It is time to take stock of our current climate trajectory, and consider what it means for climate policy. In Part 1 of this week long series, we argued that our current climate trajectory means we must 1) redouble efforts to reduce CO2 emissions as quickly as possible, and 2) we must proactively build resilience to the uncertain impacts of a changing climate. Part 2 examined why voluntary economic contraction is a not a viable strategy for reducing emissions “as quickly as possible.” Part 3 explains why implementing a robust clean energy innovation strategy is the key way to making clean energy cheaper than fossil fuels, thus enable rapid adoption of low-carbon energy sources and drastically reducing CO2 as quickly as possible.
As we wrote in Part 1 and Part 2 of this series, our current climate trajectory and global political economy dictates that the only way we can limit potentially dangerous climate change impacts, above the dangerous impacts we’re already locked into, is to redouble efforts to reduce global CO2 emissions as quickly as possible. To rapidly decarbonize the economy requires greatly accelerating the replacement of fossil fuels with low or zero-carbon clean energy substitutes. Implementing the right strategies to do so raises numerous stark policy choices and issues.
The most fundamental issue is that energy is largely a fungible commodity – the electricity coming out of your wall socket doesn’t have any immediately tangible differences whether it comes from a coal plant or a wind farm. The only immediate difference is cost. This key reality means that the rate of adoption for new clean energy technologies is largely moderated by two principal levers:
(1) The level of public tolerance for paying for the cost of cleaner energy in the form of higher energy costs, subsidies, or reduced economic welfare; and
(2) The cost competitiveness of clean energy compared to fossil fuels.
Before adjourning to watch yule logs and eat holiday hams, Congress actually managed to pass a 2012 budget bill. ITIF's Matthew Stepp provided us with an early analysis of the bill's impact on energy innovation funding. Funding for key Department of Energy (DOE) innovation offices are up by a modest 2.5 percent relative to the 2011 budget, with impacts on specific programs summarized in the table below...
The Fiscal Year 2012 budget dedicates $768 million to the DOE Office of Nuclear Energy, a nearly 6 percent increase from FY2011 levels. As with overall funding for DOE innovation offices, the 2012 budget thus halts and begins to reverse the declines in federal energy innovation funding initiated in the 2011 budget, which saw nuclear energy funding fall 15 percent (or $132 million) from 2010 budget appropriations.
By Matthew Stepp, Clean Energy Policy Analyst at the Information Technology and Innovation Foundation and 2010 Breakthrough Generation Fellow." Originally published at the ITIF Blog.
The FY2012 Omnibus Appropriations bill, passed through the House and Senate conference committee last week, provides a small 2.5 percent increase in DOE energy innovation investment-related Offices and programs compared to FY2011. The budget includes key investments for new Energy Innovation Hubs, next-generation small modular nuclear reactor (SMR) RD&D and licensing programs, as well as a boost in funding for ARPA-E. Compared to the roughly $800 million cut to energy innovation investments in FY2011 and the additional cuts sought in the House version of the appropriations bill, the FY2012 budget provides renewed, albeit modest, government support for developing affordable and viable clean energy technologies.
To be clear, the 2012 federal budget still falls short of FY2010's peak in energy innovation investments made through the Stimulus and represents only 72 percent of what the President requested for next year. It's vital that more work is done to increase public investments in clean energy innovation, as the government must play an energetic role in supporting the development of next-generation technologies. However, the FY2012 budget does take steps to stabilize, and in some cases boost, high-impact clean energy investments (Figure 1, below). Below are a few of the highlights:
In a new report from the Breakthrough Institute Energy and Climate Program, we document the challenges facing American energy entrepreneurs seeking to commercialize advanced energy technologies to enhance US energy, economic, and environmental security. Innovative public policy solutions are needed to support private sector innovation and overcome the "valleys of death" that trap too many promising advanced energy ventures.
The United States faces an urgent national imperative to modernize and diversify its energy system by developing and deploying clean, and affordable advanced energy technologies. Domestically, developing new energy supplies and ensuring affordable energy prices will bolster American competitiveness and economic growth. Reducing the cost of advanced energy technologies is the key to finally ending a dependence on volatile global oil markets that holds the American economy hostage, compromises our foreign policy, and bleeds more than a billion dollars a day out of the US economy.
Abroad, the military has already begun deploying innovative clean energy technologies to reduce the high cost, paid in both lives and money, associated with transporting fossil fuels across war zones. Moreover, the impending risks posed by climate change compel the accelerated improvement and widespread deployment of low-carbon energy technologies. Countries around the world are already recognizing the critical need for new advanced energy technologies and are positioning themselves to lead the next wave of energy innovation.
Global energy demand is rising steadily, straining the ability of conventional energy systems to keep pace. For security, economic, and environmental reasons, the global energy system is thus modernizing and diversifying. Developing and developed nations alike are seeking new forms of advanced energy technologies that reduce dependence on foreign nations, insulate economies from volatile energy markets, and are cleaner and thus less costly from a public health perspective. Supplying this $5 trillion global energy market with reliable and affordable clean energy technologies thus represents one of the most significant market opportunities of the 21st century.
Despite this clear energy innovation imperative, the United States and the world remain overly reliant on conventional fuels and exposed to the price volatility and persistent public health impacts that reliance entails. The necessary course of energy modernization remains impeded by the high cost and barriers to scalability of today's clean energy technologies. These are barriers that only innovation can overcome.
However, two obstacles currently block the progress of energy innovation, obstacles which can only be addressed through effective public policy. Due to pervasive market barriers, private sector financing is typically unavailable to bring new energy innovations from early-stage laboratory research to proof-of-concept prototype and on to full commercial scale. This leads to two market gaps that kill off too many promising new energy technologies in the cradle. These gaps are known as the early-stage "Technological Valley of Death" and the later-stage "Commercialization Valley of Death." This pair of barriers is endemic to most innovative technologies yet is particularly acute in the energy sector. As a result, many innovative energy prototypes never make it to the marketplace and never have a chance to compete with established energy technologies. These valleys of death particularly plague capital-starved start-ups and entrepreneurial small and medium-sized firms, the very same innovators that are so often at the heart of American economic vitality.
In effect, the current lack of public policy to address this pair of barriers acts to protect today's well entrenched incumbent technologies from full market competition, while hamstringing American entrepreneurs and innovative ventures seeking to develop and deploy advanced energy technologies. The implementation of creative policies to effectively deal with the Technological and Commercialization Valleys of Death will foster vibrant competition in the energy sector and help drive technological innovation and job creation throughout the economy as a whole.
In the past, the United States has driven immense and far-reaching technological transformations. As the pioneering global innovator of the 20th century, the United States built the world's largest economy because of the ingenuity and creative enterprise of its entrepreneurs and citizens. Each step of the way, proactive public policy has played a crucial role in driving American innovations, from railroads and jet engines to microchips, biotechnology, and the Internet, unleashing long waves of economic growth and shared prosperity. New and advanced clean energy technologies afford the same opportunities to the United States today--if public policy is shaped in a way that allows American innovators to thrive once again.
Energy Secretary Steven Chu will appear today before the House Energy and Commerce Subcommittee on Oversight and Investigation to answer questions on the DOE Loan Program Office. While there are important questions to answer regarding the role of government in technology investment and energy innovation, these questions are unlikely to be the main subject of today's hearing.
What was the original purpose of the Section 1705 loan guarantee program, and what was the expected impact on federal budgets and taxpayers?
In 2009, Section 1705 was added to the DOE Loan Programs Office (LPO), established by the bipartisan Energy Policy Act of 2005. The program was originally appropriated $6 billion in federal funds to provide reserves to cover expected losses on a portion of the loans issued by the agency. This $6 billion would be leveraged to offer a significantly higher loan guarantee volume, unlocking substantial debt finance that would be supplied by private banks. The original $6 billion in funding was raided by Congress to provide funds for the Cash-for-Clunkers program in 2009, however, and ultimately 1705 ended up with a $2.5 billion pool to cover expected loan losses.
Congressional investigators should prioritize clean energy commercialization solutions over political grandstanding and focus on identifying key lessons from the experience of the Loan Programs Office. Congress should put these lessons to immediate use to reform federal involvement in clean energy commercialization and establish a new Clean Energy Deployment Administration.
Step right up to see the latest chapter in the ongoing political circus surrounding the bankruptcy of solar manufacturer and federal loan guarantee recipient Solyndra. Today's main attraction: Secretary of Energy Steven Chu's long-awaited appearance before the eager Republican members of the House Energy and Commerce Committee.
Key questions remain about the ill-fated solar manufacturer's dramatic demise earlier this year. Unfortunately, investigations on the Hill long ago veered into the realm of political point-scoring, rather than a serious inquiry designed to improve federal support for nascent and nationally-critical clean energy technologies.
Taking a step back from the circus on the Hill, let's make two things very clear.
First, the global energy system is modernizing and diversifying. For an array of motivations from public health and climate change to security and economic growth, today's economies demand a 21st century suite of clean and reliable energy technologies to supply the $5 trillion-and-growing global energy market.
Second, the DOE Loan Programs Office was never particularly well equipped to effectively address the "Commercialization Valley of Death"--the persistent lack of risk-tolerant capital that plagues American innovators and entrepreneurs working valiantly to improve the nation's energy, economic, and environmental security.
In the wake of Solyndra's failure, pundits have latched on to a simple, compelling narrative: government can't do energy right.
From synfuels to solar panels to "clean coal" (written, inevitably, with knowing quotation marks), demonstration projects funded by the Department of Energy are described as one failed white elephant after another. Today the DOE is the agency everyone loves to hate (and, at least in Texas Gov. Rick Perry's case, the agency to forget).
What gets left out (and forgotten) is that virtually every one of today's major energy technologies exists thanks to sustained US government investments in research, development, and demonstration. Consider:
Solar panels were pioneered by NASA, and have seen massive price declines thanks to government research, development, and deployment. Industry leader First Solar is a direct descendant of DOE research as are Nanosolar and GE's thin film solar division.
Wednesday's news that California solar manufacturer and DOE loan guarantee recipient Solyndra will be declaring Chapter 11 bankruptcy has government critics grumbling about clean tech boondoggles and failed government programs and has analysts worried about the ability of American clean tech companies to compete with subsidized Chinese solar exporters.
Amidst this week's dismal news that U.S. job growth is at a standstill, KQED's Forum hosts Breakthrough Institute Director of Energy and Climate Policy Jesse Jenkins to discuss Solyndra's failure and the future of U.S. energy and manufacturing policy. Listen to the program below...
