It has become the custom for government to provide incentives to the private sector to encourage its behavior in a way deemed in the public good. Often this involves politicians making changes to the tax code to encourage development and adoption of solutions (or technology, or products, or materials) believed (by the politicians) to effectively address a problem. Cynically one might suggest that the solutions thought most effective also happen to be those most beneficial to the parochial interests of the of a particular constituency.
I suggest that this practice inhibits the creative energy of the private sector and corrupts the process of the market choosing solutions that best address its needs. There is no better environment for the incubation, development, and promulgation of effective solutions than the free market.
On the one hand it is very difficult to identify solutions not yet invented. On the other hand it is relatively easy to identify problems that are evident and long standing. So instead of attempting to identify and encourage specific solutions to societal problems it would be more effective to discourage the continuation of the problem.
With regard to energy policy and the development of 'green' energy solutions, I suggest that no incentives be provided for particular solutions. Instead place a tax on oil, or more generally carbon, that would predictably increase at a reasonable rate each year, i.e., place a federal tax on each barrel of oil that would result in a $0.25 per gallon increase of the cost of gasoline and diesel each year for 20 years.
The market would quickly seek less expensive alternatives and eventually would reward those who develop the most cost-effective energy sources and delivery mechanisms.
