Corruption In The Department Of Energy
Note: 4 mins and 30 seconds into the video above you discover that a report actually shows that this project would run out of money September of 2011, i.e. it was written on paper that this project wasn't feasible.
The Energy Department’s loan guarantee program is the real Solyndra scandal
You can call it crony capitalism or venture socialism — but by whatever name, the Energy Department’s loan guarantee program privatizes profits and socializes losses. It’s an especially risky approach in the alternative-energy space, where solar energy is many years from being cost-competitive with fossil fuels for most uses — and history is littered with failed government attempts to back the next big thing.
Exclusive Timeline: Bush Administration Advanced Solyndra Loan Guarantee for Two Years, Media Blow the Story
It’s often claimed that the Solyndra loan guarantee was “rushed through” by the Obama Administration for political reasons. In fact, the Solyndra loan guarantee was a multi-year process that the Bush Administration launched in 2007.
You’d never know from the media coverage that:
The Bush team tried to conditionally approve the Solyndra loan just before President Obama took office.
The company’s backers included private investors who had diverse political interests.
The loan comprises just 1.3% of DOE’s overall loan portfolio. To date, Solyndra is the only loan that’s known to be troubled.
Because one of the Solyndra investors, Argonaut Venture Capital, is funded by George Kaiser — a man who donated money to the Obama campaign — the loan guarantee has been attacked as being political in nature. What critics don’t mention is that one of the earliest and largest investors, Madrone Capital Partners, is funded by the family that started Wal-Mart, the Waltons. The Waltons have donated millions of dollars to Republican candidates over the years.
More incredible signs of corruption...
But the above is just the tip of the iceberg...
Solyndra Scandal: 5 More U.S. Energy Scandals
2005: Halliburton and Iraq: The Texas oil giant reportedly overcharged $108 million for work in Iraq, but reports didn't leak until after the 2004 election. Former Vice President Dick Cheney, who was once chief executive, came under fire for his connection to the company. Nonetheless, Halliburton continued to be awarded government contracts, such as in 2006 when subsidiary Kellogg Brown & Root received a $385 job to build immigration detention centers in the U.S. for the Department of Homeland Security.
the man who sat down with oil company lobbyists behind closed doors to write the current failed policy. But those remarks show the bankruptcy of the Republican vision on energy. It's a vision of the status quo, invested in the problem, not in finding a solution. And it just doesn't cut it.
With all the evidence of corruption above, the following connections between General Electric and it's (initial) lack of taxes makes complete sense, as it's part of the government so obviously it will create policy that will benefit them...
With so many corporations so firmly embedded in the government, it's funny the kind of rhetoric you hear. Jon Stewart explains...
Crony Capitalism has existed for a long time. So energy companies have been able to get government officials to pass legislation that helps them make more money. So they get tax breaks, loopholes, subsidies while the rest of the economy suffers and they make huge profits (and in some cases, record breaking profits).
The aim of this paper is to study and quantify the effect of public policy on corruption. As an example of government intervention, we focus on the case of renewable energy. Renewable energy provides an interesting and policy relevant case for a variety of reasons. The energy sector is known to be both a target and a source of corruption, owing to the characteristics of the energy resources, the possibility of generating rents, and the key oversight role played by the government. For example, power generation and transmission as well as oil and gas are among the most bribery prone sectors, according to the Bribe Payers Index of Transparency International.1 International organizations such as the World Bank, which have been involved in the financing of energy infrastructure in the developing world, have recognized the need to reduce corruption, often by trying to strengthen governance. As Mauro (1998) suggests, the need for secrecy characterizing the corrupt deals implies that “it will be easier to collect substantial bribes on large infrastructure projects or highly sophisticated defense equipment than on textbooks or teachers’ salaries”. Complicated regulations and public spending are among the major factors that can promote corruption (Tanzi 1998) and both elements characterize renewable energy projects.