The failure of Solyndra, while unfortunate for the company, its investors and employees, is not an indictment of federal energy technology policy. Indeed, judged by its whole portfolio of investments, the Department of Energy's Loan Guarantee Program has been a remarkable success. As global clean energy competition continues to heat up, the United States must double down on its efforts to drive innovation and support America's clean energy entrepreneurs by making critical investments in our nation's future.
Wednesday's news that the California solar cell manufacturer and DOE loan guarantee recipient Solyndra will be declaring Chapter 11 bankruptcy has government criticsgrumbling about clean tech boondoggles and failed government programs. But Solyndra's failure, while unfortunate, is hardly an indictment of federal energy technology policy. Failure is to be expected with emerging, innovative companies, whether they are financed by the government or the private sector. The success of the Department of Energy's Loan Guarantee Program (LGP) should thus be judged not by any one investment but by the performance of the entire portfolio.
Critics have seized on the news of Solyndra's bankruptcy to condemn the Department of Energy's Loan Guarantee Program, which provided a $535 million loan guarantee in 2009. The National Review's Greg Pollowitz writes that Solyndra's failure shows "why the government should not play venture capitalist." Yet the fact is that, when judged by its entire diverse portfolio of investments, the LGP has performed remarkably well. Indeed, with a capitalization of just $4 billion, DOE has committed or closed $37.8 billion in loan guarantees for 36 innovative clean energy projects. The Solyndra case represents less than 2% of total loan commitments made by DOE, and will be easily covered by a capitalization of eight to ten times larger than any ultimate losses expected following the bankruptcy proceedings.
The broad success story of the LGP shows why federal investment in clean energy is necessary to help early-stage clean energy technologies achieve scale and reach commercialization. The inherent uncertainty in investing in novel technologies, coupled with the high capital costs and long time horizons, prohibits most venture capital funds from investing in large-scale clean energy projects. Financing tools and direct investment from the federal government can help bridge this well-known "Commercialization Valley of Death," and the LGP is an effective way of doing that.
The best way for Washington to green America's economy is to employ new innovation and commercialization policies that will replace the old and expiring clean tech deployment subsidies.
Before discussing the best way to green the economy, it's important to note that the U.S. economy has been greening steadily over the past three years. Buoyed by the policies established and extended by the American Recovery and Reinvestment Act (ARRA), the largest federal investment in clean tech in American history, the clean energy industry has experienced precipitous growth, as documented by Mark Muro and colleagues at the Brookings Metro program in their recent "Sizing the Clean Economy" report.
Unfortunately, the path of progress may be coming to an end. Our research shows that over 70% of the federal policies and funding support for clean energy that has catalyzed the recent growth of the industry is expected to lapse in the next three years, or has already expired. And make no mistake--clean energy is an industry dependent on government subsidy: tax credits, depreciation and other subsidies compose one third or more of the total after-tax value of most solar, wind or other renewable energy projects, for example. So while ARRA provided a "down payment" on a green economy, as these public investments fade away, we are now more likely to witness a clean tech crash than a clean tech revolution.
A pragmatic strategy to restart stalled global climate efforts through the pursuit of energy innovation, climate resilience, and no regrets pollution reduction (Report Overview)
Climate Pragmatism, a new policy report released July 26th by the Hartwell group, details an innovative strategy to restart global climate efforts after the collapse of the United Nations Framework Convention on Climate Change (UNFCCC) process. This pragmatic strategy centers on efforts to accelerate energy innovation, build resilience to extreme weather, and pursue no regrets pollution reduction measures -- three efforts that each have their own diverse justifications independent of their benefits for climate mitigation and adaptation. As such, Climate Pragmatism offers a framework for renewed American leadership on climate change that's effectiveness, paradoxically, does not depend on any agreement about climate science or the risks posed by uncontrolled greenhouse gases.
The new report brings the Hartwell framework into an American perspective, and it is authored by a broad group of 14 international scholars and analysts representing a diverse range of political and ideological positions -- from the conservative American Enterprise Institute to moderate Democratic think tank Third Way and the liberal Breakthrough Institute.
Climate Pragmatism is the third paper released by the Hartwell group, an informal international network of scholars and analysts dedicated to innovative strategies that uplift human dignity through mitigation of climate risk, enhancement of disaster resilience, improvement of public health, and the provision of universal energy access. Previous publications include The Hartwell Paper (May 2010) and How to Get Climate Policy Back on Course (July 2009).
Climate Pragmatism also builds on the limited and direct energy technology innovation strategy outlined by the Breakthrough Institute along with scholars at the American Enterprise Institute and Brookings Institution in the October 2010 policy report, Post-Partisan Power.
As the report's authors explain:
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.
Economist and New York Times Columnist Paul Krugman continues to get it wrong on clean energy innovation. A carbon price is not the only, nor the most important, policy for creating a clean energy future. Indeed, the history of technological innovation shows breakthrough innovation comes from research-driven technological development.
Yesterday, New York Times columnist Paul Krugman published a blog post repeating his insistence that a carbon price is the key (if not the only) incentive needed to unleash "the magic of the marketplace" and drive innovation in clean energy technology. It was reminiscent of the conventional wisdom of the climate community over the past decade, and reflective of Mr. Krugman's own typically neoclassical views on the economics of climate change. Unfortunately, Mr. Krugman (and most climate policy advocates) continues to get the story wrong on clean energy innovation.
In the spring of 2010, Krugman wrote a widely-read piece in the New York Times Magazine called "Building a Green Economy," which pondered why, if anti-environmentalists are so adamant in their free-market faith, do they not support a price on carbon dioxide emissions. A carbon price, in Krugman's estimation, would serve as a signal to the market, driving innovation in cleaner technologies to the point where they achieved price parity with fossil fuels.
The clean tech sector is headed for a major crash, as the subsidies required to make clean energy artificially cheaper are becoming unsustainable. Avoiding future crashes will require reorienting our energy policies to drive innovation, rather than simply deploying existing technologies that can't compete without subsidy.
The global clean energy industry is set for a major crash. The reason is simple. Clean energy is still much more expensive and less reliable than coal or gas, and in an era of heightened budget austerity the subsidies required to make clean energy artificially cheaper are becoming unsustainable.
Clean tech crashes are nothing new. The U.S. wind energy industry has collapsed three times before, first in the mid 1990s and most recently in 2002 and 2004 when Congress failed to extend the tax credit that made it profitable. But the impact and magnitude of the coming clean tech crash will far outstrip those of past years.
Two recent articles show that an innovation and investment-centered paradigm for addressing climate change is advancing in other countries around the world.
After 20 years of dominance, the pollution paradigm--the idea that we could solve climate change similar to the way we've addressed conventional pollution problems--irretrievably failed in 2010. At the end of 2009, the collapse in Copenhagen spelled the end of efforts to enact legally binding emissions caps at the international level. In the United States, cap and trade failed for the fourth time in ten years and is politically dead for decades.
Carbon pricing and emissions trading schemes are also in retreat in other nations around the world, including Canada and Australia. Recognizing both the political difficulties associated with carbon pricing and its failure to reduce emissions where it has been tried, more scholars and opinionmakers in other countries are advancing an innovation and investment-centered climate agenda developed over the years by the Breakthrough Institute and its allies.
In a slew of recent events, Bill Gates has continued his vocal support for significantly increasing federal investment in energy research and development. At a climate change meeting this morning in Seattle, Gates said that the government isn't doing nearly enough to invest in energy R&D, and should more than double its current commitment. He singled out the Advanced Research Projects Agency for Energy (ARPA-E) for praise, but noted that it's too small and that it's funding was almost cut in recent budget negotiations.
Gates also stressed the difference between the energy and IT sectors, and why federal investment in energy R&D is so critical:
"The decisions you make now are based on some prediction about government policy way out there, decades in the future...Those kinds of things are so risky that there's a tendency to underinvest. When it comes to software and chips, the life cycles are two to three years, you understand who wants to buy them, and it's not subject to all this regulation."
Last week, Gates spoke at the Wired Business Conference in New York, where he noted that the need for radical innovation in energy technologies necessitates a shift in emphasis away from deployment of existing technologies and toward research and early commercialization of innovative ones. Any solution, Gates said, needs to be big, noting that rooftop solar PV will have a smaller impact than utility-scale solar:
"If you are going for cuteness, go after the those things at the home. If you want to solve the energy problem go after the big things in the desert."
Last year Gates, along with other business leaders, created the American Energy Innovation Council to lobby the government to increase federal energy R&D investment to at least $16 billion annually.
In a new report the Breakthrough Institute, ITIF, and Americans for Energy Leadership pick apart the Heritage Foundation's proposal to dismantle the Department of Energy's research programs.
The Heritage Foundation recently released a report proposing a near dismantling of the Department of Energy's research budgets in the name of budget deficit reduction.
In a new report, the Breakthrough Institute, ITIF, and Americans for Energy Leadership pick apart the Heritage proposal and demonstrate that it displays a fundamental lack of understanding of technological innovation and therefore serves as a poor guide to America's energy, economic, and fiscal policy.
In particular, there are three major misconceptions in the Heritage proposal:
1. The proposal fails to meaningfully reduce the deficit now or in the future.
Even though the proposal advocates cutting DOE research budgets in the name of deficit reduction, the Department of Energy represents a tiny portion of the federal budget and contributes little to the deficit and national debt. Moreover, the proposal fails to distinguish between government spending and productive public investment in science and technology, which drives innovation and economic growth.
2. Heritage fails to understand where technological innovations come from.
Heritage wrongly assumes that "when it comes to energy policy, the free market works" and is best suited to develop new technologies. In fact, the energy sector is anything but free, and has always been characterized by extensive regulations and subsidies, natural monopolies, and other divergences from the free-market ideal held by Heritage. Moreover, Heritage ignores the long history of public support for innovation and assumes the private sector will invest sufficiently in energy innovation. For decades, the energy sector has consistently underinvested in R&D, and market failures plague the energy innovation process at each stage of development, from lab to market launch. There is a broad expert consensus that public investment and public-private partnerships are essential to moving new, innovative technologies into the marketplace.
3. The proposal ignores the immediacy and enormity of U.S. energy challenges.
While Heritage pays lip service to energy security, its recommendations would undermine many of the best efforts underway to achieve it. The Department of Defense has recognized the critical role that innovative clean energy technologies will play in enhancing their strategic and tactical abilities, as well as the nation's energy security. DOD also views the DOE as a strategic partner in its effort to reduce its own vulnerability from relying on fossil fuels. If Heritage had it their way, DOD would lose a key partner in the long-term effort for greater force effectiveness and security through better energy management.
