Hummer, Merritt-senior thesis final April 2010.pdf - CASTLE Lab ...

Introduction to the Energy Problem
consumption by 2017. “20-­‐in-­‐10” is complemented by the “20% Wind Energy by
2030” goal, which aims for a major increase in wind’s contribution to the U.S.
electricity supply [40] [4]. Wind-­‐generated electricity has gained traction since the
formal 20% goal was published in an exhaustive July 2008 report.
Renewable energy skeptics often point to the cost of solar and wind power as
the biggest hindrance to the adoption of renewable technology. Indeed, experts
generally agree that it is highly unlikely that the nation will be able to meet the
DOE’s goals without some form of government intervention. One of the conclusions
of Aghion, Hemous, and Veugelers’s [41] policy analysis is that even though the
private market for green technology is ready to take off, “in the absence of the right
push from government this will be difficult, if not impossible” [41]. Put another
way, “governments must initially redirect market forces towards cleaner energy
before market forces can take over” [41]. Ultimately, public intervention will be as
critical as private initiative to the success of renewable energy.
To accelerate the shift from fossil fuels to renewable energy, renewable
technology must become cost-­‐competitive with traditional fuels. There are three
main ways in which the government can play a role in accomplishing this:
• Providing subsidies or tax credits for renewable energy installations, making
such investments more attractive to consumers.
• Imposing a carbon tax on emissions of CO2, thereby increasing the cost of
coal, petroleum, and natural gas. Alternatively, the government could set a
cost on carbon via a cap-­‐and-­‐trade system whereby firms are allowed to buy
and sell emissions credits in the marketplace; this “tax-­‐free” model of
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