Analyze the economic and political rationales behind subsidization

What will be an ideal response?

The economic rationales for the subsidization of renewable power are three fold. First, subsidization provides environmental improvements by displacing carbon-based power generated from coal or natural gas. Second, subsidization provides security benefits to the extent that it reduced the dependence on imported fuels. Third, the subsidies could enable producers to realize economies of scale that would reduce costs and allow output to expand. The first and second rationales are based on positive externalities, whereas the third is intended to achieve cost efficiencies and increased output.
The political rationales for the subsidization of renewable power had two aspects to them. First, the positive externalities for the environment and security benefitted constituents, although those benefits were often difficult to observe.
Second, subsidization generated pork, since the recipients of the subsidies and their suppliers earned rents from the economic activity stimulated by the subsidization.
Demand-side rents were earned by installation companies and their employees,
power producers and their employees, and suppliers. Rents from supply-side subsidization were earned by power producers and the producers of power generation inputs, such as solar panels. The U.S. government regularly cited the number of jobs created in the solar panel production and installation industries. An associated political rationale was that subsidies built interest group support for continued subsidization in a manner that the dispersed environmental and security benefits typically could not build.
Demand-side subsidies differed from supply-side subsidies in a way important for nonmarket risk analysis. The additional demand generated by demand-side subsidization could be satisfied by production located in the United States or overseas. The first political rationale thus was satisfied because the higher demand generated positive environmental externalities. The second political
rationale of creating jobs, however, could only be realized by production located in the United States. Supply-side subsidization more directly served the second political rationale.