In yesterday's New York Times, Connecticut Department of Environmental Protection chief Daniel Esty and Harvard Business School professor Michael Porter issued a call for an "emissions charge" (i.e. a carbon tax) to address the nation's oil dependence and climate risks, joining a long line of others who continue to do the same. Specifically:
The best way to drive energy innovation would be an emissions charge of $5 per ton of greenhouse gases beginning in 2012, rising to $100 per ton by 2032. The low initial charge, starting next year, would make the short-term burden on consumers and businesses almost negligible.... Our proposal would apply to all greenhouse gas emissions, so that everybody, and every fossil-fuel-dependent form of energy, would be included...Yes, these costs would be passed on to consumers, but this is what motivates changes in behavior and technological investments.
It's the neoclassical view that's reverberated throughout the debate for years: get the prices right, get government out of the way, and let the market do its thing. Andrew Revkin has a point when he refers to the piece's "retro feel."
The Heritage Foundation recently proposed a near dismantling of the Department of Energy in the name of budget deficit reduction. But their proposal includes numerous inconsistencies and inaccuracies to justify eliminating programs vital to the United States energy innovation system. In response, the Breakthrough Institute, along with ITIF and Americans for Energy Leadership, detail point-by-point the fundamental inaccuracies of Heritage's proposal.
Last week the Heritage Foundation released a policy "backgrounder" report calling for a near-dismantling of the Department of Energy's research budget, including key energy innovation programs that are investing in scientific breakthroughs needed to make clean energy technologies more reliable and affordable. The report suggests that innovation spending increases at DOE are dangerous contributors to the national deficit and inferior financing mechanisms to private sector investment in energy technologies.
The Heritage proposal calls for (1) fully eliminating the Office of Energy Efficiency and Renewable Energy, slashing the $3.2 billion budget, and eliminating proposed advanced nuclear energy technology programs from the Office of Nuclear Energy; (2) eliminating the Innovative Technology Loan Guarantee Program and reducing other applied programs like the Office of Nuclear Energy; (3) cutting $1.59 billion from the Office of Science, including the elimination of two of the four Energy Innovation Hubs, elimination of the 46 Energy Frontier Research Centers (EFRCs), elimination of the Workforce Development for Teachers and Scientists Program, and a broad range of other cuts to basic energy sciences; (4) eliminating the power marketing administrations; and (5) cutting the administration's FY2012 budget request for ARPA-E from $650 million to $300 million. However, the white paper contains numerous inconsistencies and inaccuracies about federal investment in energy innovation.
The Breakthrough Institute, along with our colleagues at ITIF and Americans for Energy Leadership, have produced a Counterpoint that documents the misleading statements and inconsistencies in the Heritage report. The full Counterpoint is reproduced below, and you can download a PDF copy here.
In a new report, ITIF's Matt Hourihan and Rob Atkinson write that the conventional wisdom that carbon prices can spur breakthrough innovation is wrong. While carbon prices can help at the margin by pulling mature technologies into the market, it is investment in focused, strategic research and technology development that have led to some of the great innovations of our time.
Carbon prices won't drive the level of energy innovation required to mitigate climate change and fuel sustainable global development, according to a new report by the Information Technology and Innovation Foundation (ITIF).
One of the most influential pieces of conventional wisdom in the energy and climate debate is that a price on carbon is the key to unleashing the breakthrough innovation required to make clean energy technologies much cheaper. Venture capitalist John Doerr captures this view well, saying in 2009 that "no long-term signal means no serious innovation at scale."
But the new ITIF paper, co-authored by Research Analyst Matt Hourihan and ITIF President Rob Atkinson, finds that the idea that carbon prices can spur breakthrough innovation is built on flawed assumptions about the nature of technological change and wholly inconsistent with real-world evidence of the sources of breakthrough technology innovation.
The Advanced Research Projects Agency for Energy has drawn bipartisan praise for it's forward looking investments in advanced energy technologies. But can it survive budget cutting mania in Congress?
As both Republicans and Democrats in Congress appear willing to cut funding for key energy innovation programs, a bipartisan group of Senators have spoken out in support of maintaining funding for an innovative energy technology agency that invests in game-changing research.
Senators Lamar Alexander (R-TN), Lisa Murkowski (R-AK), and Jeff Bingaman (D-NM), have all rallied around the Advanced Research Projects Agency for Energy (ARPA-E), hoping to shield it from major budget cuts in the following months.
Speaking at ARPA-E's recent Washington D.C. summit, Senator Alexander, one of most respected Republican Senators on energy issues, discussed the importance of maintaining investments in energy research:
"Obviously we're going to have to work to reduce spending, but we have to be smart, not cheap. We need to make certain we leave room for the basic research that drives our high standard of living. Most of the focus is on reducing spending, but sooner or later we're going to have to set priorities. One of my priorities is research and development...It is my belief that ARPA-E is one of the bright stars in innovation in the world today, and certainly for our country."
Alexander advocates ending energy subsidies for mature energy technologies--including both oil and some older renewable energy technologies--in order to free up funding for expanded investments in energy research and advanced technologies--a concept broadly consistent with the advanced energy strategy that the Breakthrough Institute and our colleagues at Brookings and AEI called for in Post-Partisan Power.
In the latest in DC's battle over the federal budget, the Senate Democrats released on Friday their plan to fund the government through FY2011, which would make substantial cuts in federal energy innovation across DOE agencies.
While ultimately keeping energy innovation-related spending at a higher level than would the House's Continuing Resolution (CR) (passed two weeks ago), the Senate's plan decreases budgets for each of the DOE's offices involved in energy-innovation as compared to FY2010 appropriations, in sharp contrast to the proposed increases for energy innovation related spending through President Obama's proposed FY2012 budget.
(click to enlarge)
*ARPA-E received $400 million in ARRA funding, to be spent over FY2009 and FY2010, or $200 million per year on average. No additional funding was provided for the agency in regular FY2010 appropriations.
**The estimates for Fossil Energy R&D used in this post refer solely to the Fossil Energy R&D program, rather than Fossil Energy Program as a whole, as Fossil Energy R&D is where energy innovation investments are concentrated.
***For exact figures, see chart at the end of this post.
Two more influential voices have joined the growing ranks of innovation hawks on both sides of the political spectrum in urging against cuts in federal investment in science and technology. Noted political commentator Mort Kondrake writes that the GOP budget would "torch America's seed corn," while Duke Energy CEO Jim Rogers writes that Congress should increase funding for energy research to make clean energy cheap.
As the Congressional Republicans continue to push cuts to critical federal investments in innovation, two more prominent voices have joined a growing group of innovation hawks on both sides of the aisle seeking to preserve or even increase federal funding for science and technology.
The first is noted political commentator Mort Kondrake, who wrote recently in Roll Call that the GOP is threatening to "torch America's seed corn" by cutting federal technology investment. Kondrake, a long-time contributor to Fox News and Executive Editor of Roll Call, notes that the Republicans' budget bill would cut funding for scientific research agencies by more than 33 percent, at a time when countless science and technology experts argue that we must increase such investments to spur economic growth. As Kondrake notes, the GOP budget proposal would abandon the long, bipartisan history of federal investment in American innovation:
Republican priorities represent not just a repudiation of President Barack Obama's proposed increases for science -- 10 percent for energy, 13 percent for the NSF, 15 percent for NIST -- but of a bipartisan process started in 2005 to secure a doubling of hard science research.
Although fossil energy sources receive far more federal subsidy than renewables, when compared based on the share of U.S. energy consumption provided, renewable energy sources receive over seven times more subsidy than fossil fuels.
Here's your latest edition of Friday Factoids, (this one a smidgen early)...
A while back, I posted some quick math reminding readers that while pushing to end subsidies for mature, centuries-old fossil fuel technologies is a pretty smart policy, it on it's own will be far from sufficient to make clean energy cost competitive. The global figures come from the International Energy Agency's latest World Energy Outlook and reveal that worldwide, renewable energy sources receive more than twice the subsidy than fossil fuels, when compared based on how much of global energy demand they supply.
Here's a summary of the global figures:
Fossil energy:
Total subsidies (2009) = $312 billion;
Share of global energy consumption provided (2009) = 83 percent;
Subsidy per percentage of global energy consumption provided: $3.8 billion
Renewable energy:
Total subsidies (2009) = $57 billion;
Share of global energy consumption provided (2009) = 7 percent;
Subsidy per percentage of global energy consumption provided: $8.1 billion (Note: excludes conventional hydropower and biomass)
Compared on a per unit of energy provided basis, renewables therefore receive 2.1x more government subsidies than fossil fuels.
Today, we'll add in the U.S. figures, which advantage renewables even more. That's because globally, much of the subsidies provided for fossil fuels are provided in either developing nations or in oil rich Middle Eastern nations, which make it easier for their citizens to purchase fuels through government-funded subsidies for consumer purchases (rather than subsidies for fossil fuel producers; see IEA for more on that).
For the United States:
Fossil energy:
Total subsidies (2002-2008, cumulative): $72.4 billion;
Share of U.S. energy consumption provided (2008): 84.6 percent;
Subsidy per percentage of U.S. energy consumption provided: $0.9 billion.
Renewable energy:
Total subsidies (2002-2008, cumulative): $28.9 billion;
Share of U.S. energy consumption provided (2008): 4.3 percent;
Subsidy per percentage of U.S. energy consumption provided: $6.7 billion. (Note: excludes conventional hydropower)
Compared on a per unit of energy provided basis, renewables therefore receive 7.4x more U.S. federal subsidies than fossil fuels.
Data source: subsidies for Environmental Law Institute, energy cosumption from U.S. Energy Information Administration, "Annual Energy Outlook 2010." Note that subsidy figures are cumulative for the seven years from 2002 to 2008. The per unit subsidy figures for the U.S. should therefore not be strictly compared to the global figures above.
Clearly, ending all subsidies for fossil and renewables alike would not 'even the playing field' for renewables, as some have argued. These figures indicate that fossil energy would still retain quite a distinct price advantage.
Even if we cut all subsidies for fossil fuels, then, we'll need accelerated innovation to fully close the price gap between new renewables and incumbent fossil energy. (For more on that price gap, see a previous installment of our Friday Factoids series here).
There are times when the nation's political leadership in Washington is perfectly in sync with the realities of the day, and there are times when much of that leadership is out to lunch. Exhibit A: the current energy debate.
There are times when the nation’s political leadership in Washington is perfectly in sync with the realities of the day, and there are times when much of that leadership is out to lunch. Exhibit A: the current energy debate. Even as global demand and instability threatens to challenge affordable supply, and as overseas states are investing heavily in clean technology, many of the nation’s leaders are contemplating gutting domestic investment in clean energy.
