>
<p>It’s true that some subsidy programs represent <a href="https://doi.org/10.1093/icesjms/fsaa142">wasteful, unjustified and potentially corrupt transfers</a> of public funds to private corporations. In such cases, it is essential that <a href="https://doi.org/10.1016/j.marpol.2015.10.001">governments eliminate such practices</a>. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1461259768157323269"}"></div></p>
<p>But this does not mean that restricting governments’ ability to intervene will lead to a fair playing field. On the contrary, governments should help small-scale fisheries be more commercially competitive through programs that reduce licence fees or support catch quota acquisitions and those that provide essential infrastructure and services. </p>
<p>Developing coastal nations — particularly <a href="https://www.un.org/ohrlls/content/about-small-island-developing-states">small island developing states</a> — have been locked in decade-long fights over transboundary fish stocks. Their goals <a href="https://doi.org/10.1016/j.marpol.2021.104781">include developing domestic fleets</a> that are capable of capturing their fair share of resources. </p>
<p>Given the <a href="https://www.undp.org/sites/g/files/zskgke326/files/publications/FfD-SIDS-UNDP-OHRLLS-Discussion-Paper.pdf">lack of private capital</a> in these countries, they are unlikely to achieve these aspirations without public financial support. </p>
<p>Simply put, public interventions like subsidies are necessary to remedy the disproportionate market power and access that industrial fleets have accrued under <a href="https://doi.org/10.1016/j.marpol.2015.03.025">decades of neoliberal policies</a>. </p>
<h2>Need a more nuanced conversation</h2>
<p>Addressing social injustice within communities starts with recognizing their diverse histories, future goals, local management practices, governance structures and the sociocultural and economic roles of fishing in certain contexts. </p>
<p>The new WTO agreement improves global transparency by expanding subsidy notification obligations. Member states will be required to submit any information about new subsidies programs to the WTO, where the committee will assess them to ensure member states are complying with the new agreement. In order for the new agreement to be meaningful, this new notification mechanism must be publicly accessible.</p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/y07KIrkBi5g?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">The new WTO agreement creates a framework for global transparency through fisheries subsidies programs including an enhanced notification scheme and a new Committee on Fisheries Subsidies.</span></figcaption>
</figure>
<p>Future attempts to restrict how sovereign nations support their domestic fisheries and coastal communities must proceed with caution. We must be aware of the limits in a top-down, international approach, and avoid unnecessarily constraining governments’ capacity. </p>
<p>We must ensure that the actions to control overfishing must not lead to further marginalization of small-scale fishers. </p>
<p>Now that the mandate for the WTO agreement on fisheries subsidies is embedded within the UN Sustainable Development Agenda, future negotiations must protect and enhance ocean equity. This starts with more nuanced conversations about so-called harmful subsidies.</p><img src="https://counter.theconversation.com/content/185567/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Wilf Swartz does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There is a need for nuanced discussions around the role of fisheries subsidies — even those that may be nominally harmful — to avoid further inequity and marginalization of small-scale fishers.Wilf Swartz, Associate Professor, Marine Affairs Program, Dalhousie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1853732022-06-21T19:56:34Z2022-06-21T19:56:34ZWorld Trade Organization steps back from the brink of irrelevance – but it’s not fixed yet<figure><img src="https://images.theconversation.com/files/469885/original/file-20220620-18-wsmzgw.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5000%2C2544&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">India's minister of commerce Piyush Goyal and WTO director-general Ngozi Okonjo-Iweala celebrate the end of the WTO's 12th Ministerial Conference.</span> <span class="attribution"><span class="source">Fabrice Coffrini/Pool/Keystone via AP</span></span></figcaption></figure><p>After decades of conflict that has neutered its work, the World Trade Organization looks to be back in business. </p>
<p>Its highest decision-making body – a conference of ministers from the organisation’s 164 member nations – has just met for the first time since 2017. </p>
<p>None of what the ministerial conference (<a href="https://www.wto.org/english/thewto_e/minist_e/mc12_e/mc12_e.htm">dubbed MC12</a> due to being the 12th such meeting) agreed on was particularly groundbreaking. But the fact there was agreement at all – on areas such as agriculture, fishing, intellectual property, e-commerce and food insecurity – was itself a milestone.</p>
<p>The question is what happens now, with considerable challenges ahead for the WTO and its role in promoting and protecting a global rules-based trading system.</p>
<hr>
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<h2>Fighting for relevance</h2>
<p>The WTO’s job is to be the forum for <a href="https://dictionary.cambridge.org/dictionary/english/multilateral">multilateral</a> rule-making, to observe the implementation of these trade rules, and to settle disputes among members. </p>
<p>In most situations, decisions must be made by consensus. This means a single detractor can scuttle initiatives supported by the rest of the WTO’s membership.</p>
<p>This has proved particularly problematic for the WTO’s rule-making function, which has largely been comatose for two decades, since negotiations on reducing trade barriers ground to a standstill at the ill-fated Doha Round launched in 2001. </p>
<p>Particularly damaging to the WTO has been the hostility of the US. Past administrations, especially the Trump administration, stymied the WTO’s dispute-settlement function by blocking the appointment and reappointment of judges to its appeal court (<a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3399300">known as the Appellate Body</a>). By 2019, there were not enough judges to hear appeals, leaving disputes in limbo.</p>
<p>The WTO has also been criticised for having few to no answers to the world’s most pressing issues: how to craft modern trade rules that support climate action and sustainability. </p>
<p>The rise of <a href="https://www.piie.com/sites/default/files/documents/wp19-15.pdf">economic nationalism</a> and unilateralism has increased trade friction making the WTO look increasingly irrelevant. </p>
<h2>Reaching agreement</h2>
<p>Given this, the <a href="https://www.wto.org/english/news_e/news22_e/mc12_17jun22_e.htm">ministerial conference</a> held in Geneva last week delivered welcome agreements on several sometimes long and strongly contested areas.</p>
<figure class="align-center ">
<img alt="The closing session of World Trade Organization's 'Ministerial Conference 12' in Geneva, June 17 2022." src="https://images.theconversation.com/files/469952/original/file-20220621-11-2i0sfz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469952/original/file-20220621-11-2i0sfz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469952/original/file-20220621-11-2i0sfz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469952/original/file-20220621-11-2i0sfz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469952/original/file-20220621-11-2i0sfz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469952/original/file-20220621-11-2i0sfz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469952/original/file-20220621-11-2i0sfz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The closing session of World Trade Organization’s ‘Ministerial Conference 12’ in Geneva, June 17 2022.</span>
<span class="attribution"><span class="source">Fabrice Coffrini/Pool/Keystone/AP</span></span>
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<p>It agreed on <a href="https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/W22.pdf&Open=True">limiting government subsidies</a> for <a href="https://www.weforum.org/agenda/2021/05/ending-harmful-fisheries-subsidies-would-positively-impact-ocean-health-and-coastal-communities/">harmful fishing</a> operations in an attempt to slow the depletion of rapidly declining fish stocks. This agreement will aid in curbing food insecurity and increase the sustainability of certain fish species. </p>
<p>Importantly, it is the first WTO treaty with environmental protection and sustainability as its objective. </p>
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Read more:
<a href="https://theconversation.com/we-still-need-a-vaccine-patent-waiver-but-not-the-one-on-offer-at-the-world-trade-organization-meeting-181235">We still need a vaccine patent waiver, but not the one on offer at the World Trade Organization meeting</a>
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Read more:
<a href="https://theconversation.com/putting-an-end-to-billions-in-fishing-subsidies-could-improve-fish-stocks-and-ocean-health-163470">Putting an end to billions in fishing subsidies could improve fish stocks and ocean health</a>
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<p>It agreed to <a href="https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/W15R2.pdf&Open=True">relax intellectual property rules</a> for COVID-19 vaccines. </p>
<p>Countries such as South Africa have been pushing for a waiver from provisions in the Agreement on Trade-related Aspects of Intellectual Property Rights so they can produce cheaper generic versions of vaccines. The impact should be limited, given <a href="https://www.who.int/campaigns/vaccine-equity">vaccine supply is now enough to meet demand</a>, but the concession may serve as a blueprint for the future.</p>
<p>It agreed to extend the moratorium on customs duties on “<a href="https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/W23.pdf&Open=True">electronic transmissions</a>” first agreed to in 1988.</p>
<p>It agreed to co-operate to resolve issues to do with <a href="https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/W17R1.pdf&Open=True">food insecurity</a>. With Russia’s war on Ukraine driving up food prices, some countries have <a href="https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/W18.pdf">restricted certain food exports</a> or are <a href="https://www.business-standard.com/article/current-affairs/india-s-food-subsidies-plan-needs-to-improve-coverage-plug-leakages-122030600092_1.html">subsidising the price of food</a> from domestic farmers.</p>
<p>It also agreed on reforming the WTO dispute settlement process, committing members – including the US – to “<a href="https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/W16R1.pdf&Open=True">conduct discussions</a>” to arrive at a “fully and well-functioning dispute settlement system accessible to all Members by 2024”. </p>
<p>Such soft language is a far cry from reinstating the Appellate Body. It was likely the only way to bring the US on board.</p>
<h2>But fundamental differences remain</h2>
<p>The ministerial conference is only the first step. It will be difficult – and take time – for WTO members to reach a compromise on many important issues. </p>
<p>Compromise is needed between the policy space governments demand for themselves and effective international trade rules. </p>
<p>For example, the US and its allies have been <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/january/joint-statement-trilateral-meeting-trade-ministers-japan-united-states-and-european-union">pushing for tightening the rules</a> on China’s state-owned enterprises and industrial subsidies. China has showed strong resistance to any new rules it views as being against its interests. </p>
<p>Another issue is <a href="https://www.wto.org/english/tratop_e/covid19_e/trade_related_support_measures_e.htm">support measures</a> adopted during the pandemic. Some governments understandably adopted policies to support domestic businesses in a time of crisis. But some of these measures are arguably against the WTO’s rules to eliminate trade distortions. </p>
