September 16, 2012

TAX WHAT YOU DON'T WANT:

How not to manage a boom : Neither presidential candidate has the vision now required in energy policy (Lexington, Aug 11th 2012, The Economist)

[P]olicy has been crucial to the revival of America's energy industry. But the sorts of policies that matter most are so basic that they would never seem weighty or visionary enough to grace a political platform. First and foremost, the boom depends on a free, liquid, competitive market in gas, underpinned by an extensive and well-regulated pipeline network. A relatively mild system of royalties and taxes makes drilling lucrative, and a relatively permissive bureaucracy allows it to happen. Thanks to its particular mix of policy and culture, America has the engineers to dream up and perfect the necessary technology and the investors to fund their work. These are rarer qualities than one might imagine; at any rate, no other country has seen its shale gas exploited so vigorously, though many have equally promising geology. [...]

The lesson of the shale gas boom, after all, is not that government should forswear any part in shaping the energy mix, but rather that innovation and entrepreneurship can yield dramatic results in a short time if the right incentives are in place. That should provide great encouragement to those, like Mr Obama, who worry about climate change--as long as they are willing to embrace market forces.

Posted by at September 16, 2012 7:41 AM
  

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