Amid this context, enter the 2011 ARPA-E Energy Innovation Summit, a gathering of some of the best and brightest in clean energy innovation intended to showcase often-astounding advances in energy technology. The Advanced Research Projects Agency-Energy – one of the single most important agencies in the federal innovation portfolio – has recently been fighting for its budgetary life, surviving a recent push to de-fund the program, and still facing significant uncertainty over future appropriations. Yet few programs are doing what ARPA-E is doing: supporting cutting-edge energy research in the private and academic sectors in search of revolutionary game-changers to fundamentally alter our energy landscape.
ARPA-E was modeled after DARPA – the cutting-edge Defense Department research agency – to be an agile, dynamic innovation engine at the recommendation of the National Academies. It’s early yet (the agency’s research programs are multiyear endeavors), but if just a handful pay off, the potential upside is enormous. Already, certain awardees are leveraging public funding to entice private investment at a 4-to-1 ratio. Agency Director Arun Majumdar summed up the program’s mission on the first day: “What ARPA-e does best is identify the opportunities and create the competition. And eventually, the market will pick the winners.” (video)
Even given its relative youth and small size, the agency has attracted plaudits for its ability, as when CO Sen. Mark Udall remarked of ARPA-E at the summit, “You're a model of efficiency. That’s government at its best.” On top of this well-earned reputation, multipleexpertrecommendations have said ARPA-E is critical to American cleantech competitiveness and urged a boost to its original $400 million budget. And last year Congress saw fit to reauthorize the agency for three more years in the America COMPETES Act, albeit at lower levels than has been recommended.
Nevertheless, some leaders want to zero out the agency, and even those who nominally support it remain unwilling to invest adequately. AK Sen. Lisa Murkowski acknowledged as much, warning that “Many programs are never funded at their authorized levels, let alone higher. At what level Congress will support funding for ARPA-E remains uncertain.”
Suffice to say, we hope those leaders out to lunch will finish up soon and get back to investing in the future.
China is on a roaring path towards single-handedly swamping any hopes of climate stability. The nation's current climate pledges appear lackadaisical rather than ambitious and just as likely to trigger significant rebounds in energy use than real CO2 reductions. The only way to avert potential climate catastrophe is to de-link economic growth from carbon emissions by fueling China -- and the world -- with clean, affordable, and massively scalable energy technologies. Our current menu of technological options is dangerously short, and there's no time to waste: we must make clean energy cheap, and fast.
I've said it before and I'll say it again: when it comes to the global climate challenge, as goes China, so goes the world.
Driving that aphorism home, co2scorecard.org, a not-for-profit project that closely tracks global greenhouse gas emissions, now reports that China's CO2 emissions increased by 906 million tons in 2009 -- the second largest annual increase for any country in recorded history. China's soaring emissions were enough to completely offset the drop in emissions wrought by the economic havoc plaguing much of the Western world (see graphic below).
China's unprecedented surge in CO2
As Goes China, So Goes the World: Soaring CO2 emissions from energy use in China drive global greenhouse gas trends (click image to enlarge; source: co2scorecard.org)
Over the last decade, China's annual emissions of climate destabilizing CO2 jumped by 5 billion tons per year. According to Shakeb Afsah, President and CEO of co2scorecard.org, that's "the highest [increase in annual CO2 output] for a single country in recorded history, representing an average annual emissions increase of almost 12%--more than four times the rate observed [for China] the previous decade."
To put this unprecedented 5 billion ton increase in annual CO2 emissions in context, Mr Afsah and colleague Kendyl Salcito note that during the 14-year long post-war boom period of 1959-1973, during which U.S. CO2 emissions rose each year, America's annual output of CO2 jumped by only 2 billion tons.
This set of frequently asked questions accompanies a new Breakthrough Institute report, "Energy Emergence: Rebound and Backfire as Emergent Phenomena." That report surveys the relevant academic literature and finds extensive evidence that a large amount of the energy savings from below-cost energy efficiency are eroded by demand 'rebound effects.'
On February 17th, Breakthrough Institute released a new, comprehensive survey of the literature and evidence concerning the rebound effects triggered by many energy efficiency improvements.
"Energy Emergence: Rebound and Backfire as Emergent Phenomena" explains why energy efficiency measures that truly 'pay for themselves' will lower the cost of energy services -- heating, transportation, industrial processes, etc. -- driving a rebound in energy demand that can erode a significant portion of the expected energy savings and climate benefits of these measures.
This new set of Frequently Asked Questions explains rebound effects, how they operate, what kinds of energy efficiency improvements trigger bigger or smaller rebounds, and why coming to terms with the full scale of rebound challenges the heart of many contemporary climate mitigation strategies.
A: Increasing the efficiency of an energy consumptive activity will lower the cost of the services derived from that activity - that is, it will change the price of the "energy services" derived from the fuels, such as lighting, transportation goods or services, heating or cooling, industrial processes, etc.
Economic actors respond to price changes in two general ways:
Increasing the utilization of that energy service to increase outputs or incomes. For example, a low-income resident may now heat his or her home more often or heat more areas of the home after weatherizing their home, because it is now far more affordable to heat. (In economics speak, this involves 'elasticities of demand,' or the responsiveness of demand to changes in the price of goods and services)
Re-arranging the factors of production or goods and services consumed to substitute now-cheaper energy services for other goods or services (maintaining the same level of output or income). For example, a more efficient heat plant may enable a chemicals plant or metals smelter to raise temperatures in industrial processes to extract high quality product from poorer quality inputs (substituting energy for materials) or to reduce process times (substituting energy for labor). (In economic terms, this involves 'substitution elasticities,' or the ability of firms or consumers to take advantage of lower prices to productively re-arrange the production inputs or consumer goods they utilize).
Both of these dynamics are "rebound effects," a term for any economic mechanism that leads to a rebound, or increase, in demand for energy following an improvement in energy efficiency that lowers the effective cost of that energy service.
There are other rebound effects as well (for a quick description of each, see the summary here). Our report, "Energy Emergence" surveys more than half a dozen distinct rebound mechanisms, some of which are fairly direct (like the two above), others that are more indirect (like the impact of money saved through efficiency measures as it is re-spent in the economy on other goods or services that in turn require energy to produce). Still more effects are only visible in the aggregate, at the macro-economic scale, as economies respond in a variety of ways to widespread improvements in energy efficiency.
A: No, not always. Although in some cases, it is possible that efficiency improvements will "backfire," driving a rebound in energy that fully compensate for the initial energy savings, increasing energy demand overall. While backfire is by no means the norm, it is possible in some cases (we'll explore conditions that are likely to lead to backfire in a later question).
As "Energy Emergence" concludes, "Rebound effects are real and significant, and combine to drive total economy-wide rebound in energy demand with the potential to erode much (and in some cases all) of the reductions in energy consumption expected to arise from below-cost efficiency improvements."
Think of it this way: rebound effects mean that for every two steps forward we take in energy savings through efficiency, rebound effects take us one (and sometimes more) steps backwards. We may still move forward, but not as much as we initially expected.
A: Rebound matters because the magnitude of rebound effects determines how effective below-cost efficiency improvements are at contributing to lasting reductions in total energy use and therefore greenhouse gas emissions.
Energy efficiency has frequently been cited as the single greatest contributor to emissions reduction and climate mitigation strategies, by everyone from the International Energy Agency and Intergovernmental Panel on Climate Change to consultants like Amory Lovins' Rocky Mountain Institute and McKinsey to efficiency advocates and environmental NGOs. The IEA counts on efficiency for roughly half of the emissions reductions needed in their "Blue Map" climate stabilization scenario (graphic below), for example, while President Obama told reporters in 2009 that with efficiency, "we can save as much as 30 percent of our current energy usage."
So we're counting on energy efficiency to do quite a bit of "climate mitigation work," so to speak.
The problem is that all of these estimates are based on an assumption: that energy efficiency reduces energy demand in a linear, direct, and one-for-one manner. An X% gain in efficiency leads to an equivalent X% reduction in total energy use.
But the economy is anything but direct, linear, and simple, especially when responding to changes in the relative price of goods and services. When a good or service or input to production gets cheaper, consumers and firms use more of it, find new cost-effective uses for it, re-invest any savings in other productive activities, and the economy overall gets more productive overall, driving economic growth and activity.
That's the rebound effect, and it means that we can't assume that improving energy efficiency by 20%, for example, will reduce energy demand by 20%.
If we don't accurately and rigorously account for rebound effects, we risk over-relying on energy efficiency to deliver lasting reductions in energy use and greenhouse gas emissions, and we will fall dangerously short of climate mitigation goals.
A: Rebound effects differ in scale, depending on the type of energy efficiency improvements we're talking about, and where in the economy we look. In very few cases are rebound effects "very small" or insignificant.
Dozens of academic studies have examined the empirical evidence, conducted modeling inquiries, and otherwise tested the scale of rebound effects. While there is much more work to be done to determine the precise scale and impact of rebound effects in different circumstances, the conclusion is that rebound effects are significant and cannot be ignored in energy and climate analysis and policymaking. See the following three questions for summaries of the scale of rebound in different circumstances...
A: In rich, developed nations, if we improve the efficiency of end-use consumer energy services, like cars, home heating and cooling, or appliances, the literature indicates that direct rebound effects alone are typically on the scale of 10-30% of the initial energy savings. Additional indirect and macroeconomic effects may mean total rebound erodes roughly one quarter to one third of expected energy savings in these situations.
Rebound here is smallest in cases when demand for the energy service in question is already saturated (that is, we use as much of it as we would care to use), and highest in cases where the cost of the energy service is a key constraint on fulfilling demand for that service. For example, if a wealthy homeowner already reliably heats all the rooms in his or her house to 70 degrees, he/she wouldn't increase the thermostat to 77 degrees just because our heating system got 10% more efficient. But if a poorer household can't afford to turn the thermostat up, or only heats one room of the house with a small space heater, because the house is too drafty, then if the house gets weatherized and more efficient, that household is likely to use more energy to heat their home. In general, end-use consumer efficiency improvements in rich, developed economies will still lead to a net savings in energy, although rebound effects shouldn't be ignored even here.
A: No, rebound effects are almost certainly larger in poorer, developing nations.
For efficiency in end-use consumer energy services in developing nations, direct rebound effects alone are likely to be much higher than in richer nations, on the order of 40-80%. Rebound is higher here because demand for energy services is far from saturated, demand is far more elastic (responsive to changes in price), and the cost of energy services is often a key constraint on the enjoyment of energy services. This is important, because growing demand in developing nations is the principal driver of energy demand growth worldwide.