<p>These points are symbolic of the larger disagreements between WTO members, with economic nationalism and unilateralism presenting a fundamental challenge to the organisation’s reason for being.</p>
<p>Examples abound. There are the US <a href="https://www.piie.com/research/piie-charts/us-china-trade-war-tariffs-date-chart">tariffs</a> on steel and aluminium on national security grounds. China’s trade <a href="https://kluwerlawonline.com/journalarticle/Journal+of+World+Trade/56.5/TRAD2022003">sanctions against Australia</a> on products such as wine, coal, lobster, barley and beef. China’s <a href="https://www.china-briefing.com/news/chinas-anti-foreign-sanctions-law-how-businesses-should-prepare/">Anti-Foreign Sanctions Law</a> and the European Union’s <a href="https://news.cgtn.com/news/2022-05-26/ACI-is-sign-of-European-departure-from-the-multilateral-trading-system-1alQWJqNdbG/index.html">Anti-Coercion Instrument</a> allow these governments to retaliate against any foreign actions they deem to be unfair. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/why-have-canada-and-australia-taken-such-a-different-approach-to-china-168236">Why have Canada and Australia taken such a different approach to China?</a>
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<p>A common feature of these instruments or actions is governments taking the law into their own hands, ignoring the WTO’s rule book and its dispute resolution mechanisms.</p>
<p>To overcome these existential challenges, the multilateral trading system will need strong and sustained commitment from member governments.</p><img src="https://counter.theconversation.com/content/185373/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Meeting for the first time since 2017, the WTO’s highest decision-making body managed to agree on some things – including its first treaty with environmental protection as the objective.Markus Wagner, Associate Professor of Law and Director of the UOW Transnational Law and Policy Centre, University of WollongongWeihuan Zhou, Associate Professor, Co-Director of China International Business and Economic Law (CIBEL) Centre, Faculty of Law and Justice, UNSW Sydney, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1846322022-06-10T12:30:50Z2022-06-10T12:30:50ZBiden just declared heat pumps and solar panels essential to national defense – here’s why and the challenges ahead<figure><img src="https://images.theconversation.com/files/468106/original/file-20220609-19608-lxmyyh.jpg?ixlib=rb-1.1.0&rect=0%2C3%2C1022%2C731&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Joe Biden authorized use of the Defense Production Act to ramp up production of several climate-friendly technologies.</span> <span class="attribution"><a class="source" href="https://images.nrel.gov/MX/Profiles/en/default/#/main/single/841ccf9e-d112-4ece-b75d-0e0c03f0de5e">Werner Slocum/NREL</a></span></figcaption></figure><p>Solar panels, heat pumps and hydrogen are all building blocks of a clean energy economy. But are they truly “essential to the national defense”?</p>
<p>President Joe Biden proclaimed that they are in early June when he <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/06/fact-sheet-president-biden-takes-bold-executive-action-to-spur-domestic-clean-energy-manufacturing/">authorized using the Defense Production Act</a> to ramp up their production in the U.S., along with insulation and power grid components.</p>
<p>As an environmental engineering professor, I agree that these technologies are essential to mitigating our risks from climate change and overreliance on fossil fuels. However, efforts to expand production capabilities must be accompanied by policies to stimulate demand if Biden hopes to accelerate the transition from fossil fuels to clean energy. </p>
<h2>Energy and the Defense Production Act</h2>
<p>The United States enacted the <a href="https://uslaw.link/citation/us-law/public/81/774">Defense Production Act of 1950</a> at the start of the Korean War to secure materials deemed essential to national defense. Presidents soon recognized that essential materials extend far beyond weapons and ammunition. They have invoked the act to secure domestic supplies of everything from <a href="https://www.bloomberg.com/news/articles/2011-11-30/obama-invokes-cold-war-security-powers-to-unmask-chinese-telecom-spyware#xj4y7vzkg">communications equipment</a> to <a href="https://trumpwhitehouse.archives.gov/presidential-actions/executive-order-preventing-hoarding-health-medical-resources-respond-spread-covid-19/">medical resources</a> and <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/22/president-biden-announces-first-two-infant-formula-defense-production-act-authorizations/">baby formula</a>.</p>
<p>For energy, past presidents used the act to expand fossil fuel supplies, not transition away from them. Lyndon Johnson used it to <a href="https://www.resources.org/resources-radio/the-history-of-the-defense-production-act-in-the-energy-sector-with-ty-priest/">refurbish oil tankers</a> during the 1967 Arab oil embargo, and Richard Nixon to secure materials for the Trans-Alaska oil pipeline in 1974. Even when Jimmy Carter used the act in 1980 to seek substitutes for oil, <a href="https://www.presidency.ucsb.edu/documents/executive-order-12242-synthetic-fuels">synthetic fuels made from coal and natural gas</a> were a leading focus.</p>
<p>Today, the focus is on transitioning away from all fossil fuels, a move considered essential for confronting two key threats – climate change and volatile energy markets.</p>
<figure class="align-center ">
<img alt="A field of solar panels in the desert with Las Vegas casinos and mountains in the background." src="https://images.theconversation.com/files/468113/original/file-20220609-22-lh5ute.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/468113/original/file-20220609-22-lh5ute.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=418&fit=crop&dpr=1 600w, https://images.theconversation.com/files/468113/original/file-20220609-22-lh5ute.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=418&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/468113/original/file-20220609-22-lh5ute.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=418&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/468113/original/file-20220609-22-lh5ute.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=525&fit=crop&dpr=1 754w, https://images.theconversation.com/files/468113/original/file-20220609-22-lh5ute.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=525&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/468113/original/file-20220609-22-lh5ute.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=525&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Utility-scale solar is now cheaper than fossil fuels. This installation is at Nellis Air Force Base in Nevada.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/the-las-vegas-strip-is-shown-behind-solar-panels-during-a-news-photo/510721582">Ethan Miller/Getty Images</a></span>
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<p>The Department of Defense has identified numerous <a href="https://www.defense.gov/News/News-Stories/Article/Article/2818343/dod-analysis-highlights-geostrategic-risks-of-climate-change/">national security risks</a> arising from climate change. Those include threats to the water supply, food production and infrastructure, which may trigger migration and competition for scarce resources. Fossil fuels are the <a href="https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data">dominant source of greenhouse gas emissions</a> that are driving global warming.</p>
<p>Russia’s invasion of Ukraine highlights additional risks of relying on fossil fuels. Russia and other adversaries are among the leading producers of these fuels. Overreliance on fossil fuels leaves the United States and its allies <a href="http://washingtonpost.com/business/2022/04/30/europe-natural-gas-scramble/">vulnerable to threats</a> and to price shocks in volatile markets.</p>
<p>Even as the world’s <a href="https://www.eia.gov/todayinenergy/detail.php?id=48756">top producer</a> of oil and natural gas, the United States has been rocked by price spikes as our allies shun Russian fuels.</p>
<h2>Targeting 4 pillars of clean energy</h2>
<p>Transitioning from fossil fuels to cleaner energy can mitigate these risks.</p>
<p>As I explain in my book, “<a href="https://yalebooks.yale.edu/book/9780300251678/confronting-climate-gridlock/">Confronting Climate Gridlock</a>,” building a clean energy economy requires four mutually reinforcing pillars – efficiency, clean electricity, electrification and clean fuels. </p>
<p>Efficiency shrinks energy demand and costs along with the burdens on the other pillars. Clean electricity eliminates <a href="https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks">greenhouse gas emissions from power plants</a> and enables the electrification of vehicles, heating and industry. Meanwhile, <a href="https://www.science.org/doi/10.1126/science.aas9793">clean fuels will be needed</a> for airplanes, ships and industrial processes that can’t easily be electrified.</p>
<p>The technologies targeted by Biden’s actions are well aligned with these pillars. </p>
<p>Insulation is crucial to energy efficiency. Solar panels provide one of the <a href="https://www.lazard.com/perspective/levelized-cost-of-energy-levelized-cost-of-storage-and-levelized-cost-of-hydrogen/">cheapest</a> and <a href="https://www.nrel.gov/analysis/life-cycle-assessment.html">cleanest</a> options for electricity. Power grid components are needed to integrate more wind and solar into the energy mix. </p>
<p><a href="https://www.energy.gov/energysaver/heat-pump-systems">Heat pumps</a>, which can both heat and cool a home, are far more efficient than traditional furnaces and replace natural gas or heating oil with electricity. <a href="https://www.nrel.gov/hydrogen/wind-to-hydrogen.html">Electrolyzers</a> produce hydrogen for use as a fuel or a feedstock for chemicals.</p>
<p><iframe id="76N59" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/76N59/12/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Generating demand is essential</h2>
<p>Production is only one step. For this effort to succeed, the U.S. must also ramp up demand. </p>
<p>Stimulating demand spurs learning by doing, which drives down costs, spurring greater demand. A virtuous cycle of rising adoption of technologies and falling costs can arise, as it has for <a href="https://doi.org/10.1016/j.isci.2022.104378">wind and solar power</a>, <a href="https://pubs.rsc.org/en/content/articlehtml/2021/ee/d1ee01530c">batteries</a> and <a href="https://doi.org/10.1016/j.enpol.2015.06.011">other technologies</a>.</p>
<p>The technologies targeted by Biden differ in their readiness for this virtuous cycle to work. </p>
<p>Insulation is already cheap and abundantly produced domestically. What’s needed in this case are policies like building codes and incentives that can stimulate demand by encouraging <a href="https://www.energy.gov/articles/president-biden-invokes-defense-production-act-accelerate-domestic-manufacturing-clean">more use of insulation</a> to help make homes and buildings more energy efficient, not more capacity for production.</p>
<p>Solar panels are currently cheap, but the <a href="https://www.statista.com/statistics/668749/regional-distribution-of-solar-pv-module-manufacturing/">vast majority are manufactured in Asia</a>. Even if Biden succeeds in <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/06/fact-sheet-president-biden-takes-bold-executive-action-to-spur-domestic-clean-energy-manufacturing/">tripling domestic manufacturing capacity</a>, U.S. production alone will remain insufficient to satisfy the growing <a href="https://emp.lbl.gov/generation-storage-and-hybrid-capacity">demand for new solar projects</a>. Biden also put a two-year <a href="https://theconversation.com/biden-throws-us-solar-industry-a-lifeline-with-tariff-relief-but-can-incentives-bring-manufacturing-back-184537">pause on the threat of new tariffs</a> for solar imports to keep supplies flowing while U.S. production tries to ramp up, and announced support for <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/06/fact-sheet-president-biden-takes-bold-executive-action-to-spur-domestic-clean-energy-manufacturing/">grid-strengthening projects</a> to boost growth of U.S. installations.</p>
