by Roger Valdez
Is Oregon's Business Energy Tax Credit program worth the money?
A recent article in The Oregonian (“Tax dollars blow away in wind projects”) tackles the Business Energy Tax Credit Program or BETC program in Oregon. The article by Ted Sickinger charges that the BETC program doesn’t influence where developers build wind farms. He also says those projects would have happened anyway because of the nature of regulation in the northwest pushing more renewable energy production. But this analysis doesn’t take into account green job growth in Oregon compared with other states, especially Oregon’s neighbor to the north, Washington.
Asking tough questions about whether BETC is really working is a good thing. But the article never really surfaces any strong evidence to support its headline. When judged on the green jobs it creates, BETC is a program that is worth keeping and improving.
Governments at every level face a conundrum when trying to intervene in a marketplace to stoke demand for more sustainable products. When a state, for example, creates a subsidy for wind power it forgoes actual tax revenue with the hope that the benefits—jobs, increased tax revenue and economic activity—exceeds the money not collected in taxes. Often these programs can be unfairly called “give aways.” The claim is that they only generate increased profits for a few at the expense of many people who face fewer services as state budgets shrink. The Oregonian article engages exactly this kind of criticism of BETC. But do the criticisms hold up?
It’s not perfect, but BETC isn’t simply a give-away. AsI wrote earlierthis year, the BETC program could use some improvement by doing a better job of ensuring fairness. I suggested three improvements. One was attaching strings to the credits—like requiring that users of the credits create jobs with decent wages and provide health benefits for their workers—as a legitimate way of creating more public benefits from the program.
Unfortunately efforts to change BETC this year didn’t succeed because of disagreement between the Governor Kulongoski and the Oregon Legislature about how to address claims that the tax credits give too much away for not enough community benefit. So the program is still where it was a year ago.
But The Oregonian piece isn’t very persuasive as an indictment of the program. It relies largely on speculation that projects that happened (projects it doesn’t claim are bad projects) would have happened anyway—with our without state tax incentives. That is almost impossible to prove. Additionally, it argues that much of the benefit accrues to energy producers who sell their product on the grid to California. Why would that matter?
The implication is that all the energy created by BETC products should be used in Oregon. That argument doesn’t make sense. One big benefit to Oregon is certainly locally produced clean energy from winds blowing across the state. But so are the economic benefits from jobs and tax revenue created from a large thriving employer. Saying that exporting energy to California for a profit is a bad thing makes no more sense than saying exporting Willamette Valley Pinot Noir to California (or even Japan) is a bad thing; the benefits of the economic activity end up back in Oregon in both cases.
And what about jobs? According to the most recent update of its nationwide clean energy jobs study the Center for American Progress found that jobs in Oregon’s clean energy sector “grew by 50.7 percent between 1998 and 2007, while jobs overall grew by just 7.5 percent.” That’s compared with Washington, where growth in the sector was a meager 0.5 percent. Is that because Washington doesn’t have a BETC program? Again, that would be speculation—but it’s worth looking into.
A recent report by the Washington State University Extension Energy Program on jobs in the renewable sector called out
a concern expressed by several renewable employers [in Washington State] is that federal and some state policies regarding long-term incentives for renewables are not stable, which makes it difficult for new businesses to start up, and hard for existing companies to grow . . . businesses may be reluctant to add new employees, or invest in education and training needed to upgrade and expand the skills of incumbent workers.
Similar concerns are expressed in the Oregonian article by leaders in Washington; they wish they had a program like BETC.
Here is one final point. Governments subsidize all kinds of activities—roads, farming, manufacturing—for the same reason the BETC program tries to subsidize renewable energy: jobs. Jobs have been the calculus for big freeway projects in our region. Take the Columbia River Crossing project, for example, which would add more capacity for cars on Interstate 5. Anna Richter Taylor communications director for Governor Ted Kulongoski said about the River Crossing, "this is about a project that creates jobs -- it's key to a strong economy.” How many jobs? The claim is about 2500 jobs a year for ten years, all jobs that will go away when the project is completed.
A study by ECONorthwest found that in 2007 alone Oregon’s BETC program created 2084 new jobs, added more than $177 million to the economy, created more than $100 million in energy savings and reduced CO2 emissions in Oregon by 699,527 tons. All of this for about $60 million in tax credits and program expenditures compared to the more than $4 billion price tag attached to the bridge project.
So while the BETC program can be improved, the region’s political leadership needs to start shifting its priorities about what we support with tax dollars. Oregon has been a leader in clean energy because it has put policy and public dollars behind it in a way previously reserved for more unsustainable enterprises. That shouldn’t spare BETC from scrutiny, but the program deserves to be judged by the number and kinds of jobs created, not speculation about what might have happened if it didn’t exist.
This piece originally appeared on Sightline Daily.