We should be very careful in generalizing our experiences or intuitions about rebound effects in rich, developed nations to the larger bulk of the global population living in developing economies. As Lee Schipper and Michael Grubb wrote in 2000:
"[I]n low-income economies, energy and energy costs are often a constraint on economic activity. ... In short, the shadow of Jevons lurks [in developing nations] for precisely the same reason that more efficient use of coal [in Jevons' Britain] did not save coal: the combined effects of different rebounds are very important when energy availability, energy efficiency, and energy costs are a significant constraint to activity and therefore energy use."
Since expanding the supply of energy services is a key constraint on economic activity in developing nations, the macro-economic impact of efficiency improvements in developing economies is also likely to be more significant, helping developing economies grow faster (and thus consume more energy).
A: While more study of rebound effects for efficiency improvements at producing firms (e.g. industry and commerce) is needed, the literature to date indicates that direct rebound effects may be on the order of 20-70% for these sectors, with additional rebound due to indirect and macroeconomic effects.
Rebound effects in firms depend principally on the ability of firms to rearrange their factors of production (labor, capital, energy, and various materials) to better take advantage of now-cheaper energy services. This is especially true for new productive capacity. If long-term substitution is high, rebound effects can be substantial. In addition, output effects contribute to rebound for energy intensive firms with a high elasticity of demand for their products (that is, where consumers are very responsive to changes in the price of their products and demand more product as the price falls).
Improvements in energy productivity at firms can also contribute to greater economic activity and growth, driving up energy demand overall. In general, rebound effects are higher for efficiency in productive sectors of the economy than for end-use consumer efficiency. This is notable, because two-thirds of the energy consumed in the U.S. is consumed in the productive sectors of the economy and "embedded" in the non-energy goods and services purchased by consumers.
A: Yes. At the economy-wide, macro-economic scale, the aggregate impacts of widespread energy efficiency improvements can lead to substantial rebound effects, as producers and consumers respond in turn to various cascading changes in the price of goods and services, the pace of economic growth quickens, and market prices for fuels may fall, driving a further rebound due to market price effects. Since these economic responses are complex and varied, economic modeling is most often used to estimate the scale of macroeconomic rebound due to aggregate efficiency improvements.
A number of 'Computable General Equilibrium' models (see page 34 of the study) generally show rebound at the scale of a national economy of 30-50% or greater, with a surprising number predicting rebound greater than 100% (aka 'backfire'). These studies look at national economies and thus ignore global, macro-economic impacts beyond national boarders, which can add additional rebound in energy consumption.
'Integrative modeling,' a more detailed approach utilized by energy analysts at Cambridge, found that if the world adopted all of the "no regrets" energy efficiency policies suggested by the International Energy Agency, then rebounds effects would erode more than half of expected savings (52%) in the long-term. There are also several reasons to think this is may be a conservative estimate (see pages 39-40 of the study).
At the macro-economic, global scale most relevant to climate change mitigation efforts, then, rebound effects can be substantial, and erode much (if not all) of the expected energy savings and climate benefits.
A: Rebound is likely to be particularly acute and is most likely to trigger backfire (rebound >100% of initially expected energy savings) in the following cases:
If the supply of energy services is a key constraint on economic activity and growth (as it is in much of the developing world), then improvements in energy efficiency are likely to trigger acute rebound or even backfire. In a world where roughly 1.6 billion people lack access to electricity and 2.5 billion rely primarily on primitive biomass (e.g., wood and dung) for cooking and heating, huge pent-up demand for energy services persists and the availability of energy services will be a major determinant of future rates of economic growth and progress. This in turn indicates potential for very large rebounds for efficiency improvements in developing nations.
When more efficient (and thus lower cost) energy services open up new markets or enable widespread new energy-using applications, products, or even entire new industries to emerge. We dub this dynamic a 'frontier effect' in our report, because in these cases, the 'production-possibility frontier' for an energy-using technology expands significantly, opening up unforeseen opportunities for substitution and potentially significant impacts on economic activity and the composition of the economy. In such cases, backfire is the most likely outcome.
Backfire due to this 'frontier effect' dynamic is most likely to arise for 'general-purpose technologies' that have a wide scope for improvement and elaboration, have potential for use in a wide variety of products and processes, and have strong complementarities with existing or potential new technologies. Examples of 'general-purpose technologies' could include steam engines, electric motors, lighting, gas turbines, semiconductors and computing technologies, lasers, robotics, radio transmitters, and perhaps many others. Backfire is most likely to result after energy efficiency improvements in these general-purpose technologies. (See p. 47-8 of the report.)
These emergent 'frontier effect' dynamics may prove particularly challenging for energy analysts to forecast or account for in modeling efforts, as they necessarily involve unforeseen and unpredictable applications of new and improved technologies. This means that forecasts of rebound can easily underestimate eventual rebound due to frontier effects triggered by sustained efficiency gains.
When energy efficiency improvements not only improve the productivity of energy, but also result in simultaneous improvements in other factors of production, such as labor or capital (a 'multi-factor productivity improvement'), an outsized impact on economic output and significant rebound in energy demand can arise.
Very large rebound or backfire is likely the norm in cases of 'win-win' efficiency opportunities, where energy-saving technical changes simultaneously improve the productivity of other factors of production, multiplying the impacts on output, economic growth and energy demand.
For example, in a 2005 paper, efficiency consultant Amory Lovins writes:
"Improved energy efficiency, especially end-use efficiency, often delivers better services. Efficient houses are more comfortable; efficient lighting systems can look better and help you see better; efficiency motors can be more quiet, reliable, and controllable; efficient refrigerators can keep food fresher for longer; efficient cleanrooms can improve the yield, flexibility, throughput, and setup time of microchip fabrication plants; ... retail sales pressure can rise 40% in well-daylit stores ... Such side- benefits can be one or even two orders of magnitude more valuable than the energy directly saved. ...[I]n efficient buildings, ... labor productivity typically rises by about 6-16%. Since office workers in industrialized countries cost ~100x more than office energy, a 1% increase in labor productivity has the same bottom-line effect as eliminating the energy bill - and the actual gain in labor productivity is ~6-16x bigger than that."
While the multi-factor productivity improvements Lovins describes greatly improve the economic case for energy efficiency upgrades, they simultaneously raise the specter of significantly greater rebound in energy demand than if the improvement in energy productivity were considered alone (as is common in the inquiries discussed in prior sections). If the economic impact of labor productivity improvements from efficient buildings is several orders of magnitude greater than the simultaneous savings in energy consumption, for example, then the rebound due to economic growth/output effects alone should also be several orders of magnitude greater than would be predicted if the energy savings were considered alone.
A: Most certainly not! Truly cost-effective energy efficiency improvements make great economic sense and improved energy efficiency may be a key determinant of future economic welfare. In this sense, it may also contribute indirectly to climate mitigation and decarbonization objectives (see "Discussion and Implications" section of our report).
As Skip Laitner of the American Council for an Energy Efficiency Economy writes, "our lagging efforts on efficiency may actually constrain our larger economic productivity."
As we note in our report, this is often the case, particularly in the developing world. Pursuing cost effective energy efficiency opportunities makes great sense then from an economic development and human welfare perspective. At the same time, however, this is precisely why energy efficiency can trigger significant rebound effects that reduce the ability of efficiency to drive down total greenhouse gas emissions, even as efficiency contributes significantly to greater economic growth.
In short, unlocking the full potential of efficiency may mean the difference between a richer, more efficient world, and a poorer, less efficient world. The former is clearly the desirable case, and the one we should all strive for! But in either case, the world will use more or less the same amount of energy. In some parts of the economy, efficiency may reduce overall energy use, while in others it may increase it. The net effect, after accounting for efficiency's role in unlocking economic growth (among other rebound effects) is far from a linear and direct reduction in energy use.
We therefore argue that we should continue to pursue any cost-effective efficiency opportunities on economic grounds, even as we reconsider the degree to which these measures will contribute to climate mitigation efforts.
"In any case, truly cost-effective energy efficiency measures should be vigorously pursued, as they will lead to an improvement in general welfare (at least narrowly construed in economic terms). However, from a climate mitigation perspective, we must be keenly aware of the precise, macroeconomic impacts of energy efficiency improvements, since only a reduction in total aggregate energy consumption will directly contribute to emissions reduction objectives. This in turn requires an understanding and analysis of the non-linear combination of impacts on economic activity, demand for energy as a factor of production, and other macroeconomic factors that are together summed up in the term 'rebound effect.'"
A: Rebound effects are part of the reason that energy use is still growing, even as the economy gets more and more efficient. True, economic growth drives up energy use, even as we get more efficient. But those two terms - economic growth, and energy efficiency - are not unrelated, and rebound effects describe the relationship between the two.
Part of the reason the economy continues to grow is because below-cost energy efficiency improvements grow the supply of energy services and increase the productivity of the economy - we get more economic activity and income and welfare out of the same amount of energy - and productivity improvements are a key driver of economic growth.
Some economists argue that the supply of energy services is a key enabling force in economic growth: think about the impact of electric motors, industrial lasers, computing, automation, and all of the other ways in which we use energy - often quite efficiently - to greatly improve the productivity of our economy. Think about how important energy services - lighting, efficient cooking stoves, electricity - are to development outcomes in the emerging economies of the world. Efficiently expanding the supply of energy services may thus be one of the principal factors determining the rate of economic growth in rich and poor nations alike (see the previous question for more).
That said, there are definitely other factors driving economic growth, including improvements in the productivity of other inputs to the economy, such as labor, capital, and other materials. Rebound effects and energy productivity improvements aren't the only driver of economy growth by any means.
A: Overall, the global economy has been growing at the rate of roughly 3% per year. Historically, we've only seen a roughly 1-1.5% improvement in energy use per unit of economic output (energy intensity or productivity) each year.
For energy efficiency gains to outstrip the increase in energy demand driven by the growing economy, the economy must improve energy intensity/productivity by at least 3% per year, roughly double or triple the historic rate of improvement.
So economic growth continues to out-pace energy efficiency improvements, and energy use continues to grow overall.
Efficiency advocates argue that if we work harder at capturing energy efficiency opportunities, we can more than double or triple this rate of efficiency improvement and bend global energy use downwards.
That's a big task already, but at least two factors make this challenge even harder:
First, a large portion of changes in energy intensity over time can be attributed to structural changes in the economy (Baksi and Green 2007), as economies shift from agricultural to industrial to services-oriented over time. These aren't the technical improvements in transportation, lighting, buildings, or industrial efficiency that energy efficiency policies are concerned with, and these trends are hard to accelerate or effect through policy. They may not continue indefinitely either, so there are limits to gains here.