<p>Electrolyzers face a tougher road. They’re expensive, and using them to make hydrogen from electricity and water for now <a href="https://www.energypolicy.columbia.edu/research/article/hydrogen-fact-sheet-production-low-carbon-hydrogen">costs far more than making hydrogen from natural gas</a> – a process that produces greenhouse gas emissions. The Department of Energy aims to <a href="https://www.energy.gov/eere/fuelcells/hydrogen-shot">slash electrolyzer costs by 80%</a> within a decade. Until it succeeds, there will be little demand for the electrolyzers that Biden hopes to see produced.</p>
<h2>Why heat pumps are most likely to benefit</h2>
<p>That leaves heat pumps as the technology most likely to benefit from Biden’s declaration. </p>
<p>Heat pumps can slash energy use, but they also cost more upfront and are unfamiliar to many contractors and consumers while technologies remain in flux. </p>
<p><a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/06/fact-sheet-president-biden-takes-bold-executive-action-to-spur-domestic-clean-energy-manufacturing/">Pairing use of the Defense Production Act</a> with customer incentives, increased government purchasing and funding for research and development can create a virtuous cycle of rising demand, improving technologies and falling costs.</p>
<figure class="align-center ">
<img alt="A worker in ballcap and short sleeves installs a large hat pump, hooking up hoses next to a house." src="https://images.theconversation.com/files/468093/original/file-20220609-15-8g6ytb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/468093/original/file-20220609-15-8g6ytb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=380&fit=crop&dpr=1 600w, https://images.theconversation.com/files/468093/original/file-20220609-15-8g6ytb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=380&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/468093/original/file-20220609-15-8g6ytb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=380&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/468093/original/file-20220609-15-8g6ytb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=477&fit=crop&dpr=1 754w, https://images.theconversation.com/files/468093/original/file-20220609-15-8g6ytb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=477&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/468093/original/file-20220609-15-8g6ytb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=477&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Heat pumps, which can both heat and cool and home, are four times more efficient than traditional furnaces and air conditioning.</span>
<span class="attribution"><a class="source" href="https://phyxter.ai/">Phyxter.ai</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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</figure>
<p>Clean energy is indeed essential to mitigating the risks posed by climate change and volatile markets. Invoking the Defense Production Act can bolster supply, but the government will also have to stimulate demand and fund targeted research to spur the virtuous cycles needed to accelerate the energy transition.</p><img src="https://counter.theconversation.com/content/184632/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Daniel Cohan serves on the Board of Scientific Counselors for the U.S. Environmental Protection Agency. He has received research funding from the Energy Foundation, the Carbon Hub, and various federal agencies.</span></em></p>Other presidents used the Defense Production Act to boost fossil fuel supplies. Biden is now using it to boost clean energy. But just ramping up production isn’t enough to succeed.Daniel Cohan, Associate Professor of Civil and Environmental Engineering, Rice UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1793612022-03-25T12:09:40Z2022-03-25T12:09:40ZIn Egypt, where a meal isn’t complete without bread, war in Ukraine is threatening the wheat supply and access to this staple food<figure><img src="https://images.theconversation.com/files/454156/original/file-20220324-23-vxy165.jpg?ixlib=rb-1.1.0&rect=13%2C0%2C2982%2C1998&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A man carries a tray of freshly baked bread outside a bread factory on Dec. 15, 2016, in Cairo.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/man-carries-a-tray-of-freshly-baked-bread-through-a-crowd-news-photo/630245052">Chris McGrath/Getty Images</a></span></figcaption></figure><p>Russia’s war on Ukraine is disrupting global grain supplies. Restrictions on navigation in the Azov Sea and the closure of ports have interrupted grain shipments from Russia, <a href="https://www.fao.org/3/cb9013en/cb9013en.pdf">the world’s largest wheat exporter</a>, and economic sanctions are complicating purchase agreements. </p>
<p>Amid concerns about meeting food needs at home, Ukraine – which, together with Russia, supplies almost one-third of the world’s traded wheat – <a href="https://www.kmu.gov.ua/en/news/uryad-v-umovah-voyennogo-stanu-vstanoviv-novi-pravila-eksportu-nizki-silskogospodarskih-tovariv">has banned wheat exports</a>. This turmoil in world wheat markets has resulted in a price increase of <a href="https://www.ft.com/content/e6a28dd9-ecea-4d67-b6b5-a50301b731b2">more than 50%</a> since the invasion began.</p>
<p>This is a particular concern for countries like Egypt, which <a href="https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Grain%20and%20Feed%20Annual_Cairo_Egypt_03-15-2021">relies on imported wheat</a> to meet over half its needs. Russia and Ukraine are Egypt’s largest suppliers of wheat: In the 2020-2021 season, they provided <a href="https://www.apk-inform.com/en/news/1521865">85% of the country’s imports</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/454166/original/file-20220324-21-5igstc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Four large harvesting machines advance through a wheat field." src="https://images.theconversation.com/files/454166/original/file-20220324-21-5igstc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/454166/original/file-20220324-21-5igstc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/454166/original/file-20220324-21-5igstc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/454166/original/file-20220324-21-5igstc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/454166/original/file-20220324-21-5igstc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/454166/original/file-20220324-21-5igstc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/454166/original/file-20220324-21-5igstc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Harvesting wheat in 2017 in Ukraine’s Kharkiv region. Russian attacks have inflicted heavy damage in and around the city of Kharkiv.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/harvesters-in-the-field-harvesting-combines-in-the-fields-news-photo/822482662">Pavlo Pakhomenko/NurPhoto via Getty Images</a></span>
</figcaption>
</figure>
<p>To understand what is at stake, one must appreciate how bread is so much a part of Egyptians’ daily lives. Building on <a href="https://scholar.google.com/citations?hl=en&user=6VJudJMAAAAJ&scilu=&scisig=AMD79ooAAAAAYjS0iX5uOtc_Er2tvRo0FSCF7yxUJMQU&gmla=AJsN-F6Ao1zztRyTkZ883DGRxvW3KH19zW9lDKLnZc8HgZWINGKxQ8Sl7YbGm-N6hZUM5ueUvZcjZ9wTBungdA-PQbAq0TR5tZ3n7lAtWqvlDObxQbpZjE0&sciund=11739393503387704378">ethnographic work</a> that I have conducted in Egypt since 2007, my forthcoming book, <a href="https://www.dukeupress.edu/staple-security">“Staple Security: Bread and Wheat in Egypt</a>,” examines the anxieties that pervade Egyptian society over the possibility that their nation could run out of wheat, or that they might not have decent bread to eat. </p>
<p>Egyptians work hard to ensure that there is always good bread available. The government purchases grain for a vast subsidized bread program. People visit bakeries daily to buy cheap bread. In rural areas, some women bake at home. The availability and quality of bread is an existential concern both for the state, which has long bolstered its legitimacy by providing <a href="https://read.dukeupress.edu/cssaame/article-abstract/37/1/49/274/How-War-Shaped-Egypt-s-National-Bread-Loaf">this basic need</a>, and for the people, most of whom eat bread three times a day.</p>
<h2>Staple foods make the meal</h2>
<p>In 2008 when I was doing fieldwork in Egypt, there were severe shortages in the supply of government-subsidized bread, as well as lines at bakeries and high flour prices. Conversations turned frequently to bread. One man told me, “I didn’t bring bread for my children today, they won’t have anything to eat.” By this he didn’t mean that his children literally wouldn’t have anything to eat all day. Rather, he meant that without bread, their meals wouldn’t be complete.</p>
<p>A staple is a food that defines a meal. <a href="https://journal.culanth.org/index.php/ca/article/view/ca31.3.08/381">Liberians</a> talk about not having eaten unless they have eaten rice. <a href="https://www.jstor.org/stable/pdf/27919110.pdf">Ghanaians</a> say the same thing about a day without fufu, a dish made by mashing starchy vegetables like cassava or plantains. In <a href="https://www.dukeupress.edu/good-bread-is-back">France</a>, as in Egypt, a real meal requires bread. </p>
<p>There is something about a staple food that is central to the experience of feeling satiated. As one woman in the Egyptian village where I’ve conducted research said to me: “It’s impossible to last a day without bread. Bread is something fundamental.”</p>
<p>Beyond their importance as items of consumption, staples are distinct in the ways in which they are eaten. In <a href="https://iupress.org/9780253038371/an-ethnography-of-hunger/">Tanzania</a>, a typical meal is porridge and a vegetable side dish; in <a href="https://www.ucpress.edu/book/9780520293526/bitter-and-sweet">southeastern China</a>, it’s rice and meat or vegetable trimmings. </p>
<p>These pairings reflect both tastes and eating techniques: dipping bread in soup, rolling stiff porridge into balls to scoop up stew, or folding a tortilla around beans. The staple makes it possible to stretch more expensive foods further. A small bowl of fermented cheese and some olives can become a meal for six if accompanied by bread.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/454167/original/file-20220324-27-4khjrs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Dishes of egg and stewed beans with flatbread arranged on a tray." src="https://images.theconversation.com/files/454167/original/file-20220324-27-4khjrs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/454167/original/file-20220324-27-4khjrs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/454167/original/file-20220324-27-4khjrs.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/454167/original/file-20220324-27-4khjrs.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/454167/original/file-20220324-27-4khjrs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/454167/original/file-20220324-27-4khjrs.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/454167/original/file-20220324-27-4khjrs.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">An Egyptian breakfast with stewed fava beans, egg and bread.</span>
<span class="attribution"><span class="source">Mariam Taher</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Staples carry deep symbolic resonance. Egyptians often comment that “bread is life.” This is partly a reference to the fact that the Egyptian colloquial term for bread is ‘aish, which means “life,” rather than the Arabic word for bread, khobz. But it is also a reference to the centrality of bread in Egyptian lives. As with <a href="https://www.ucpress.edu/book/9780520291812/eating-nafta">tortillas</a> in Mexico and <a href="https://global.oup.com/ushe/product/sacred-rice-9780199358687?cc=us&lang=en&">rice</a> in West Africa, symbolism around bread has <a href="https://doi.org/10.1080/07409710.1997.9962051">a spiritual dimension</a>. Egyptians <a href="https://journal.culanth.org/index.php/ca/article/view/4069/467">handle bread with care and respect</a> at the bakery, on the street and in their homes.</p>
<h2>Grain imports and bread production in Egypt</h2>
<p>Commentators have warned that the war in Ukraine may increase bread prices, generate shortages and lead to <a href="https://www.theguardian.com/global-development/2022/mar/07/we-need-bread-fears-in-middle-east-as-ukraine-russia-war-hits-wheat-imports">social unrest</a> in nations far from Eastern Europe. As the <a href="https://rajpatel.org/wp-content/uploads/2009/11/patel-mcmichael-2010Review321.pdf">history of bread riots</a> shows, people don’t sit idly by when there’s no bread to eat. </p>
