How Philippine Renewable Energy Policies Sow The Seeds To The Next People Power Revolt

Friend and libertarian colleague Nonoy Oplas has a wonderful article on renewable energy cronyism, as a result of climate change hysteria, here in the Philippines.

Politicos along with the media have successfully drummed up fear based frenzy on the public that has led to the justification of political interventionism in the local energy sector.

And like parasites, vested interest groups (associated with the political class) jump in to profit from such politically mandated economic concessions-all manifesting symptoms of crony capitalism.

Mr. Oplas’ article can be summarized into the imposition of the arbitrary law, the Renewable Energy Act or RA 9513 that has the following features:

-punishes non renewable energy with taxation and regulation while exempting clean and renewable energy

-guarantees profits (despite the inefficiency) of the politically privileged industry

-a deluge of other unilateral incentives:

a) Income Tax Holiday for 7 years, (b) Duty-free importation of RE machinery, equipment and materials within the first 10 years, (c) Special realty tax rates, (d) Net Operating Loss Carry-over (to be carried for the next 7 consecutive years), (e) 10% Corporate tax rate, (f) Tax Exemption of Carbon Credits, and (g) Tax Credit

-and an expansion of the bureaucracy:

the National RE Board (NREB) to be composed of different government agencies to some private sector players. The other is a technical secretariat, the RE Management Bureau (REMB)

You can read the rest of Mr. Oplas article here

However, the unintended consequences of Renewable Energy Act or RA 9513:

-the redistribution from traditional energy suppliers to politically endowed renewable energy suppliers is a form of political economic discrimination which means forthcoming shortages in conventional “cheaper” energy supplies.

-political economic discrimination spawns more illegitimate activities such as envy based violence and corruption

Why? Because, as the great libertarian Frank Chodorov explained,

State does not grant privileges without a quid pro quo. Every privilege involves the getting of something for nothing; it is never an honorable exchange, and therefore has to be enforced. The coercive power of the political establishment is involved. The State, far from being an impersonal fiction, consists of men who are called politicians but whose inclinations are not unlike those of other men. The only difference between the politician and the rest of mankind is that he is invested with the power to compel other men to do what they do not want to do, or to refrain from doing what they want to do. (bold highlights mine)

-Mr. Oplas further notes that renewable energy are pricier where the “current RE costs per kwh are high, between 2x to 5x the prevailing rates, and even if RE supply is unstable and unreliable. Us energy consumers will be forced to pay for their more expensive energy output”

So essentially the public will be faced with a perfect storm: rampant energy and eventually food price inflation!

Shortages in conventional energy equates to higher prices, while high costs of renewable energy means higher prices to the consumers too!

So along with the transmission channels from energy prices to food production and distribution, such policies we are likely to sow the seeds of the next “People Power” revolution here.

The Philippines is the most prone or vulnerable to food-energy inflation in Asia, as shown by the chart above by Soc-Gen and Businessinsider.

So even if prices from renewable energy are to be subsidized to the public, since there is no such thing as a “free lunch”, then the nation’s fiscal conditions will eventually bear the brunt in the substance of ballooning fiscal deficits.

Remember, the government has been tinkering here with the most politically sensitive commodities.

-in providing state guarantees where profits are privatized and losses are socialized this also means redistribution from the consumers to the cronies (robbing the poor to give to the rich).

As people pay for higher energy prices, the cronies of the ruling class will get wealthier.

And people, likely to be led astray by media, will blame 'greed' on free markets or laissez faire capitalism for what essentially is a state capitalism based on social democracy or political greed.

And when public uproar translates to the end of the system, cronies remain insured (flee the country) while fiscal situation as above worsens--public pays for the sins of the political class.

In other words, we should expect higher taxes, lower economic growth and more unemployment, if these laws remain enforced.

-the usual cycle: every new law means more bureaucracy and government spending.

All these along with the above only entails the ruling class, government employees and the cronies benefit while the society suffers.

The problem is that people or the public have been allured to the pessimism bias, which makes them all too vulnerable to the manipulation or propaganda of political-economic (ruling) elite classes.