If, for example, one-half or two-thirds of the historic rate in energy intensity improvements are due to sectoral transitions and structural changes in the economy, then efforts to increase the rate of technical efficiency improvement must work two or three times harder to succeed. Instead of a more than doubling or tripling of our efforts, we must achieve a more than four to nine-fold increase in technical efficiency improvements.
Second, that estimate does not account for rebound effects. Rebound makes the goal even more challenging, as it means efficiency feeds back into energy consumption and economic growth increasing both and making the horizon we're reaching towards recede even further. For every two steps forward we take with below-cost energy efficiency, rebound effects take us roughly one (or more) steps backwards.
For these reasons, we think it is prudent to revisit the ability of below-cost energy efficiency to decouple the economy from growing energy use and drive lasting reductions in climate-destabilizing greenhouse gases. While we should continue to pursue cost-effective energy efficiency measures improvements wherever they may be found, as we write in the report (p. 52):
"Efforts to reliably reduce greenhouse gas emissions or dependence on depleting fossil fuels would be prudent to avoid the risk of overreliance on energy efficiency measures. Such efforts should therefore focus primarily on shifting the means of energy production (rather than end use), relying on zero-carbon and renewable energy sources to diversify and decarbonize the global energy supply system."
A: While the term 'rebound effect' is generally used by energy economists to talk about rebounds after energy efficiency, the basic economic mechanisms - elasticity of demand and substitution, re-spending effects, and the contribution of productivity to economic growth - are well-understood economic phenomena relevant to improvements in the price or productivity of any factor of production, be it capital, materials, or labor.
Let's consider labor, for example. Economists would never assume that a 20% improvement in labor productivity - aka a "labor efficiency" improvement - would reduce overall demand for labor in the economy by 20%.
Everyone knows that improving labor productivity drives economic growth, creates new profitable ways to utilize labor, and overall generally increases employment at the macroeconomic scope, not decreases it.
Even at the scope of the individual factory or assembly line, improving labor productivity may mean the plant can get by with fewer laborers on the shop floor, but even there, the net effects on demand for labor are far from linear and direct. Higher labor productivity lowers product costs and increase demand for those products and opens up new markets that weren't profitable before. It frees up money to re-invest in other areas of production, and it creates new jobs in other areas of business. Even at the firm level, a 20% improvement in labor productivity won't mean 20% of the company's staff is laid off.
Yet this is precisely the simplified, linear assumption that is routinely made in energy and climate forecasting and scenario planning. A 20% improvement in energy efficiency = a direct, 20% net reduction in energy demand, relative to business as usual.
"Rebound effects" are what energy economists call the same, common sense story we just went over for labor, when we're talking about energy productivity or efficiency rather than labor productivity.
The reality is that energy isn't different from labor, or materials, or capital, and a whole field of academic work has gone on - largely out of notice of mainstream energy analysis and policy making - to explore and illustrate how energy efficiency leads to a series of complex, non-linear response throughout the economy that drive a rebound in demand for energy services and thus a rebound in consumption of energy itself. Our "Energy Emergence" report surveys this evidence and presents key implications for climate mitigation efforts.
A: More or less, yes. This basic but somewhat paradoxical dynamic - that energy efficiency lowers the price of energy services, leading to a rebound in consumption of those services - was first thoroughly discussed by British Economist William Stanley Jevons in an 1865 book, The Coal Question. He famously wrote, "It is a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth."
Some people define this so-called "Jevons Paradox" more strictly, saying that the Paradox refers only to cases when the rebound effects triggered by efficiency measures drives more demand for energy than was originally saved by the efficiency improvements. That's a scenario known in the rebound literature as "backfire," a special kind of severe rebound effect that is greater than 100% of the initially expected energy savings. Backfire means improving energy efficiency actually increases energy demand overall, relative to what it would have been if the efficiency measures hadn't been pursued at all. This is precisely what Jevons observed when he noted that the much more efficient steam engine developed by James Watt led to a huge increase in coal consumption during the 19th century, rather than the conservation of Britain's dwindling coal resources.
However, the generalized dynamic Jevons observed: that efficiency lowers the cost of energy services, driving a rebound in demand for those services, not a direct linear reduction in demand or conservation of fuels, is equivalent to what energy economists now call "rebound effects."
A: No, not all energy efficiency measures trigger rebound effects. Rebound effects are concerned with the response to below-cost efficiency improvements. That's the "low-hanging fruit" we always hear about, the efficiency measures that pay back more in avoided energy use than they cost to install. These are also the ones "below zero" on the often-cited McKinsey and Co. greenhouse gas abatement cost curve seen below. Below-cost efficiency measures always reduce the implicit price of energy services - the useful work provided by energy consumption, be it heating a home, transporting people or goods some distance, powering a production facility, or lighting a work space - and thus always trigger a rebound in demand for those services (see the first question in this series above). It's not a question of whether efficiency measures that truly "pay for themselves" will trigger rebound - they will - the question is how large that rebound will be?
Not all energy efficiency measures are below cost though (the graphic above has arrows pointing to a couple of 'above-cost' efficiency measures, according to McKinsey: plug-in hybrid electric cars, and efficient building design for new buildings). While they incur an economic cost, these efficiency measures should not trigger rebound effects and may still prove effective at reducing energy demand. As we wrote in the report (p. 52):
There is no shortage of opportunities to improve energy efficiency that are not cost-neutral or below-cost. While these measures come with a price tag, in many cases the costs are reasonable and such efforts may be well justified given the long-term threat, economic and otherwise, that global climate change represents.
A: Technically, yes. Price-induced efficiency improvements, whether in response to exogenous energy price increases (changes not caused by policy that is) or successful policy efforts to price carbon emissions or impose energy taxes, should not be expected to result in significant rebound. However, as we write in the report (p. 53), "to fully avoid rebound effects, energy price increases must be sufficient to keep the final price of energy services constant despite improvements in energy efficiency, eliminating any net productivity gains from the efficiency measures." That is, in rough terms, if energy efficiency drives down the price of energy services by 30% or 50%, then energy prices would have to increase through carbon taxes or fees by an equivalent 30% or 50%.
Achievement of deep reductions in energy demand and associated carbon emissions through price induced efficiency will therefore require substantial and rising energy prices over time and sustained over the multi-decadal periods relevant to climate policy, such that rising energy prices keep pace with the improvements in energy productivity.
Furthermore, if revenues collected through carbon pricing, energy taxes, or other efforts to raise energy prices are reinvested into economically productive ends, macroeconomic rebound effects may result, so the precise use of revenues will determine the efficacy of these policies in curbing rebound.
As we conclude in the report:
"Thus, carbon pricing policies (e.g., carbon taxes or cap and trade systems) and energy taxes offer potential tools to mitigate some or all of the energy demand rebound resulting from efficiency improvement - although implementing such policies faces practical challenges and will invariably encounter the political difficulties inherent to policy efforts that seek to impose energy price increases that will result in loss of economic welfare (ignoring potential benefits of avoided economic externalities).
A: Dr. Koomey has done no such thing, as he clarifies in a post at his own blog here. Koomey writes, "It will take time to review the technical questions in the detail this issue deserves, so I'll hold off on stating any conclusions until that work is done."
Joseph Romm of Climate Progress has misrepresented Koomey's work, claiming that "Some of the nation's top energy experts have debunked" our report, linking to a memo from Koomey as his sole evidence. There has been no "debunking" of the the Breakthrough Institute report surveying that literature nor even a serious attempt to debunk it.
A more up to date and unedited compilation of the key emails in that dialog can be read here, if the reader cares to delve deeply into this discussion and see for themselves. Note that the discussion is ongoing.
No. Far from blaming below-cost efficiency for "evils" we praise it as good for economic growth and welfare. However, we do point out that it can increase energy consumption, and that efforts to reduce greenhouse gas emissions cannot rely, as many leading analysts to, on simplistic claims that energy efficiency results in direct energy consumption declines.
Steven Sorrell of the University of Sussex in England headed up a similarly comprehensive review of the evidence for rebound effects published by the UK Energy Research Center in 2007 and originally commissioned by the UK government. In reply to NRDC's David Goldstein and Ralph Cavanagh, he wrote:
"[T]he claim that the Breakthrough Institute "fails to back up its accusations with facts" is plain wrong. Their report is based upon a large volume of empirical evidence in the academic literature. I reviewed this a few years ago - [link] - and the Breakthrough report brings this up to date."
As Mr. Sorrell cautious, "[T]his topic [rebound effects] needs intelligent and careful research to help us understand it better, to improve the quantitative estimates, to reduce the uncertainties and to figure out what we can do in response. Simply dismissing it out of hand," as Goldstein and Cavanagh have tried to do, "will get us nowhere."
Do you have your own questions that aren't answered here? Please leave your question in the comments and we'll do our best to answer.
In this guest post, Americans for Energy Leadership Contributor Natalie Relich writes that energy poverty is one of the least discussed facets of energy and climate policy, yet is one of the greatest challenges confronting the world today. In this enlightening article, she discusses how American energy innovation can help solve the energy poverty challenge.
In the age of iPhones, Facebook, and Twitter, we have instant access to information and constant means of communication. It is difficult to imagine life without these luxuries, but they are just that, luxuries. For a large portion of the world these technologies are not only a rarity, but an impossibility, as there is no access to electricity.
1.5 billion people do not have access to electricity; 585 million of them living in Sub-Saharan Africa and 404 million in India. Three billion people, almost half of the world’s population, rely on biomass, such as wood, charcoal, and dung for cooking and heating purposes. Sub-Saharan Africa is an especially dire case. Only 31% of the population has access to electricity and the Sub-Saharan African population (excluding South Africa) of 791 million consumes as much energy annually as the city of New York, a population of 19.5 million, according to a recent IEA and UNDP report entitled “Energy Poverty: How to Make Modern Energy Access Universal.”
These people are living in energy poverty, the ramifications of which extend far beyond heating and cooking. Instead of children – usually young girls – going to school, they have to spend hours collecting firewood to heat their homes and cook. If the children are able to go to school, they can only do school work during daylight hours because they have no light to study by at night.
Energy poverty is one of the least discussed aspects of our current energy challenge, yet it poses serious threats to economies, national security, the environment, and public health throughout the world. It is unacceptable that such a massive social problem exists, yet here in the U.S. we do little to alleviate it. This article seeks raise awareness about energy poverty and to describe the threats posed by it and what is being done to remedy them.