<p>There were riots across Egypt in 1977 when the government tried to raise the cost of one type of subsidized bread. Unrest also occurred in response to bread price increases in <a href="https://www.jstor.org/stable/259536?seq=1">Algeria</a> in 1988 and <a href="http://dx.doi.org/10.1017/S0020743818000016">Jordan</a> in 1996.</p>
<p>But many factors affect how changes in wheat markets translate into changes in bread availability and cost. In Egypt, the government provides <a href="https://www.madamasr.com/en/2021/12/22/feature/politics/bread-politics/">five loaves of subsidized bread daily</a> to around 70% of the population at a price that has not increased since 1989 – five piasters a loaf, less than half a U.S. cent. </p>
<p>Sourcing grain for this subsidized bread program is complex and expensive. Over the coming months, through May, Egyptian farmers will be harvesting their wheat, so the government will be buying homegrown grain rather than importing. The country also has enough wheat in reserve to cover several months of bread production. But if the war in Ukraine becomes drawn out, that outlook may change. </p>
<p>[<em>More than 150,000 readers get one of The Conversation’s informative newsletters.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-150K">Join the list today</a>.]</p>
<p>Egypt can buy wheat from other countries, but importing it from further afield would mean higher freight costs. Any upward trend in global wheat markets would increase the burden that wheat imports place on the national budget.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/hfQKEI5FhEc?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Middle Eastern nations are looking for alternatives to Russian and Ukrainian wheat.</span></figcaption>
</figure>
<p>A key question is whether these pressures could play into the government’s decision about <a href="https://www.bloomberg.com/news/articles/2022-03-02/war-choking-off-wheat-leaves-middle-east-buyers-most-vulnerable">increasing the price of subsidized bread</a>. In the past year, President Abdel Fattah Al-Sisi has suggested <a href="https://www.reuters.com/world/middle-east/egypts-sisi-calls-first-bread-price-rise-decades-2021-08-03/">that the time has come to raise the price</a>, but he has yet to take this step. </p>
<p>Egyptians are worried. Cairo residents are <a href="https://www.nytimes.com/2022/02/25/world/middleeast/in-north-africa-ukraine-war-strains-economies-weakened-by-pandemic.html">fretting</a> about how the war will affect the nation’s wheat supply and bread production. For tens of millions of Egyptians, Vladimir Putin’s act of aggression is not an abstract concern – it is tied to a food that they count on to remain affordable even as other costs rise, a food that fills their bellies, making each meal complete.</p><img src="https://counter.theconversation.com/content/179361/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jessica Barnes has received funding from the American Council of Learned Societies, George A. and Eliza Gardner Howard Foundation, and Wenner-Gren Foundation.</span></em></p>Viewed from Cairo, the war in Ukraine poses an existential threat to something Egyptians can’t do without: abundant, cheap bread.Jessica Barnes, Associate Professor of Geography, University of South CarolinaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1794022022-03-23T14:37:21Z2022-03-23T14:37:21ZA beginner’s guide to petroleum pricing in Ghana<figure><img src="https://images.theconversation.com/files/452480/original/file-20220316-15-1qbd0jj.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Fuel price determination is a contentious issue in Ghana</span> <span class="attribution"><span class="source">Wikimedia Commons</span></span></figcaption></figure><p>Reliable and affordable energy is basic to any country’s ability to grow and equitably share the economic gains. The consumption of crude oil and gas, and derivative petroleum products such as petrol, diesel and kerosene, features strongly in the global energy geopolitics debate. </p>
<p>In Ghana, as in many other countries, the price of fuel — particularly petroleum products — is both a <a href="https://onlinelibrary.wiley.com/doi/abs/10.1002/pa.2028">political</a> and an <a href="https://www.researchgate.net/publication/280976194_Petroleum_Product_Pricing_Deregulation_and_Subsidies_in_Ghana_Perspectives_on_Energy_Security">economic</a> decision. </p>
<p>Before 2005, the Ghanaian state controlled the import, distribution and pricing of petroleum products. But shortages were a regular occurrence. Coupled with this, the government subsidised consumers, meaning they didn’t pay the full cost of the product. It is <a href="http://www.iisd.org/gsi/sites/default/files/strategies_ffs.pdf">estimated</a> that Ghana spent about 2.2% of its gross domestic product subsidising fuel in 2004, far <a href="https://openknowledge.worldbank.org/handle/10986/11178">exceeding</a> the budget of the Ministry of Health.</p>
<p>The regime was deemed inefficient as the rules were inconsistently applied. Ineffective subsidies put a strain on the economy and often benefited middle-class consumers rather than the poor. A <a href="https://media.africaportal.org/documents/uploads_Project_-_12721_1389903137_-_PEP-UNICEF-Ghana.WP.2014.public2.pdf">study</a> indicated that almost 78% of fuel subsidies in Ghana benefited the wealthiest group while only about 3% of subsidy benefits reached the poorest quintile.</p>
<p>In 2005, Ghana <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2644561">deregulated</a> the downstream petroleum industry as part of the debt relief package under the joint IMF–World Bank <a href="https://www.imf.org/en/News/Articles/2015/09/14/01/49/pr0211">Heavily Indebted Poor Countries (HIPC</a>) <a href="https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/16/11/Debt-Relief-Under-the-Heavily-Indebted-Poor-Countries-Initiative">initiative</a>. The policy had three objectives, namely to: </p>
<ul>
<li><p>remove restrictions on the establishment and operation of facilities by the private sector</p></li>
<li><p>remove restrictions on the importation of crude oil and petroleum products</p></li>
<li><p>remove price controls.</p></li>
</ul>
<p>To give legal effect to the policy, the country passed the <a href="http://www.npa.gov.gh/Data/Documents/acts-LI-template-manuals/NPA%20Act%202005.pdf">National Petroleum Authority Act, 2005 (Act 691)</a>, which established the National Petroleum Authority. Its mandate is to regulate, oversee and monitor activities in the downstream petroleum industry, establish a Unified Petroleum Price Fund, and provide for related purposes.</p>
<p>The other component of the 2005 regulatory reform was a transparent automatic petroleum pricing formula for full cost recovery. In other words, consumers would bear the full costs of petroleum products. Only some were cross-subsidised, such as premix used in the fishing sector.</p>
<p>In addition, Ghana’s 2009 and 2017 energy policies and the 2012 Petroleum Pricing Regulations state that:</p>
<ul>
<li><p>Ex-refinery prices of petroleum products will be based on import parity prices.</p></li>
<li><p>Transportation and distribution charges for petroleum products will be regulated to ensure reasonable profit margins for transporters and distributors.</p></li>
<li><p>Cross-subsidies between petroleum products will be applied, as necessary, to achieve specific national development objectives.</p></li>
<li><p>Uniform national prices for petroleum products will be maintained.</p></li>
</ul>
<h2>Demand growth</h2>
<p>Petroleum products are imported into the country by bulk distribution companies or wholesalers, which then sell them to oil marketing companies or retailers. Demand for the products, especially diesel and petrol, has <a href="http://www.npa.gov.gh/Data/Documents/statistics/National/National%20Consumption%20from%201999-2021.xlsx">grown</a> at an average of 5% per year since 2000 due to economic <a href="https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2020&locations=GH&start=1984">growth</a>.</p>
<p>While Ghana has been a net exporter of crude oil since 2010, the country remains <a href="https://theconversation.com/ukraine-war-how-ghana-is-vulnerable-and-what-can-be-done-178528">highly vulnerable</a> to oil price shocks because it imports a significant share of petroleum products consumed in the country and exports to others in the sub-region. These imports mostly come from Europe (Rotterdam). Consequently, the country is subject to volatility in international markets for crude and petroleum products, as seen <a href="https://www.weforum.org/agenda/2022/03/how-does-the-war-in-ukraine-affect-oil-prices/">recently</a> with the Russia-Ukraine conflict.</p>
<h2>Arriving at a price</h2>
<p>Three key factors drive petroleum products prices in Ghana. First is the import parity price of the product. The second is the foreign exchange rate. The third is taxes and margins. </p>
<p>Imports are regulated by the petroleum authority to ensure full cost recovery, government revenue generation and uniformity of prices. Full cost recovery is based on the import parity pricing benchmark or “landed cost” of refined fuel in Ghana. The import parity pricing, quoted in US dollars, represents the price that the bulk distributors pay for the delivery at the <a href="https://www.bollore-ports.com/en/worldwide-network/africa/port-of-tema-ghana.html">Tema Port</a>. This includes the free on board price, freight charges, insurance, customs duty, and port dues.</p>
<p>The rationale behind the import parity pricing benchmark is to have a strong relationship with the actual costs of fuel imports into Ghana. The petroleum authority employs a two-week inventory window (1st-16th of the month) whereby the two-week average of the free on board prices of the products is computed.</p>
<p>The historical average exchange rate of the cedi to the dollar within the two-week time-frame is then added to the equation. Charges such as port duties are added to arrive at the ex-refinery price, calculated in Ghana pesewas per litre. </p>
<p>Taxes and levies passed by Parliament are then added along with various oil marketing companies’ (distribution) margins to arrive at the final ex-pump price. The ex-pump price is the price the public pays for fuel at the various filling stations. Fuel taxes and margins typically make up about 40% of ex-pump fuel prices.</p>
<p>Ghana imposes eight levies and five margins on petroleum products. The levies are for energy debt recovery, energy fund, energy sector recovery, price stabilisation and recovery, road fund, sanitation and pollution, special petroleum tax and unified pricing petroleum fund. The margins paid to the distributors are for bulk oil storage and transportation, dealers (retailers/operators), fuel marking, marketers, and primary distribution.</p>
<h2>Some reform options</h2>
<p>The government and other stakeholders can adopt the following reform options to improve Ghana’s pricing in downstream petroleum markets.</p>
<p>Firstly, Ghana’s central bank, the Bank of Ghana, can preferentially auction or sell dollars to the bulk distribution companies at the interbank rate. This will help these companies mitigate forex pressures, especially since they often have to borrow at higher forex rates from commercial banks. A couple of basis point reductions in the exchange rate could go a long way in stabilising prices.</p>
<p>Secondly, the Tema Oil Refinery, which is <a href="https://www.myjoyonline.com/you-cant-continue-to-ground-your-refinery-and-buy-from-foreign-refinery-copec-to-government/">barely functional</a>, must be restructured. The refinery needs new ownership under a public-private partnership arrangement, improved corporate governance, and new financing to provide critical upgrades to its facilities. The <a href="https://www.bost.com.gh/">Bulk Oil Storage and Transportation Company Limited</a> must expand its storage capacity to play a more critical interventionist role in Ghana’s energy security. </p>
