The solar manufacturer Solyndra– recipient of a $535 million loan guarantee from the Department of Energy– recently announced it is shutting its doors and declaring bankruptcy. Many will seize on this failure as evidence that the government shouldn’t be involved in supporting radical innovation. Yet this critique gets it exactly backwards: failure is a constant companion to innovation, and as such we should expect firms trying new things to occasionally fail. The most innovative firms in need of government support are those who are doing things or producing technologies that haven’t been tried commercially before. Whatever the merits of Solyndra as an investment– and there are suggestions it was, in fact, a mistake– failure in itself is not the enemy, so long as the investments are seeking to push the technology envelope and laying groundwork for future success.
Green Scissors 2011: A Misguided Proposal for Budget and Environmental Reform
The “Green Scissors 2011” report offers a unique opportunity to break through the budget gridlock in a way that cut wasteful programs while reinvesting in vital areas for economic and environmental progress. Unfortunately, it failed to meet this potential. Instead of taking a balanced approach, the report jumped on the spending cut bandwagon and focused solely on slashing or eliminating public programs, including vital investments like ARPA-E, which has become one of the federal government’s single most important agencies for advancing a sustainable economic future. In order to justify these cuts, the report peddled false myths about the nature of public investment and innovation policy, even while pushing an ideologically-driven agenda for picking energy technology winners and losers. In this way, despite some of its strengths, the report offers a misguided strategy for confronting the nation’s budgetary and environmental challenges.
Averting the Coming Clean Energy Cliff
The nascent clean energy industry is headed for a crisis. The culprit and one of our biggest obstacles to creating a green economy: the boom-and-bust cycle of short-sighted energy policies that prop up mature, lowest-common denominator technologies, but do little to support clean energy innovation. States and the federal government must learn from their mistakes in propping up limited technologies with misguided subsidy policies and instead make energy innovation the core driver new clean energy policies.
Look Beyond the U.S. Market
Green jobs have grown tremendously in recent years. But a key economic challenge is to make sure that we aren’t just swapping green jobs for fossil energy jobs, and are actually achieving net job growth. And an important way to do that is to look beyond the U.S. market. But to achieve these job gains from trade, we need to get off foreign oil, develop a strategy to ensure we’re building clean technology at home, and knock down unfair foreign trade barriers.
Australia’s New Energy Regime
Australian Prime Minister Julia Gillard last month unveiled a major climate change package attempting to reduce carbon emissions and spurring clean energy development. The centerpiece of the package is an AU$23 ($25 USD) per ton carbon price on the country’s 500 largest polluters. The price will rise by 2.5% each year until 2015, after which it will be replaced by a carbon trading scheme. Most of the revenues will be dedicated for consumer and industry assistance to offset higher energy costs and investment in efficiency, though the Gillard government also plans to invest heavily in domestic innovation and clean energy financing. Australia seems to be taking the right steps on the first point, but challenges related to the second point might make this effort more difficult than it needs to be, and could leave the entire effort at risk.
Drilling Revenues: A Funding Stream for Energy Innovation?
One of the major challenges in structuring a large-scale push for energy innovation is figuring out how to fund it. The International Energy Agency and multiple domestic organizations inside and outside government have identified shortfalls in energy research, development and demonstration as a key barrier to developing viable clean technology. Yet the House budget debate has made painfully clear that there’s little interest in addressing this shortfall. We thus need to be looking for alternative, dedicated revenue streams wherever we can find them – which brings us to drilling revenues. The federal government typically brings in anywhere from $5 billion to $7 billion in a given year in revenues from offshore oil and gas. Most are deposited directly into the U.S. treasury for no specified purpose. It’s high time Congress specified a purpose – by creating a new, dedicated trust for energy innovation to boost investment, especially if coupled with a royalty rate increase.
Climate Pragmatism: Innovation, Resilience and No Regrets
Future historians of efforts to address climate change will almost certainly look back on 2010 as the end of one era and the beginning of another. The first began with the creation of the United Nations Framework Convention on Climate Change (UNFCCC) in Rio de Janeiro in 1992 and ended with the negotiation of the Copenhagen Accord in December 2009. By the Cancún talks in late 2010, the emphasis of international negotiations had shifted from efforts to establish legally binding emissions limits to more modest agreements to invest in new energy technology, transfer technology among nations, and support climate resilience efforts in the developing world.
If efforts in this direction are redoubled, this shift of priorities could redeem international climate cooperation. What’s more, as the old framework has collapsed, new American leadership to address global energy, economic, and environmental challenges also becomes possible. In recognition of this reality, a group of scholars and analysts recently convened in Washington, DC to discuss the potential for renewed American engagement on climate change and the development of a strategy that’s effectiveness, paradoxically, would not depend on any agreement about climate science and the risks posed by uncontrolled greenhouse gas emissions. Climate Pragmatism is the result of that meeting and is co-authored by several of the same scholars who produced The Hartwell Paper.
The old climate framework failed because it would have imposed substantial costs associated with climate mitigation policies on developed nations today in exchange for climate benefits far off in the future — benefits whose attributes, magnitude, timing, and distribution are not knowable with certainty. Since they risked slowing economic growth in many emerging economies, efforts to extend the Kyoto-style UNFCCC framework to developing nations predictably deadlocked as well.