Renewable energy is also extremely policy relevant. Renewable sources such as wind and solar have been growing incredibly fast in recent years, especially in developed economies and largely spurred by public support schemes aimed at promoting low carbon energy alternatives. Moreover, policy instruments that promote market flexibility in the regulation of greenhouse gases have incentivized the trade of emission reduction credits between developed and developing countries (through the so-called Clean Development Mechanisms -CDM- of the Kyoto protocol). Renewable energy now represents the largest share of the CDM projects in the pipeline. Overall, renewable energy provides an important case for testing whether public incentives fuel rent-seeking and corruption in this sector.
Anecdotal evidence in Europe and elsewhere suggests the diffusion of corrupt practices related to public incentives for the renewable energy sector. Several official inquiries made by the Italian police have been made public, and have led to the arrest of managers and local politicians who allegedly used corrupt practices and bribes in order to obtain licenses to build wind farms. For example, according to an inquiry called “P3”, the entrepreneur Flavio Carboni and a former politician Pasquale Lombardi set up a criminal association able to collect private funds from other entrepreneurs to pay bribes in exchange for wind farm permits in the region of Sardinia.2 Similar scandals have occurred in Spain, where 19 persons were arrested in 2009 on charges of corruption in the wind sector. In the United States, the bankruptcy of the solar power manufacturing firm Solyndra has led to a controversy over the potential influence of the Department of Energy on the loan guarantee the firm was granted. Many countries are now evaluating public subsidies implemented over the past several years with the aim of promoting renewables. In most cases, ex post policy assessment has focused on issues of efficiency and effectiveness, but has essentially disregarded the role of the main political economy factors at play. To our knowledge, this is the first attempt to study whether public incentives for renewable energy resources can lead to an increase in illegal activities.
The main contribution of the paper is to understand whether the presence of a renewable natural resource, such as wind energy, creates scope for rent seeking practices and corruption when public incentives make it profitable to harvest the renewable potential. We do so by first sketching a simple theory of political influence by interest groups, which yields predictions on the relation between corruption, renewable resources and public subsidies. These insights are tested on a panel dataset of Italian provinces for the 1990–2007 period. In the analysis we can exploit the presence of the renewable energy resource (e.g., wind potential) as inducing an exogenous variation in the expected rent opportunities which allows us to identify a treatment and a control group of provinces. Using a difference in difference approach we provide strong evidence that supports our model, establishing that the expectations of high public incentives in the wind energy sector have fueled corruption as measured by the level of criminal association activity. Our main finding is that criminal association activity increased more in the high-wind provinces of the treatment group after the introduction of the generous public policy regime. The magnitude of the effect is significant: for an average wind park (of 10 MW) installed after 1999, and which receives about 1.5 Million euro per year in public support, the number of criminal association offenses has increased by 6 % in the windy provinces compared to the less windy ones.
Overall, the paper points out that even well designed market-based policies can have an adverse impact where institutions are poorly functioning. This effect would be greater in places with high resource potential. This has important normative implications, especially for countries which are characterized by abundant renewable resources and weak institutions, and thus are more susceptible to the private exploitation of public incentives.
Related literature The paper is mainly related to the literature on corruption, which has shown how highly regulated environments that render bureaucrats more powerful favor the spread of corruption practices (Murphy et al. 1993; Tanzi 1998).3 Several studies have found that corruption is more detrimental to economic growth than taxation (Shleifer and Vishny 1993; Fisman and Svensson 2006), due to the uncertainty and secrecy required by the bribing process and the fact that corrupt deals cannot be enforced in courts. Moreover, corrupt officials might slow down the administrative process in order to collect more bribes (Myrdal 1968; Kaufmann and Wei 1998). Although we cannot analyze the effect of corruption on the economic efficiency of renewable energy projects, we contribute to this literature by finding evidence of corruption in a heavily regulated sector. To our knowledge, our paper is the first which is able to quantify the impact of renewable energy subsidies on corruption. We also present suggestive evidence that more corrupt provinces have actually attracted a higher number of wind energy projects, eventually accelerating the development of the wind sector. This is in line with Dreher and Gassebner (2013) who provide evidence supporting the “grease the wheels” hypothesis and find that in highly regulated environments, corruption eases firm entry.