June 19, 2012

Solyndra Not the Only Questionable Obama Loan to 'Green' Energy

Veronique de Rugy

Senior Research Fellow
Summary

Environmentalists are right to be outraged by the large amount of subsidies or special treatments provided to energy forms they deem dangerous for the planet. Yet they are wrong to think that the answer to subsidies they dislike is more subsidies to energy they approve of, especially considering that the subsidies are not going to the type of companies that the Department of Energy claimed its loan guarantees would help.

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This excerpt was originally published in U.S. News and World Report. Read the full text here.

The very public failure of energy company Solyndra has focused a lot of attention on the Department of Energy's loan guarantee programs. Beyond Solyndra's failure, it's interesting to take a closer look at these programs. The economic justification for any government-sponsored lending or loan guarantee program must rest on a well established failure of the private sector to allocate loans efficiently, meaning that deserving recipients could not have obtained capital on their own. Absent such a private sector deficiency, the Department of Energy's activities would simply be a wasteful at best, politically motivated at worst, subsidy to this sector of the economy.

To measure the Department of Energy results, I looked at the flow of Department of Energy credits to evaluate who receives them and whether the department is meeting its stated policy objectives, such as promoting new start-ups or companies that have a hard time accessing capital, and encouraging the creation of green jobs.

Since 2009, Department of Energy has guaranteed $34.7 billion in loans, 46 percent through the 1705 loan program, 30 percent through the 1703 program, and 14 percent through the Advanced Technology Vehicles Manufacturing loan program.

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