<p>Thirdly, the government needs to rationalise the various taxes and levies imposed on petroleum products. Some, such as the sanitation and pollution levy, are nuisance taxes. Others, like the price stabilisation and recovery levy, have not been fully used for their intended purposes. This levy has mainly subsidised premix and residual fuel instead of the other legal requirements under the Energy Sector Levies Act, 2015 (Act 899) to “stabilise petroleum prices for consumer”. </p>
<p>The petroleum authority’s latest ex-refinery price build-up <a href="http://www.npa.gov.gh/Data/Documents/key-documents/Price%20Build-Up%20Effective%2016th%20March%202022.xlsx">data</a> shows that both premix (used by fisherfolk) and residual fuel oil (used by industry) are heavily subsidised or discounted by 89% and 77%, respectively. In other words, these categories of consumers are paying 11% and 23% of the actual landed cost of the fuel. </p>
<p>Moreover, the <a href="https://chinadialogueocean.net/en/fisheries/8677-saiko-fishing-costs-ghana-tens-of-millions-of-dollars-in-a-single-year/">evidence</a> shows that illegal industrial fishing trawlers dominate Ghana’s fishing industry, with artisanal fishing on the <a href="https://fcwc-fish.org/our-news/ghana-saiko-is-sacrilege">decline</a>. Thus, there is a need for proper economic pricing of premix and fuel oil by rationalising the heavy subsidies on them and channelling the savings to stabilise petroleum prices for all consumers.</p><img src="https://counter.theconversation.com/content/179402/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Theophilus Acheampong is affiliated with the IMANI Centre for Policy and Education, Accra, Ghana.</span></em></p>The price of fuel in Ghana has been pushed up by a depreciating currency and poor refining capacity.Theophilus Acheampong, Associate Lecturer, University of AberdeenLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1792812022-03-16T20:15:40Z2022-03-16T20:15:40ZThe Groundswell protest claimed regulation and taxes are unfair to farmers – the economic numbers tell a different story<figure><img src="https://images.theconversation.com/files/452063/original/file-20220315-131677-10u5bv5.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4292%2C2854&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">GettyImages</span></span></figcaption></figure><p>Prime minister Jacinda Ardern is <a href="https://www.stuff.co.nz/national/politics/128026639/jacinda-ardern-will-meet-groundswell-leaders-after-group-called-racist-antivax">due to meet</a><a href="https://www.stuff.co.nz/national/politics/128026639/jacinda-ardern-will-meet-groundswell-leaders-after-group-called-racist-antivax">due to meet</a> the leaders of last year’s Groundswell protests, who argue that environmental regulation and the “ute tax” have <a href="https://www.stuff.co.nz/national/politics/127034918/the-eight-key-issues-the-groundswell-group-is-protesting-about">hurt parts of the primary sector</a> and, by extension, the rest of the country. But economic data tell a different story than the farmers claim. </p>
<p>The financial contribution the agriculture sector makes to society by way of tax paid is dwarfed by the financial benefit that the sector receives by way of subsidies, concessions and other forms of assistance. </p>
<p>Considering the net benefits already delivered to farmers, there’s no justification to provide more support for the sector by further subsidising their environmental damage. </p>
<h2>Special concessions for the agricultural industry</h2>
<p>In terms of support, there are several unique tax concessions offered to parts of the agricultural sector not extended to other industries. These include special rules for deductibility of housing and capital expenses that aren’t available for other businesses.</p>
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<img alt="Prime Minister Jacinda Ardern speaking in front of media microphones and surrounded by other people." src="https://images.theconversation.com/files/452070/original/file-20220315-131692-j6zknx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/452070/original/file-20220315-131692-j6zknx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/452070/original/file-20220315-131692-j6zknx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/452070/original/file-20220315-131692-j6zknx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/452070/original/file-20220315-131692-j6zknx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/452070/original/file-20220315-131692-j6zknx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/452070/original/file-20220315-131692-j6zknx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">In 2018, Prime Minister Jacinda Ardern announced an assistance package for farmers to combat mycoplasma bovis, a bacterial disease that affects cattle, causing mastitis and arthritis in adult cattle and pneumonia in calves.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com.au/detail/news-photo/prime-minister-jacinda-ardern-speaks-to-media-during-a-news-photo/1047770054?adppopup=true">Hagen Hopkins/Getty Images</a></span>
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<p>In another tax workaround, agricultural industry access to an income equalisation scheme allows income smoothing. </p>
<p>Under this scheme, primary sector businesses are able to deposit money into the scheme during profitable years and build this up as a deduction. The money is then treated as income in the year it is withdrawn, reducing taxes in lean years. </p>
<h2>More support during tough times</h2>
<p>Government support for farmers is not limited to tax exemptions. Spending on primary services in 2019/20 was <a href="https://www.treasury.govt.nz/publications/efu/budget-economic-and-fiscal-update-2021">NZ$961 million</a> and forecast to increase to $1.3 billion in 2020/21. Public money goes into biosecurity risk management, food safety and fisheries management.</p>
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Read more:
<a href="https://theconversation.com/why-water-quality-should-have-been-an-issue-when-nz-government-joined-with-farm-sector-to-curb-emissions-125870">Why water quality should have been an issue when NZ government joined with farm sector to curb emissions</a>
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<p>Between 2018 and 2021, the Ministry of Primary Industries (MPI) <a href="https://www.mpi.govt.nz/dmsdocument/42448-201920-Annual-Report.">spent $368 million</a> on mycoplasma bovis eradication. Farmers were compensated an additional $151 million during that time. </p>
<p>The cost of recovery was meant to be split 32%-68% by industry and the ministry respectively. But as of June 30 2021, MPI reported recoverable costs of $172.6 million, of which a $72.4 million bill to farmers remained outstanding. </p>
<h2>Economic contribution comes with environmental cost</h2>
<p>It is not that the agriculture industry does not add value. About 5.5% of total New Zealand jobs were in agriculture, forestry and fishing in March 2019, according to the <a href="https://www.stats.govt.nz/information-releases/labour-market-statistics-march-2019-quarter">Household Labour Force Survey</a>. At the same time, <a href="https://www.stats.govt.nz/information-releases/national-accounts-industry-production-and-investment-year-ended-march-2019">the industry made up 10.6%</a> of the national gross domestic product. </p>
<figure class="align-center ">
<img alt="Two farmers with hats in front of New Zealand's parliament." src="https://images.theconversation.com/files/452073/original/file-20220315-131677-ozscuq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/452073/original/file-20220315-131677-ozscuq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/452073/original/file-20220315-131677-ozscuq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/452073/original/file-20220315-131677-ozscuq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/452073/original/file-20220315-131677-ozscuq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/452073/original/file-20220315-131677-ozscuq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/452073/original/file-20220315-131677-ozscuq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The co-founders of farming advocacy group Groundswell, Laurie Paterson (left) and Bryce McKenzie delivered a petition to Parliament on December 15, 2021 calling on the NZ Government to dump its proposed Three Waters reform.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com.au/detail/news-photo/the-co-founders-of-farming-advocacy-group-groundswell-news-photo/1359059952?adppopup=true">Lynn Grieveson/Getty Images</a></span>
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<p>Agriculture’s higher share of GDP than employment reflects the sector’s high reliance on our natural environment to produce its output. However, this economic value comes at both a significant financial and environmental cost, often hidden, much of which falls on future generations.</p>
<p>The decision-making around Te Waihora (Lake Ellesmere) in Canterbury is one example of an indirect subsidy to intensive farming. Te Waihora is dying due to excess nutrient inputs, 95% of which come from dairy farms. </p>
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Read more:
<a href="https://theconversation.com/new-zealand-government-ignores-expert-advice-in-its-plan-to-improve-water-quality-in-rivers-and-lakes-139554">New Zealand government ignores expert advice in its plan to improve water quality in rivers and lakes</a>
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<p>Analysis by the regional council Environment Canterbury (ECan) and the Ministry for the Environment (MfE) found <a href="https://environment.govt.nz/assets/OIA/Files/18-D-02833.pdf">two key measures to stop the lake declining</a> would result in an annual loss of revenue for local dairy farmers of around $250 million. </p>
<p>ECan concluded this <a href="https://www.rnz.co.nz/news/on-the-inside/440120/polluted-waterways-why-are-we-subsidising-environmental-harm">economic impact for farmers was too high</a> and did nothing. By not charging the polluters for this harm, ECan effectively handed a subsidy to dairy farmers in this catchment to the tune of $250 million every year.</p>
<p>The ECan decision is similar to those made by other councils.</p>
<p><a href="https://environment.govt.nz/assets/OIA/Files/18-D-02833.pdf">A recent study by Christchurch City Council</a> estimated the costs to remove the nitrate from dairy farming from their drinking water to protect human health came in at $1.5 billion or almost $4,000 per person in the city. </p>
<p>Almost half of New Zealand’s <a href="https://niwa.co.nz/education-and-training/schools/students/climate-change/agriculture">greenhouse gas emissions</a> come from agriculture in the form of methane and nitrous oxide from farmed livestock. Here, the decision to exempt livestock from New Zealand’s emissions trading scheme is another subsidy to the sector. In dollar terms, the 2019 annual net emissions from agriculture at today’s carbon price ($72/tonne CO2e) amounts to $878 million. </p>
<h2>Uneven tax burden</h2>
<p>There is no doubt agriculture provides some benefit to New Zealand but this benefit is declining, at the same time that subsidies to the sector are increasing. </p>
<figure class="align-center ">
<img alt="Giant cow statue in front of a farming goods store." src="https://images.theconversation.com/files/452076/original/file-20220315-133396-1mt3ve7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/452076/original/file-20220315-133396-1mt3ve7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/452076/original/file-20220315-133396-1mt3ve7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/452076/original/file-20220315-133396-1mt3ve7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/452076/original/file-20220315-133396-1mt3ve7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/452076/original/file-20220315-133396-1mt3ve7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/452076/original/file-20220315-133396-1mt3ve7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">About 5.5% of total New Zealand jobs were in Agriculture, Forestry and Fishing.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com.au/detail/news-photo/giant-fibreglass-model-of-a-fresian-dairy-cow-looms-over-news-photo/1294695783?adppopup=true">Lynn Grieveson - Newsroom via Getty Images</a></span>