Last week, a group of Senate Democrat leaders unveiled their plan to build off of the innovation-centered budget proposal released by the President two weeks ago, including several important investments in energy innovation, advanced manufacturing, and infrastructure.
Senate Majority Leader Harry Reid introduced the proposal as an effort to simultaneously "create jobs, promote growth and help America win the future by making smart investments in education, innovation and infrastructure while cutting spending to live within our means."
The Senate Democrats' plan to judiciously invest in innovation and infrastructure while cutting wasteful spending elsewhere in the budget stands in sharp contrast to the Continuing Resolution bill passed by the House this weekend. The House bill budget would cut more than $60 billion from the federal budget to fund the government through FY2011, slashing several important energy innovation initiatives.
The House Republican's Continuing Resolution proposal to fund the government through the rest of Fiscal Year 2011 (FY11, ending Sept. 30) would slash energy innovation investments across federal agencies. The bill, H.R. 1, was introduced last Friday as the GOP's attempt to reduce the deficit and restore "fiscal responsibility," yet would nevertheless strip highly leveraged dollars from important federal programs, while representing merely a drop in the bucket of the $1.3 trillion federal deficit.
The Continuing Resolution as it stands would slice over two billion dollars from the DOE's budget alone and would have detrimental impacts on the state of American energy innovation. The budget cuts would force the layoffs of scientists and engineers, shrink the capabilities of laboratories and universities to perform the most critical cutting-edge energy research projects, and, by cutting funds for highly-leveraged loan guarantee programs, steer private sector funds away from American entrepreneurs and small businesses looking to demonstrate and deploy their innovative energy technologies on American soil.
The Continuing Resolution proposes cuts of at least 17% as compared to FY10 levels in each of the most innovation-oriented offices in the Department of Energy:
The agency which would be hardest hit would be the Advanced Research Projects Agency-Energy (ARPA-E), which funds both the riskiest and most transformative, early-stage energy innovation projects, and would lose a staggering 75% of its budget under H.R. 1.
The Office of Energy Efficiency and Renewable Energy (EERE), which was responsible for roughly 34% of the DOE's energy innovation investments in 2010, would lose 35% of its FY10 budget.
The Office of Science, which funds critical early-stage energy innovation research, would see a 20% decline in its budget. Office of Science devoted 20% of its 2010 budget to energy innovation funding, while supporting additional fundamental physical science research.
The Office of Nuclear Energy, which devoted 41% of its funds to energy innovation projects in 2010, would lose 23% of its budget.
Meanwhile, the Office of Fossil Energy would see an 11% reduction in its budget. 43% of the office's 2010 budget was devoted to energy innovation efforts.
President Obama released his fiscal year 2012 budget proposal this morning, a solid endorsement of the necessity to increase public investment in energy innovation amidst proposals to indiscriminately cut discretionary spending across all federal programs. The President's budget proposal builds off of the innovation-centered economic growth strategy presented in the State of the Union Address last month and the White House Innovation Report released two weeks ago.
On the energy investment front, the budget proposal aims to increase the DOE's budget by 11.8 percent over FY2010's current appropriation levels, or $3.1 billion dollars, a comparatively small increase in an overall budget proposal of $3.7 trillion that proposes reducing the projected deficit by roughly $110 billion per year for the next ten years.
This budget increase is a vital step towards meeting the scale of the energy innovation challenge long-underlined by the Breakthrough Institute and by a general consensus of leading energy innovation experts, think tanks, and policymakers.
However, not all of these increases lie with funding for energy innovation. Using the Energy Innovation Tracker, a tool that compiles federal energy-innovation funding across nine federal agencies for the years 2009-2011, inclusive of ARRA, we've broken out investments in energy innovation (defined in the tracker as Basic Science, RD&D, and Education investments) from general energy investments in measures such as deployment, facility construction, and program management.
Last week, President Obama threw down an ambitious national goal in his second State of the Union Address: by 2035, 80% of America's electricity will come from "clean" energy sources, double the share we now derive from clean sources.
But what counts as "clean," how do we get there, and is the goal feasible?
Dr Nathan Lewis, a distinguished professor of chemistry at CalTech and direct of the new, Department of Energy-funded Fuels from Sunlight Energy Innovation Hub (which also got a shout-out in the President's SOTU) appeared on NPR/WBUR's "On Point" radio yesterday, to discuss the President's clean energy objectives, the energy innovation challenges that must be overcome to reach that goal, and the economic and environmental consequences at stake.
I highly recommend you give the segment a listen here.
Bucking the conventional D.C. wisdom of the day, Senator Kerry delivered a rousing speech Tuesday calling for a major bipartisan investment strategy for infrastructure, technology, research, and education to keep the United States competitive.
On Tuesday, Senator John Kerry (D-MA) delivered a major speech in Washington that may be remembered as one of the most important political responses to the Tucson shooting and as a powerful new post-partisan vision for restoring American vitality and leadership in the 21st century.
As Ezra Klein of Washington Post noted, "Frankly, it's the speech President Obama should be giving." In this moment of national reflection, the speech should be read by Americans of all political stripes and serve as a model for Democratic and Republican leaders alike.
In short, Senator Kerry argued that today's violent and divisive political dialogue -- which may or may not have contributed to the event in Tucson -- is damaging U.S. global leadership and preventing us from making the critical investments we need to stay prosperous and secure. Unless Democratic and Republican leaders can wake up and come together around a new agenda for strategic public investments -- including infrastructure, technology, research, and education -- we will not be able to maintain our place in the world.
Internalizing market externalities through pricing carbon is unlikely to spur the development of new solar photovoltaic technologies, writes Americans for Energy Leadership Contributor Tucker Willsie.
By Tucker Willsie, originally published at Americans for Energy Leadership.
For proponents of clean energy technology, the holy grail is to reach price parity with conventional power sources such as coal. For photovoltaics, this tipping point is generally regarded as a dollar per watt ($1/Wp), a measure that indicates the generation capacity of a cell in peak sunlight. At this point the stage will be set for a massive explosion in the number of solar panels being installed and sold - a situation eagerly anticipated by the PV industry and environmentalists alike.
While most agree that cost competitive solar panels would be a good development, there is a great deal of disagreement on how to reach this point. In this debate, two major schools of though have emerged. The first school recognizes that market externalities such as the cost of pollution must be internalized in order to allow the free market to allocate enough resources to renewable energy. Proponents of this view back programs such as carbon taxes and cap and trade.
The second school of thought acknowledges that market signals need to be corrected, but believes that the free market is not able to support the massive upfront costs required to advance renewable energy technology. This group maintains that the market is excellent for creating incremental advances and lowering costs for existing products, but it does not support the decades of investment required to develop a new technology before profit can be generated. In these cases, it is necessary for government entities to ensure that necessary advances occur despite the lack of a market.
As Ryan Avent writes: "economics is clearly moving beyond the carbon-tax-alone position on climate change, which is a good thing. If the world is to reduce emissions, it needs technologies that are both green and cheap enough to be attractive to economically-stressed countries and people. And a carbon tax alone may not generate the necessary innovation."
Over at the Economist, Ryan Avent notes that economists are beginning to move beyond a simple reliance on carbon pricing as the sine qua non of climate policy:
The typical baseline economist response to the problem of global warming is a very simple and straightforward one. Climate change is a negative externality, and the carbon emissions that generate it are easily targetable. The clear thing to do, then, is to place a tax on carbon emissions which will lead economic actors to internalise the cost of the warming they create with their decisions. This will discourage carbon-intensive activities and contribute to the development of clean alternative, reducing emissions and climate change.
Easy enough. Unfortunately, this strategy quickly runs into difficulty. One big problem is political. It's very difficult to convince people to accept higher energy costs, and it's very difficult to coordinate policy across countries, which is necessary to ensure that the policy works correctly. But there are also economic challenges. ... Economies are good at finding substitutes for key technologies, but it does take some time. And so because the world has waited so long to act, it now seems that the disaster-avoiding carbon tax path may itself be too economically damaging. So what's an economist to advocate?
Climate science was supposed to unite us, on the left and the right, and result in common, concerted action. Instead, the science of climate change has proved to be ideologically polarizing. In a speech for the National Institute of Standards and Technology, Michael Shellenberger and Ted Nordhaus explain why climate science divides us. By contrast, energy technology may actually be able to transcend politics and unify Republicans and Democrats alike.
[Updated 1/11/2011: Robert Stavins was previously misidentified as the former chief economist of the Environmental Defense Fund. He is a former staff economist. We regret the error.]
By Michael Shellenberger and Ted Nordhaus
Thank you very much. We'd like to start by thanking William Ott for inviting us to give this colloquium, which is an honor. NIST has a long record of advancing innovation by developing new ways of measuring new natural phenomena and creating standards for critical technologies. The Institute, famous for the first atomic clock, played a critical role in creating the technologies behind modern computers, semiconductors, sonar, and blood pressure machines. We are grateful for NIST's work and reminded of the critical role played by America's sustained investments in science and technology in creating our prosperity.
It may be hard to remember now but it wasn't that long ago that much of the American political establishment came to believe that the science of climate would transcend ideological and national boundaries and result in common national and global action. The idea was that climate scientists would tell us what the safe level of atmospheric emissions was, and that nations would take shared steps to reducing their emissions over the next 50 years.
But things didn't work out that way. The United Nations treaty process has devolved into an endless exercise in empty promises and angry recriminations. The growth of global carbon emissions has only accelerated in the 13 years since Kyoto was signed. The United States failed last summer for the fourth time in seven years to cap its emissions while Europe, which supposedly has, has seen its emissions grow faster than the United States since 1997.
Nobel Laureate physicist Dr. Burton Richter discusses the three dimensions of the global energy challenge - economy, security, and environment - in his keynote at the "Energy Innovation 2010" conference in December.
"Energy Innovation 2010" keynote presentation delivered by Nobel laureate physicist Dr. Burton Richter on December 15, 2010.
(Richter's Keynote begins at 5:56 in the video below)
I have been asked by the organizers to be provocative at this discussion of energy innovation - the more provocative the better, I was told. So far, the talks have focused on the need for innovation to get the technologies of the future developed and deployed so that the issue of climate change can be effectively addressed. We all know that the country is not getting the action on the Federal front that the issue warrants, and thinking about how we might do better leads me to three questions.
1. Have we focused so exclusively on climate change as a justification for action on energy that we have excluded potential allies?
2. Have we emphasized ultra-green technologies that are not yet ready for the big time, and so had our desire for the perfect drive out the available good?