The new framework now emerging will succeed to the degree to which it prioritizes agreements that promise near-term economic, geopolitical, and environmental benefits to political economies around the world, while simultaneously reducing climate forcings, developing clean and affordable energy technologies, and improving societal resilience to climate impacts. This new approach recognizes that continually deadlocked international negotiations and failed domestic policy proposals bring no climate benefit at all. It accepts that only sustained effort to build momentum through politically feasible forms of action will lead to accelerated decarbonization.
If this new era is to be led at all, it will be led primarily by example, not global treaty. The Copenhagen Accord is one of essentially voluntary actions among major emitters. The accord perpetuates the conceit that international negotiations will ultimately include legally binding emissions reduction targets, but in reality, the emissions targets will be unenforceable and thus constitute aspirational goals, not binding limits. That reality became ever clearer at UNFCCC negotiations in Cancún in December 2010. The substantive parts of the Copenhagen Accord are the new multilateral agreements to invest in new energy technology, slow deforestation, and build disaster resilience — far better grounds for global cooperation than unenforceable emissions targets and timetables.
A new climate strategy should take a page from one of America’s greatest homegrown traditions — pragmatism — which values pluralism over universalism, flexibility over rigidity, and practical results over utopian ideals. Where the UNFCCC imagined it could motivate nations to cooperatively enforce top-down emissions reductions with mathematical precision, US policymakers should acknowledge that today’s global, social, and ecological systems are too messy, open, and complicated to be governed in this way. Whereas the UNFCCC attempted to create new systems of global governance, a pragmatic approach would build upon established, successful institutions and proven approaches. Where the old climate policy regime tried to discipline a wildly diverse set of policies under a single global treaty, the new era must allow these policies and measures to stand—and evolve—independently and according to their own logic and merits. And where the old regime required that everyone band together around the same core motivation and goals, policymakers today are likely to make the most progress to the degree that they refrain from centrally justifying energy innovation, resilience to extreme weather, and pollution reduction as “climate policy.”
Energy innovation, resilience to extreme weather, and no regrets pollution reduction — each of these goals has its own diverse justifications:
- Support for energy innovation today comes from those concerned about the high (and rising) economic costs, not to mention the foreign entanglements created by America’s dependence on oil; the need for greater energy access in poor countries; diseases and deaths caused by air pollution, oil and gas drilling, and coal mining and waste; and the potential for America to manufacture and export new energy technologies at a profit. All of these motivations play to America’s strengths, and each can assemble a strong coalition of support.
- Rich and poor countries alike are vulnerable to a wide range of complex socio-technical disasters, some climate change-related, some not. Domestically, Hurricane Katrina and the recent Mississippi flooding provide compelling rationale for improving resilience to extreme weather events, whether they are exacerbated by climate change or not. Internationally, US support to build disaster resilience in developing countries is strong and longstanding, and US foreign aid remains the highest in the world. When harnessed to build resilience to extreme weather and disasters, both domestic and international efforts will be more successful.
- And motivated by a clear desire to protect public health, the United States has long been a global leader in the development and deployment of pollution abatement technologies, from the creation of smokestack scrubbers to the invention of alternatives to ozone depleting chlorofluorocarbons (CFCs). A redoubling of such efforts can yield simultaneous progress to reduce climate forcings.
Globally, almost all of the important action occurring on energy innovation and adoption has occurred and is occurring in support of one or more of this diverse set of reasons, not just climate change. The only two countries in the world to have significantly decarbonized their energy sectors over recent decades, Sweden and France, did so in response to oil shocks, not environmental fears. Last fall, the Indian government imposed a small fee on coal consumption, not for climate mitigation, but to fund advanced energy development to meet future energy needs. In October 2011, the Japanese government plans to begin gradual tax increases on coal, oil, and natural gas, fuels the nation lacks in any abundance, in order to raise an estimated $3 billion (¥240 billion) annually by 2015 to fund the development and adoption of advanced energy technologies. When fully phased in, the fossil energy tax will amount to just 3.6 cents per gallon of gasoline (¥0.76 per liter). Likewise, efforts are ongoing from the Netherlands and Japan to the Maldives and India to build greater resilience to the vagaries of nature, including better infrastructure, emergency planning, and resilient design of everything from sea walls and skyscrapers to food crops. Meanwhile, the development of crops that are resilient to climate stresses, such as drought, has proceeded irrespective of specific predictions of anthropogenic warming impacts, and nations continually pursue cost effective improvements in public health and environmental quality.
For the United States and other nations to effectively pursue energy innovation, resilience to extreme weather, and pollution reduction, policymakers must make a clean break from the pitched and polarizing climate wars of the last twenty years and embrace a more pluralistic and pragmatic approach. Already, the international community is moving in the right direction. In mid-January, UN Secretary General Ban Ki-Moon announced that the focus of his efforts would shift away from climate and toward accelerating the development and deployment of clean energy, especially in the developing world.4 China presses ahead with the deployment of new, low-carbon energy technologies to enhance security of supply, improve public health conditions, and build a profitable new domestic manufacturing sector. And President Barack Obama’s 2011 State of the Union Address focused squarely on energy innovation in the context of economic renewal and competitiveness, rather than climate change.
Clean Energy Innovation Policy in Congress: The Battery Innovation Act of 2011
While Congress remains deadlocked over the debt and deficit debate, some decisionmakers are proposing excellent energy innovation policies that should be used as a framework for future energy policy debates. Case in point is Sen. Debbie Stabenow's Battery Innovation Act of 2011 that aims to support advanced battery innovation across the entire range of development phases.