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<p>While the sector pays tax on income like everyone else, the amount paid by the dairy sector ($531.7 million in 2019/20 – or 0.7% of total tax revenue) looks to be substantially less than the costs associated with transfers from the government back to the sector and remediation of environmental damage caused by the sector. </p>
<p>A <a href="https://taxworkinggroup.govt.nz/sites/default/files/2019-02/twg-bg-4032531-tax-concessions-and-environmental-impacts.pdf">briefing paper to the Tax Working Group</a> in 2019 observed that the tax deduction rules for agriculture had not been reviewed in 30 years, revealing a lack of appetite to challenge the industry’s privileged position. </p>
<p>The political reluctance to hold the sector to account for its environmental damage while passing the cost on to the rest of society is even more problematic. This damage reduces the standard of living of many people living in Aotearoa and increases the economic and environmental debt for future generations. </p>
<p>So, while some in the agricultural sector argue that environmental regulation hurts the industry and therefore the rest of the country, there is a clear counterproposal: harm is done to the country when the rest of society pays for the damage created in the agricultural sector.</p><img src="https://counter.theconversation.com/content/179281/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Farmers from the Groundswell movement want more concessions from the government but the environmental and economic cost might be more than New Zealand can afford.Mike Joy, Senior Researcher; Institute for Governance and Policy Studies, Te Herenga Waka — Victoria University of WellingtonLisa Marriott, Professor of Taxation, Te Herenga Waka — Victoria University of WellingtonSimon Chapple, Director, Institute for Governance and Policy Studies, Te Herenga Waka — Victoria University of WellingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1739652022-01-25T14:42:24Z2022-01-25T14:42:24ZRenewable energy: US tax credits for wind and solar mostly benefit big banks<p>How can countries build renewable energy at the scale and rate needed to prevent dangerous climate change? The plan so far has been to try and make the cost of generating electricity from renewable sources cheap enough to compete with fossil fuels. Governments have offered support to renewable generators in other forms too, by requiring utility companies to <a href="https://www.nrel.gov/state-local-tribal/basics-portfolio-standards.html">build or buy</a> renewable power or <a href="https://www.gov.uk/government/publications/contracts-for-difference/contract-for-difference">guaranteeing attractive prices</a> for that power. </p>
<p>The monetary incentives that governments provide directly to companies which own or invest in renewable energy tend to be grants, low-cost loans or tax breaks. These subsidies cut some of the cost of developing projects like wind or solar farms, and as a result, make the power they produce cheaper. </p>
<p>But in <a href="https://journals.sagepub.com/doi/10.1177/0308518X211062601">a recent study</a>, I examined the US government’s main monetary incentive for renewables – a decades-old set of federal tax credits – and found it wasn’t working at all how it should be. As President Biden hopes to revive a diluted version of his administration’s Build Back Better Act, which includes <a href="https://www.theguardian.com/us-news/live/2022/jan/21/joe-biden-build-back-better-democrats-us-politics-live-updates">tax reform</a> and <a href="https://www.vox.com/2022/1/21/22892382/joe-manchin-climate-change-biden-negotiations-bbb">US$550 billion</a> (£409 billion) in clean energy incentives, my findings shed some light on the pitfalls that climate policy in the world’s biggest historic polluter should aim to avoid. </p>
<p>Investors who fund US renewable power projects can significantly lower the federal taxes they’re obliged to pay. The Production Tax Credit has qualified them for as much as US$0.025 in tax breaks per kWh of power that a project produces, while the Investment Tax Credit has permitted them to claim back as much as 30% of the funds they put into a project. Over the last 15 years, these tax credits have helped grow US renewables into major industries: from 2005 to 2020, national wind and solar power production <a href="https://www.eia.gov/totalenergy/data/monthly/pdf/sec10_3.pdf">grew nearly 18-fold</a>.</p>
<p>Nonetheless, there is a fundamental problem with the way US renewable tax credits are designed. Tax breaks are supposed to go to companies that develop renewable energy projects, but these developers rarely owe any taxes when they start building a wind or solar farm because most begin as a new company, with no pre-existing tax bills. If developers want to get any value out of government incentives, they must try to bring on third-party financial partners – typically massive banks like JP Morgan and Bank of America.</p>
<p>Developers effectively sell their tax breaks to these banks in return for the upfront funds that banks invest in a project. This practice is known as tax equity. If wind or solar farm developers cannot attract tax equity partners then they may never be able to use the tax credits they’re nominally entitled to, and so the project may never get built.</p>
<p>Renewable tax credits were never intended as a backdoor subsidy for Wall Street. Yet they now provide major tax shelters for banks; ones that need highly complex partnership forms to be legal at all. The renewable tax equity market was worth as much as <a href="https://www.projectfinance.law/publications/2021/february/cost-of-capital-2021-outlook/">US$18 billion</a> in 2020 alone. </p>
<h2>Renewable tax equity</h2>
<p>How did US renewable energy financing come to adopt this peculiar form, which is not used elsewhere? Attempting to answer this question led me to tax equity’s origins in Reagan-era tax breaks and waves of tax-driven investment, which included the world’s first modern wind boom (and bust) in California. That boom collapsed in the mid-1980s under allegations of wasteful tax sheltering by fly-by-night developers. Wall Street banks revived tax investment in renewables in the 2000s in the form of tax equity.</p>
<p>Since the mid-2000s, developers have relied on tax equity partnerships to make wind and solar farms viable, but they have had very few partners to choose from. Tax equity partnerships are complex and expensive to set up. This means that tax equity systematically diverts a share of intended federal support for renewables to banks, lawyers and other middlemen needed to set up deals. In 2020, the top five tax equity players – again, mostly big Wall Street banks – made up as much as <a href="https://www.ft.com/content/f54cd9b7-eee8-4a45-b0bb-f441960a5359">80% of the market</a>. </p>
<p>The pool of tax equity investors is scarce compared to the number of renewable power projects seeking their capital. Frequently, banks make developers pay them sizeable fees for their participation. They also command outsize power in determining which projects get developed, and by which developers. Because banks profit more from big deals, they prefer the largest private developers and mega-projects. The average renewable tax equity deal is <a href="https://news.bloombergtax.com/daily-tax-report/insight-tax-equity-remains-an-under-utilized-tool-for-corporate-tax-strategy">US$150 million</a>, and offshore wind developers may soon require as much as <a href="https://www.jdsupra.com/legalnews/renewable-energy-finance-forum-wall-26532/">US$800 million per project</a>. Meanwhile, smaller competitors and projects often get no deal at all. </p>
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<img alt="Countless wind turbines in a desert." src="https://images.theconversation.com/files/442244/original/file-20220124-17-yzbqlu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/442244/original/file-20220124-17-yzbqlu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/442244/original/file-20220124-17-yzbqlu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/442244/original/file-20220124-17-yzbqlu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/442244/original/file-20220124-17-yzbqlu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/442244/original/file-20220124-17-yzbqlu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/442244/original/file-20220124-17-yzbqlu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Vast wind farms are more likely to be funded than smaller, community-based projects.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/wind-farm-palm-springs-california-106386089">Joseph Sohm/Shutterstock</a></span>
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<p>Even with the extra costs developers need to set up tax equity deals, wind and solar farms are still (barely) cheaper to develop with federal subsidies than without. This may not be the case for long, however. Solar and wind farms increasingly beat fossil fuels on the <a href="https://www.theguardian.com/environment/2021/jun/23/most-new-wind-solar-projects-cheaper-than-coal-report">cost of power delivered</a>, and developers can get conventional private loans more and more cheaply. </p>
<p>Meanwhile, tax equity faces other problems. Even the biggest banks only have so many tax dollars to shelter, and fast-growing renewable power increasingly demands more capital than tax equity investors can provide. Major corporate tax cuts, like the one <a href="https://www.theguardian.com/business/2019/oct/09/trump-tax-cuts-helped-billionaires-pay-less">introduced under President Trump</a>, can unexpectedly shrink the entire market. And having to rely on tax equity worsens the pain of economic crises like that caused by COVID-19 for energy developers, as corporate profits and tax bills tumble and eliminate the need for tax equity among banks. This leaves many projects short and allows remaining investors to charge developers even higher fees.</p>
<p>Meanwhile, both of the federal tax credits for renewables in the US are set to fall in value or expire unless they are reapproved by the Biden administration. This has happened frequently in the past, and tax credits have usually been retained. But the <a href="https://newrepublic.com/article/162444/wall-street-profiting-clean-energy-tax-credits">growing controversy</a> surrounding tax credits and tax equity is provoking calls for reform. Proponents of the <a href="https://theconversation.com/uk/topics/green-new-deal-40625">green new deal</a> envisage even bigger changes in how the US government supports renewable energy development, like ushering in a new era of <a href="https://www.climateandcommunity.org/a-new-era-of-public-power">publicly owned power</a>. </p>
<p>The developers, projects and people that US government incentives have traditionally excluded and denied the full benefits of a low-carbon energy transition stand to gain the most from reform. These include <a href="https://insideclimatenews.org/news/11062020/inside-clean-energy-racial-inequity-solar/">communities of colour</a> struggling with fossil fuel pollution and <a href="https://www.nature.com/articles/s41560-020-00763-9">more expensive</a> energy. They also include smaller private developers and community-scale projects, as well as tax-exempt entities like non-profit organisations and public power authorities. </p>
<p>Can government incentives for renewables be wrestled from Wall Street to support more egalitarian visions of decarbonisation instead?</p>
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<img alt="Imagine weekly climate newsletter" src="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p class="fine-print"><em><span>Sarah Knuth is affiliated with the Climate and Community Project (CCP).</span></em></p>Wind and solar developers have to woo investors before they can get the tax credits they’re entitled to.Sarah Knuth, Assistant Professor in Geography, Durham UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1729822021-12-05T07:19:28Z2021-12-05T07:19:28ZNigeria’s transport grant isn’t the best way to allocate fuel subsidy savings: here’s what is<figure><img src="https://images.theconversation.com/files/435050/original/file-20211201-15-125022s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Protestors march in Lagos during a demonstration against fuel subsidy removal in 2012. </span> <span class="attribution"><span class="source">Pius Utomi Ekpei/AFP via Getty Image</span></span></figcaption></figure><p>Following <a href="https://www.imf.org/en/News/Articles/2021/11/19/nigeria-staff-concluding-statement-of-the-2021-article-iv-mission">unrelenting pressure</a> by the International Monetary Fund (IMF) and World Bank, the Nigerian government intends to eliminate its fuel subsidy in July 2022. </p>
