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Republicans Raise Concept of Extending Wind Power Tax Credit, With Eventual Phase-Out

There’s an election to win, particularly in wind-rich states like Iowa and Colorado, and so now the Republican standard-bearer has changed his position on allowing the wind energy production tax credit to phase out.

The tax break subsidizes wind power by 2.2 cents a kilowatt hour to bring its cost closer to that of conventional fuels, and it has periodically been renewed by Congress with support from both parties. But like other subsidies for alternative energy, it has been tarred in some people’s eyes by the government’s investment in the failed solar company Solyndra and has become a wedge issue in the presidential contest. President Obama wants the credit extended, while Mitt Romney has urged that it expire as scheduled.

But while campaigning on Friday in Iowa, a state with a lot of wind business, Mr. Romney seemed to be opening the door to a different position — or at least allowing himself some wiggle room should a compromise be found. “We will support nuclear and renewables but phase out subsidies once an industry is on its feet,” he said, without offering more specifics.

Opponents of the tax credit say the wind industry is looking for a never-ending hand-out, but some Republicans support extending the credit as long as it includes an explicit phaseout over a set number of years.

The most sub-optimal way to deal with wind energy tax favorability is to threaten to pull it back every year until coming to a compromise at the last minute. Depending on your perspective, the most optimal way would be either to end all subsidies for the various forms of energy production, or maintain just the ones that do not harm the earth with carbon pollution. A phased-out tax credit falls somewhere in the middle. But it does provide some certainty for the industry and puts them toward a target for profitability. It’s possible that you would create a cliff-like scenario, with investment falling off once the phase-out occurred. But Republicans are unlikely to provide an open-ended commitment, and the wind power industry says they can live with a phase-out, so this sounds like the stuff of compromise.

A tax extenders bill that includes something on wind energy is a possibility for the lame duck session. And this shift to a phase-out policy makes it more likely.

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David Dayen

David Dayen

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