A central thrust in many of the energy-related legislative initiatives over the past few years has been a growing role for the federal government in funding and financing infrastructure for favored fuels. Some lessons from both energy and non-energy sectors highlight the problems with this approach:
1) Inconsistent application of even rational government constraints (AIG executive pay).
2) Congressional meddling in core business decisions (GM dealer closures).
3) Mixed objectives weakening original goals of legislation (prevailing wage laws covering even small energy ventures, reducing total jobs created and likely skewing program applicants toward larger firms and projects).
4) Political pressure to mis-state financial risks in order to help favored industries (DOE lobbying of OMB to reduce default premiums on multi-billion dollar loan guarantees).
5) Hard-wiring solutions that favor one fuel (ethanol pipeline loan guarantees, though other liquid biofuels can go through conventional pipelines).
6) Poor risk measurement and management, resulting in adverse selection of projects supported and ultimate taxpayer ownership of far more what was planned at program inception (federal mortgage programs).
Got some others you want to share? Let me know.