<p>Nigeria spent about <a href="https://www.reuters.com/article/us-nigeria-oil-gasoline/nigeria-pays-14-million-for-fuel-in-june-despite-subsidy-removal-nnpc-idUSKBN25R1DO">N10 trillion</a> (currently US$24.5 billion) on petroleum subsidies between 2006 and 2018. About <a href="https://www.bloomberg.com/news/articles/2021-03-01/nigeria-s-nnpc-won-t-increase-fuel-prices-in-march">$2.5 billion</a> was spent on fuel subsidies in 2020. It is expected that the subsidy will have cost <a href="https://www.bloombergquint.com/markets/nigeria-s-annual-spending-on-subsidy-could-exceed-eurobond-raise">$3 billion</a> in 2021. </p>
<p>In lieu of the subsidy, government says, <a href="https://www.reuters.com/article/nigeria-economy-idAFL1N2SE0TB">40 million</a> poor Nigerians will receive a “transport grant” of N5,000 ($12) per month. This will amount to about N2.4 trillion ($5.8 billion) per year. </p>
<p>These figures imply that the expected savings from ending the subsidy can only cover about half of the cost of the proposed transport grant. In an era where the government has been grappling with huge budget deficits and spiralling <a href="https://theconversation.com/nigerias-debt-is-sustainable-but-dangers-loom-on-the-horizon-166372">debt</a>, it’s unclear how the other half will be paid for. </p>
<p>In the public space, there are <a href="https://guardian.ng/opinion/the-world-banks-bad-news-about-our-economy/">views</a> that the removal of the fuel subsidy in Nigeria is long overdue, and that vested interests and political expediency have prevented this from happening sooner. </p>
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Read more:
<a href="https://theconversation.com/fuel-subsidies-in-nigeria-theyre-bad-for-the-economy-but-the-lifeblood-of-politicians-170966">Fuel subsidies in Nigeria: they're bad for the economy, but the lifeblood of politicians</a>
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<p>The clamour for subsidy removal stems from the <a href="https://www.thecable.ng/rich-nigerians-benefitting-from-petrol-subsidy-not-the-poor-says-minister">argument</a> that it is inequitable and favours affluent Nigerians who use a disproportionate amount of fuel. </p>
<p>It is often argued that the fuel subsidy diverts almost <a href="https://www.bloombergquint.com/markets/nigeria-s-annual-spending-on-subsidy-could-exceed-eurobond-raise">$3 billion per year</a> that could have been invested in areas such as health, education and infrastructure that enhance the productive capacities of the poor. </p>
<p>Apart from equity issues, much has been written about how the fuel subsidy has bred <a href="https://www.reuters.com/article/us-nigeria-fuel-scam/nigeria-investigates-4-billion-fuel-subsidy-fraud-idUSTRE80I1R220120119">corruption</a> and added to the ever-increasing budget <a href="https://www.reuters.com/world/africa/nigeria-unveils-record-398-bln-budget-2022-spending-up-25-2021-10-07/">deficits</a> in Nigeria. </p>
<p>But the government’s plan to replace the subsidy with a transport grant is not the best approach for using fuel subsidy savings. My calculations of the cost of the grant suggest that it is unsustainable.</p>
<h2>Devil in the details</h2>
<p>Removing the subsidy will surely increase the price of petrol in Nigeria, which will cause transport fares to rise. </p>
<p>The extent of these increases is uncertain, which raises the question of why the government chose N5,000 as the optimum amount that would supposedly cushion the effects of price increases. </p>
<p>Then there’s the question of who will get the grant. According to the World Bank, <a href="https://blogs.worldbank.org/opendata/tackling-poverty-multiple-dimensions-proving-ground-nigeria">47.3% of Nigerians</a>, or 98 million people, live in multidimensional poverty. If the transport grant is only for 40 million, then it will reach fewer than half of poor Nigerians. </p>
<p>It is unclear what criteria will be used to determine which Nigerians will receive the grant. There is therefore the risk that those who need the grant the most may not receive it.</p>
<p>Means-testing as a tool for determining eligibility for safety nets in Nigeria is very difficult. In the absence of a means-testing mechanism, the <a href="https://nassp.gov.ng/about-us/">National Social Safety-Net Coordinating Office</a> in 2016 began to compile a national social register of poor Nigerians. About <a href="https://www.vanguardngr.com/2021/03/30m-nigerians-in-national-social-register-%E2%80%95-fg/">30 million</a> have so far been captured in the register. </p>
<p>Paying a grant in an environment where information on income, assets, bank accounts and identity cards is sparse could create opportunities for corruption, cronyism and nepotism. </p>
<p>The government has announced that the grant will last for one year, in the first instance. This may be interpreted as a political stunt with government hoping that Nigerians will forget the subsidy removal later.</p>
<p>The first year of the grant will end at the same time as the President Muhammadu Buhari administration does in 2023. So it may be that this administration is trying to shield itself from the backlash from fuel subsidy removal, while passing the buck to the next administration. </p>
<p>Poor Nigerians will be hurt if the price of petrol increases significantly, without making the transport grant permanent. A transport grant may have the effect of inducing transporters to raise fares, at a rate that might wipe out the gains from the grant. </p>
<p>In other words, many Nigerians will face a double whammy of increases in fuel price and a rise in transport fares.</p>
<h2>What to do</h2>
<p>Based on the fact that the transport grant is unsustainable, and also the difficulty of determining which Nigerians should be eligible for the grant, a better strategy for cushioning the effects of fuel subsidy removal is massive investment in public transportation. </p>
<p>The price of a 56-passenger 2019 luxury bus is about <a href="https://nwbus.com/coach-buses-for-sale/">$400,000</a>. So the $3 billion in 2021 fuel subsidies would have purchased 7,500 buses, or about 200 buses for each of the country’s 36 states. This strategy would have more of an impact and be more inclusive than a transport grant that most Nigerians will not receive. </p>
<p>Each state should be encouraged to establish an intra-state transportation agency. The federal government should have a similar agency for inter-state travel. Part of the savings from subsidy removal should be allocated to the state and federal transportation agencies. </p>
<p>They could purchase buses with the fund and cover administrative costs of providing subsidised transport to workers (both formal and informal), farmers, students and other indigent Nigerians. </p>
<p>Using the fuel subsidy savings to support a network of subsidised public transportation in urban and rural areas would boost Nigeria’s productive capacity in various ways. </p>
<p>It would reduce food inflation, as farmers would be able to transport their products to the market more easily and at a lower cost. This would encourage them to produce more and drive down food prices. </p>
<p>Nigeria should learn from the <a href="https://guardian.ng/opinion/is-nigeria-heading-for-food-riots/">Indian experience</a>, where public transportation subsidies have boosted food supply and lowered food prices.</p>
<p>Nigeria should prioritise investments that raise the economy’s productive capacities, rather than focusing on increasing consumption. Recipients of the transport grant may spend the money on non-durable consumer goods, which could drive inflation, already about <a href="https://www.statista.com/statistics/383132/inflation-rate-in-nigeria/">16%</a>. These goods are most likely to be imported, which would strain the country’s <a href="https://www.cfr.org/blog/amid-oil-price-collapse-nigeria-running-out-foreign-exchange">scarce</a> foreign exchange. </p>
<p>The provision of subsidised public transport would be good for workers, as it would enable them to spend more on things that increase their productive capacities and contribute to Nigeria’s gross domestic product (GDP). </p>
<p>Nigerian students at all levels of education would benefit from the investment in public transport. Most of them do not receive direct financial support from the government, but subsidising transport would indirectly subsidise their education. </p>
<p>The government would be pacifying students and workers, who are usually the <a href="https://www.thisdaylive.com/index.php/2019/04/14/nlc-warns-against-removal-of-fuel-subsidy/">most vociferous</a> in opposing subsidy removal. Previous administrations in Nigeria have jettisoned plans to remove the fuel subsidy, following <a href="https://www.vanguardngr.com/2012/04/fg-abandons-100-subsidy-removal/">massive</a> and violent protests against those attempts.</p><img src="https://counter.theconversation.com/content/172982/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Removal of the fuel subsidy in Nigeria is long overdue, but replacing it with a transport grant is not the best approach.Stephen Onyeiwu, Andrew Wells Robertson Professor of Economics, Allegheny CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1684592021-12-02T13:41:45Z2021-12-02T13:41:45ZThe US biofuel mandate helps farmers, but does little for energy security and harms the environment<figure><img src="https://images.theconversation.com/files/435076/original/file-20211201-25-y8w0za.jpg?ixlib=rb-1.1.0&rect=42%2C8%2C5565%2C3715&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Surplus corn piled outside a farmer's co-op storage facility in Paoli, Colorado.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/surplus-corn-harvested-in-2010-is-piled-outside-a-farmers-news-photo/107592314">Robert Nickelsberg/Getty Images</a></span></figcaption></figure><p>If you’ve pumped gas at a U.S. service station over the past decade, you’ve put biofuel in your tank. Thanks to the federal <a href="https://sgp.fas.org/crs/misc/R43325.pdf">Renewable Fuel Standard</a>, or RFS, almost all gasoline sold nationwide is required to contain 10% ethanol – a fuel made from plant sources, mainly corn. </p>
<p>With the recent rise in pump prices, biofuel lobbies are pressing to <a href="https://www.agriculture.com/news/business/biofuel-groups-push-for-strong-ethanol-mandate-citing-climate-and-gas-prices">boost that target to 15% or more</a>. At the same time, some policymakers are calling for reforms. For example, a bipartisan group of U.S. senators has introduced a bill that would <a href="https://www.feinstein.senate.gov/public/index.cfm/2021/7/feinstein-toomey-menendez-collins-introduce-bipartisan-bill-to-repeal-ethanol-mandate">eliminate the corn ethanol portion of the mandate</a>. </p>
<p>Enacted in the wake of the attacks of Sept. 11, 2001, the RFS promised to enhance energy security, cut carbon dioxide emissions and boost income for rural America. The program has certainly raised profits for portions of the agricultural industry, but in my view it has failed to fulfill its other promises. Indeed, studies by some scientists, <a href="https://research.umich.edu/john-decicco">including me</a>, find that biofuel use has increased rather than decreased CO2 emissions to date. </p>
<p>Current law sets a target of producing and using 36 billion gallons of biofuels by 2022 as part of the roughly 200 billion gallons of motor fuel that U.S. motor vehicles burn each year. As of 2019, drivers were using <a href="https://www.eia.gov/totalenergy/data/monthly/">only 20 billion gallons</a> of renewable fuels yearly – mainly corn ethanol and soybean biodiesel. Usage declined in 2020 because of the pandemic, as did most energy use. Although the 2021 tally is not yet complete, the program remains far from its 36 billion-gallon goal. I believe the time is ripe to repeal the RFS, or at least greatly scale it back. </p>
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<h2>Higher profits for many farmers</h2>
<p>The RFS’s clearest success has been boosting income for corn and soybean farmers and related agricultural firms. It also has built up a sizable domestic biofuel industry. </p>
