Free MarketFor decades, clean energy advocates have argued for policies that specifically boost clean energy and arguably benefit the economy. But things have changed. Basic free-market policies that benefit the entire economy will now especially benefit clean energy and efficiency. Since clean technologies are cost-competitive, a level-playing-field accelerant will grow the market share of clean energy more than it would for fossil fuels and will grow it more quickly than conventional subsidies.

For instance, Wayne Winegarden and I have proposed CoVictory Bonds & Loans (CVBLs—private, tax-exempt debt) as a COVID recession recovery policy that would boost and be very useful for the entire economy. We framed it this way, and did not even bother to mention climate or clean energy, because both Republicans and Democrats have made it clear they want the stimulus to focus on economy-wide recovery, not handouts for each sector. CVBLs meet that litmus test. Nevertheless, CVBLs will be especially powerful and cost-effective for all project finance and private infrastructure, which includes clean energy. 

As a leveraged tax cut, CVBLs not only lower the cost of debt, which reduces the cost of products (such as clean energy), but they also raise the return on equity. This is particularly important in project finance for clean energy projects, such as wind and solar—where entrepreneurs form a new business entity, raising both new debt and new equity for each project. CVBL’s give up tax revenue where the revenue is low, but attract investment to the equity, where the returns and tax revenue are high. Since typical equity returns are roughly 350% higher than average debt returns, such projects financed with 50% CVBLs/50% equity will generate roughly 350% more tax revenue on the equity than they save on the tax-exempt debt. 

Wayne and I estimated that $1 trillion of such debt with a 5-year term, would reduce government revenues by only $30–$40 billion—much more cost-effective than anything in the CARES Act. But that’s not all: on the above 50% debt/50% equity clean energy projects, $1 trillion of CVBLs would mean a total of $2 trillion of investment and positive tax revenues of roughly $105–$140 billion on equity returns. The net positive tax revenue on $2 trillion of such projects is $75–$100 billion.


In this week’s webinar, Jigar Shah, Abby Smith, and I explored CVBLs and other free-market proposals for clean energy.