Two Green Stimulus Proposals — and One Old Problem

Thursday, January 15, 2009

REPS. CHRIS Van Hollen (D-Md.) and Zach Wamp (R-Tenn.) have sent a letter to President-elect Barack Obama outlining two promising ideas for inclusion in the stimulus package that would help get renewable energy companies off life support and encourage homeowners to make their dwellings more energy-efficient. Both ideas are worthy -- but both also point, once again, to the importance of Congress doing something to raise the cost of using oil, gas and coal, either through a carbon tax or a cap-and-trade system.

The Home Energy Savings Revolving Fund would provide zero-interest loans to help homeowners pay for energy-efficient lighting, windows, doors, insulation and other improvements. The money would be provided by local governments, which would tie repayments to the homeowner's property tax bill. Annual payments on the loans would be lower than the resulting reduction in a home's energy costs, providing an incentive to participate. Unpaid loan balances would convey with the property, so that even a homeowner who expected to move within a couple of years could feel free to invest in long-term improvements. The measure could create jobs in the hard-hit housing and construction industries without adding new homes to a glutted market.

The National Clean Energy Lending Authority, or "green bank," would offer loan guarantees to renewable energy projects that have already attracted private capital but are endangered because of the credit crisis and the drop in oil prices. For instance, Mr. Van Hollen showed us a list of 53 wind energy projects that have been sidelined for a lack of financing. He said that every public dollar could be leveraged into $10 in private capital. If successful, many of those wind, solar, geothermal and cellulosic-ethanol projects sitting on drawing boards could come to fruition.

Both of these ideas have merit, but they have something else in common: They're needed, in part, because plummeting oil prices have reduced the incentive to invest in conservation and alternative energy. Rather than pick and choose technologies or individual projects to back, as would the green bank, Congress could pass legislation that would guarantee a gradual increase in the price of greenhouse-gas-emitting fuels. Business would get the price signal it needs to invest in clean energy technologies; consumers would change their behavior to make those new businesses viable. And the federal government could get out of the business of picking winners and losers in renewable energy.

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