<p>The <a href="https://ethanolrfa.org/">Renewable Fuels Association</a>, a trade group for the biofuels industry, estimates that the RFS has <a href="https://ethanolrfa.org/media-and-news/category/news-releases/article/2019/02/ethanol-industry-makes-a-significant-contribution-to-u-s-economy-rfa-analysis-finds">generated over 300,000 jobs</a> in recent years. Two-thirds of these jobs are in the top ethanol-producing states: Iowa, Nebraska, Illinois, Minnesota, Indiana and South Dakota. Given Iowa’s key role in presidential primaries, most politicians with national ambitions find it prudent to <a href="https://www.politico.com/magazine/story/2019/03/05/2020-democrats-ethanol-225517/">embrace biofuels</a>. </p>
<p>The RFS displaces a modest amount of petroleum, shifting some income away from the oil industry and into agribusiness. Nevertheless, biofuels’ contribution to U.S. energy security pales compared with gains from <a href="https://www.eia.gov/tools/faqs/faq.php?id=847&t=6">expanded domestic oil production through hydraulic fracturing</a> – which of course brings its own severe environmental damages. And using ethanol in fuel poses <a href="https://theconversation.com/the-government-aims-to-boost-ethanol-without-evidence-that-it-saves-money-or-helps-the-environment-96701">other risks</a>, including <a href="https://www.consumerreports.org/cro/news/2013/03/gas-with-ethanol-can-make-small-engines-fail/index.htm">damage to small engines</a> and <a href="https://www.iea-amf.org/content/fuel_information/ethanol/e10/e10_compatibility">higher emissions from fuel fumes</a>. </p>
<p>For consumers, biofuel use has had a <a href="https://www.gao.gov/products/gao-19-47">varying, but overall small, effect</a> on pump prices. Renewable fuel policy has little leverage in the world oil market, where the biofuel mandate’s penny-level effects are no match for oil’s dollar-scale volatility. </p>
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<h2>Biofuels are not carbon-neutral</h2>
<p>The idea that biofuels are good for the environment rests on the assumption that they are inherently carbon neutral – meaning that the CO2 emitted when biofuels are burned is fully offset by the CO2 that feedstocks like corn and soybeans absorb as they grow. This assumption is coded into computer models used to evaluate fuels. </p>
<p>Leading up to passage of the RFS, such modeling found modest CO2 reductions for <a href="http://dx.doi.org/10.1126/science.1121416">corn ethanol</a> and <a href="http://dx.doi.org/10.1073/pnas.0604600103">soybean biodiesel</a>. It promised greater benefits from <a href="https://en.wikipedia.org/wiki/Cellulosic_ethanol">cellulosic ethanol</a> – a more advanced type of biofuel that would be made from nonfood sources, such as crop residues and energy crops like willow and switchgrass. </p>
<p>But subsequent research has shown that <a href="http://dx.doi.org/10.1126/science.1178797">biofuels are not actually carbon-neutral</a>. Correcting this mistake by evaluating real-world changes in cropland carbon uptake reveals that biofuel use has <a href="http://theconversation.com/biofuels-turn-out-to-be-a-climate-mistake-heres-why-64463">increased CO2 emissions</a>. </p>
<p>One big factor is that making biofuels amplifies land-use change. As harvests are diverted from feeding humans and livestock to produce fuel, additional farmland is needed to compensate. That means <a href="https://doi.org/10.1073/pnas.0910275107">forests are cut down</a> and <a href="https://doi.org/10.1088/1748-9326/ab0399">prairies are plowed up </a> to carve out new acres for crop production, triggering very large CO2 releases. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/432901/original/file-20211119-17-1eetdr6.jpg?ixlib=rb-1.1.0&rect=28%2C21%2C4748%2C3695&q=45&auto=format&w=1000&fit=clip"><img alt="Corn kernels pour into a bin." src="https://images.theconversation.com/files/432901/original/file-20211119-17-1eetdr6.jpg?ixlib=rb-1.1.0&rect=28%2C21%2C4748%2C3695&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/432901/original/file-20211119-17-1eetdr6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=476&fit=crop&dpr=1 600w, https://images.theconversation.com/files/432901/original/file-20211119-17-1eetdr6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=476&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/432901/original/file-20211119-17-1eetdr6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=476&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/432901/original/file-20211119-17-1eetdr6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=598&fit=crop&dpr=1 754w, https://images.theconversation.com/files/432901/original/file-20211119-17-1eetdr6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=598&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/432901/original/file-20211119-17-1eetdr6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=598&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">About 40% of corn produced in the U.S. is used to make ethanol.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/ethanol-harvest-royalty-free-image/520153118?adppopup=true">Shuli Hallak/Getty Images</a></span>
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<p>Expanding farmland for biofuel production is also bad for the environment in other ways. Studies show that it has <a href="https://doi.org/10.1007/s10531-021-02232-5">reduced the abundance and diversity of plants and animals worldwide</a>. In the U.S., it has amplified other adverse impacts of industrial agriculture, such as <a href="https://theconversation.com/industrial-corn-farming-is-ruining-our-health-and-polluting-our-watersheds-39721">nutrient runoff and water pollution</a>. </p>
<h2>The failure of cellulosic ethanol</h2>
<p>When Congress expanded the biofuel mandate in 2007, a key factor that induced legislators from states outside the Midwest to support it was the belief that a coming generation of cellulosic ethanol would produce even greater environmental, energy and economic benefits. Biofuel proponents claimed that cellulosic fuels were <a href="https://www.scientificamerican.com/article/whatever-happened-to-advanced-biofuels/">close to becoming commercially viable</a>. </p>
<p>Almost 15 years later, in spite of the mandate and billions of dollars in federal support, <a href="https://www.forbes.com/sites/rrapier/2018/02/11/cellulosic-ethanol-falling-far-short-of-the-hype/?sh=69132fb2505f">cellulosic ethanol has flopped</a>. Total production of liquid cellulosic biofuels has recently hovered around <a href="https://www.carsclimate.com/2021/11/cellulosic-failure.html">10 million gallons per year</a> – a tiny fraction of the 16 billion gallons that the RFS calls for producing in 2022. Technical challenges have proved to be more daunting than proponents claimed. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/433778/original/file-20211124-15-1q9hjjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Man in a field of tall grass." src="https://images.theconversation.com/files/433778/original/file-20211124-15-1q9hjjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/433778/original/file-20211124-15-1q9hjjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/433778/original/file-20211124-15-1q9hjjc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/433778/original/file-20211124-15-1q9hjjc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/433778/original/file-20211124-15-1q9hjjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/433778/original/file-20211124-15-1q9hjjc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/433778/original/file-20211124-15-1q9hjjc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Making cellulosic ethanol from plants like switchgrass is complicated and remains unaffordable despite large subsidies.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/switchgrass-production-in-tennessee-royalty-free-image/522082062?adppopup=true">Karen Kasmauski/Getty Images</a></span>
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<p>Environmentally speaking, I see the cellulosic failure as a relief. If the technology were to succeed, I believe it would likely unleash an even more aggressive global expansion of <a href="https://insideclimatenews.org/news/25012019/climate-change-agriculture-farming-consolidation-corn-soybeans-meat-crop-subsidies/">industrial agriculture</a> – large-scale farms that raise only one or two crops and rely on highly mechanized methods with intensive chemical fertilizer and pesticide use. Some such risk remains as petroleum refiners invest in <a href="https://www.eia.gov/todayinenergy/detail.php?id=48916">bio-based diesel production</a> and producers modify corn ethanol facilities to <a href="https://www.desmoinesregister.com/story/money/agriculture/2021/10/25/cedar-rapids-archer-daniels-midland-adm-ethanol-plant-may-start-making-sustainable-aviation-jet-fuel/6174737001/">produce biojet fuel</a>. </p>
<h2>Ripple effects on lands and Indigenous people</h2>
<p>Today the vast majority of biofuels are made from crops like corn and soybeans that also are used for food and animal feed. Global markets for major commodity crops are closely coupled, so increased demand for biofuel production drives up their prices globally. </p>
<p>This price pressure <a href="http://dx.doi.org/10.1021/es101946t">amplifies deforestation</a> and <a href="https://www.scientificamerican.com/article/biofuels-land-grab-guatemala/">land-grabbing</a> in locations from <a href="https://www.reuters.com/investigates/special-report/brazil-deforestation/">Brazil</a> to <a href="https://doi.org/10.3390/su13179821">Thailand</a>. The Renewable Fuel Standard thus aggravates <a href="https://theconversation.com/blood-in-bio-ethanol-how-indigenous-peoples-lives-are-being-destroyed-by-global-agribusiness-in-brazil-101348">displacement of Indigenous communities</a>, <a href="https://nyti.ms/2zleOBK">destruction of peatlands</a> and similar harms along agricultural frontiers worldwide, mainly in developing countries. </p>
<p>Some researchers have found that adverse effects of biofuel production on land use, crop prices and climate are <a href="https://doi.org/10.1086/713026">much smaller than previously estimated</a>. Nevertheless, the <a href="https://doi.org/10.1016/j.jclepro.2020.120716">uncertainties surrounding land use change</a> and net effects on CO2 emissions are enormous. The complex modeling of biofuel-related commodity markets and land utilization is impossible to verify, as it extrapolates effects across the globe and into the future.</p>
<p>Rather than biofuels, a much better way to address transportation-related CO2 emissions is through improving efficiency, particularly <a href="https://theconversation.com/to-make-the-us-auto-fleet-greener-increasing-fuel-efficiency-matters-more-than-selling-electric-vehicles-153085">raising gasoline vehicle fuel economy</a> while electric cars continue to advance. </p>
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<h2>A stool with two weak legs</h2>
<p>What can we conclude from 16 years of the RFS? As I see it, two of its three policy legs are now quite wobbly: Its energy security rationale is largely moot, and its climate rationale has proved false. </p>
<p>Nevertheless, key agricultural interests strongly support the program and may be able to prop it up indefinitely. Indeed, as some commentators have observed, the biofuel mandate has become another <a href="https://www.forbes.com/sites/rrapier/2019/08/22/the-ethanol-industrys-flaw-is-its-entitlement-mentality/?sh=7b7e740f1d9a">agribusiness entitlement</a>. Taxpayers probably would have to pay dearly in a deal to repeal the RFS. For the sake of the planet, it would be a cost worth paying.</p><img src="https://counter.theconversation.com/content/168459/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John M. DeCicco, Ph.D., is a Research Professor Emeritus retired from the University of Michigan. While remaining professionally active in energy and environmental research, he currently receives no funding and has no relevant relationships beyond his academic affiliation. </span></em></p>The US has required motor fuels to contain 10% biofuels since 2005. As this program nears a key milestone in 2022, farm advocates want to expand it while critics want to pare it back or repeal it.John DeCicco, Research Professor Emeritus, University of MichiganLicensed as Creative Commons – attribution, no derivatives.