3. Have we pushed policies that are so narrowly targeted as to prevent much larger and less costly emissions reductions to be made in the nearer term than have been made with the renewables?
On December 15th 2010, hundreds of leading thinkers, scientists, public officials, and innovators gathered in Washington, DC for the Energy Innovation 2010 Conference to initiate a new conversation on a new energy policy paradigm for the 21st century
For 35 years, government and the market have been trying and failing to get energy policy right. Congress has failed to pass large-scale clean energy and climate legislation, while China and other competitors are moving aggressively to take the lead in new energy technology. And the market has failed to create needed low-carbon technology on its own. Meanwhile, the nation's dependence on oil and coal deepens and global temperatures continue to rise. To address these issues, we need to get past the old energy policy paradigm - and we just may be turning the corner.
On December 15th 2010, hundreds of leading thinkers, scientists, public officials, and innovators gathered in Washington, DC for the Energy Innovation 2010 Conference to initiate a new conversation on a new energy policy paradigm: one that recognizes the central role of innovation in resolving the world's looming energy challenges and boosting American competitiveness. Climate change aside, we can't rely on carbon-based fuels for the next 150 years the way we did for the last 150. And we can't create the transformational energy innovations we need without putting innovation front and center.
"Energy Innovation 2010" merely begins a new national energy dialog that must continue well into the coming years. Breakthrough Institute and our partners will continue to spearhead this conversation as we seek new strategies to address the multifaceted energy challenges facing America and the world.
In case you missed the conference, held before a packed house at the National Press Club, or if you simply want to revisit the top notch presentations delivered throughout the packed day, videos from the full conference can be viewed below.
Earlier this month, China surpassed Japan as the world's second largest economy and since, has snared a flurry of clean tech headlines that collectively tell a very clear story: China is rapidly and effectively securing its position as a global clean technology leader as the U.S. watches in stagnated wonder.
Below we've aggregated some of the most important updates coming out of China over recent weeks as it surges to the front of the global clean technology sector:
From hybrid crops to blockbuster drugs, nuclear power to wind power, and microchips to the Internet, government support was critical to the productive public-private partnerships that spawned so many revolutionary American technologies.
This presentation was delivered by Jesse Jenkins (Director of Energy and Climate Policy, Breakthrough Institute) and Daniel Sarewitz (Director, Center for Science, Policy, and Outcomes, ASU; Breakthrough Institute Senior Fellow) at the Energy Innovation 2010 Conference, December 15th, 2010.
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Apple, Amgen and General Electric. Bill Gates, Thomas Edison, and Alexander Graham Bell.
We are all familiar with these genius inventors and titans of industry.
Yet most of us remain unaware of the almost constant presence of a silent partner in American innovation: the federal government.
We might recall something about microchips and the space race, or know that the National Institutes of Health funds research into new drugs and treatments.
But most of us remain unaware of the depth and breadth of government support for technology innovation.
As we gather today to consider how to drive forward the dramatic innovation needed to deliver cheap, clean and massively scalable energy sources to power world, we would do well to pause and take a look back at the United State's long history of limited but energetic public investment in breakthrough technologies.
Where do good technologies come from? The history of American innovation shows that an active partnership between the public and private sectors has been key to developing breakthrough technologies, which have driven generations of economic prosperity. In an updated report, the Breakthrough Institute explores this partnership through a set of case studies in American innovation.
Driving directions from your iPhone. The cancer treatments that save countless lives. The seed hybrids that have slashed global hunger. A Skype conversation while flying on a Virgin Airlines jet across the continent in just five hours.
Where did these everyday miracles come from?
As soon as the question is asked we know to suspect that the answer is not as simple as Apple, Amgen, or General Electric. We might recall something about microchips and the Space Race, or know that the National Institutes of Health funds research into new drugs and treatments.
But most of us remain unaware of the depth and breadth of American government support for technology and innovation. Our gratitude at being able to video chat with our children from halfway around the world (if we feel gratitude at all) is directed at Apple, not the Defense Department. When our mother's Neupogen works to fight her cancer, we thank Amgen, not NIH or NSF.
By Rob Atkinson, Ted Nordhaus, and Michael Shellenberger
For forty years, presidents and policymakers have promised and planned for a new energy future just over the horizon. While the rationales have varied - reducing dependence on imported oil, stopping global warming, reducing air pollution, creating clean energy jobs - the song has largely remained the same: America has most, if not all, of the technologies needed today to make a quick and relatively painless transition away from fossil fuels.
Yet America is more dependent upon fossil fuels than ever before. U.S. oil consumption rose from 15 to 20 million barrels a day between 1970 and today, while coal still provides about 50 percent of our electricity. U.S. carbon emissions continue to rise unabated, as efforts to cap them have repeatedly foundered in the face of daunting political, economic, and technological obstacles. And renewable technologies like wind and solar only meet a tiny fraction of America's energy needs despite several decades of efforts to subsidize their deployment.
When experts convene in Washington next week to discuss energy policy at the Energy Innovation 2010 conference, they will do so in the wake of yet another failed federal effort to pass legislation to support a transition away from fossil fuel-based energy.
Breakthrough Institute and other leading think tanks sponsor day-long conference rethinking energy innovation in the United States: getting to scale, making clean energy cheap, securing American leadership.
After
two years of often-tumultuous debate in Congress, the national debate
over energy and climate change policy has now been altered: cap and
trade policy efforts have run aground in Congress, perhaps fatally, and
Republicans are ascendant, reshaping the national political landscape.
Meanwhile, with economic recovery the top priority for the public and
policymakers alike, America's clean tech competitors are surging ahead,
raising the stakes for energy policy.
Against this backdrop,
support is growing on both right and left for new national investments
in energy innovation that can help address some of the most urgent
imperatives of our time - renewing the economy, improving energy
security and public health, and overcoming key environmental challenges.
A growing chorus of voices thus counsels a renewed national commitment to develop breakthrough energy technologies - and to the reform of America's energy innovation system itself.
In
recent months, energy experts have advised policymakers to: take a page
from the nation's long history of successful military research and
procurement; build on the success of agricultural research stations and
the National Institutes of Health by establishing new innovation
institutes and clusters nationwide; promote the right mix of both
competition and collaboration to spur innovation and productive
knowledge spillover; reform energy subsidies to reward innovation; and
restructure business taxes to promote investment in the building blocks
of an innovation economy.
On December 15th, a group of America's leading policy think tanks will host a day-long conference in Washington D.C. to rethink energy innovation.
Energy Innovation 2010,
held at the National Press Club, will bring together leading experts
from government, think tanks, academia, and business to ask hard
questions about how energy innovation efforts can be brought to scale,
how the innovation system must be restructured and reformed, and how to
renew the kind of active partnerships between the public and private
sectors that were responsible for so much of America's prior
technological innovation and economic strength.
Breakthrough Institute is proud to organize and sponsor this free, day-long conference, along with the Information Technology and Innovation Foundation and with sponsoring partners the American Enterprise Institute, Third Way, Clean Air Task
Force, Consortium for Science, Policy and Outcomes, Securing
America's Future Energy, and the Brookings Institution. We are pleased to
welcome TheEnergyCollective.com and Yale Environment 360 as media sponsors for the event.
Forcing countries to agree to emissions caps will never work, argue Ted Nordhaus and Michael Shellenberger. The duo argues in a special Wall Street Journal column that the global community should think past U.N. climate talks in Cancun and focus instead on energy innovation, adaptation, and no regrets policies that do not require agreement about global warming.
The failure of the U.N. climate process is proof that shared economic sacrifice cannot be the basis of global action. Nations will not scale up clean energy as long as it remains so much more expensive than fossil fuels. Thinking past talks in Cancun, nations should focus instead on energy innovation, adaptation, and no regrets policies that do not require agreement about global warming. The first step is recognizing that the global market for clean energy exists only thanks to government subsidies and mandates. Instead of imposing emissions controls and subsidizing existing technologies, nations should use competitive deployment to purchase advanced energy technologies, benchmark the winners, and allow intellectual property to spill-over between firms and nations.
This is the framework we propose for pragmatic global climate action in the cover story for a special energy section in today's Wall Street Journal, pegged to the start of U.N. climate talks in Cancun, Mexico. Today also marks the launch of a new web site, Breakthrough Europe, and its kick-off post, "Cancun Can't: The Twilight of European Climate Leadership," which documents the failure of Europe's cap and trade system to reduce emissions.
Our Wall St. Journal essay, "How to Change the Global Energy Conversation," builds on Breakthrough Institute's thinking about the failure of the UN process ("Scrap Kyoto," Democracy Journal), the clean tech intellectual property illusion ("The Revolution Will Not Be Patented," Slate), the green Keynesianism and neoliberalism behind Obama's green jobs fiasco ("Green Jobs for Janitors," The New Republic), and our proposal to make clean energy cheap through technology innovation ("Fast, Clean & Cheap," Harvard Law and Policy Review, Feb 2008).
Research and innovation on energy storage and transmission technology must proceed in parallel as the nation ramps up use of renewable energy, according to a new report from the American Physical Society.
New innovations in energy storage, transmission, and the integration of variable electricity sources are necessary to enable renewable energy sources to contribute significantly to the U.S. energy supply, according to a new report from the American Physical Society.
Establishing national policies to spur the deployment and adoption of renewable electricity sources, such as wind and solar power, are important, but the scientists warn that research and innovation must also proceed in parallel on better energy storage technologies, new strategies for integrating the varying and intermittent output of these energy sources, and improved technologies for the long-distance transmission of renewable electricity.
A new report by Third Way and an op-ed by three U.S. Senators add to the gathering consensus for a technology and innovation-led strategy for clean energy progress and economic renewal.
America can recapture the lead in the global clean energy race if it commits itself to a major public-private effort to spur clean energy innovation.
That's the message of a new report released today by Democratic think tank Third Way. The report, "Creating a Clean Energy Century," is the first in a series of reports from Third Way's new project on energy innovation, co-chaired by U.S. Senators Mark Udall (D-CO), Kay Hagan (D-N.C.), and Debbie Stabenow (D-MI).
The report begins with clear-cut premises. Clean energy is still too expensive and unreliable relative to fossil fuels. Other countries are moving toward clean energy more quickly than the United States. Countries that are able to make clean energy cheaper than fossil fuels will gain the greatest economic benefits, by capturing more of the rapidly growing domestic and global markets for clean energy.
Over at theEnergyCollective.com, Tyler Hamilton dives into the International Energy Agency's newly released forecast of global energy trends (exec sum here [pdf]) focusing on the disparity in global subsidies for renewables and fossil fuels:
The International Energy Agency put out its annual World Energy Outlook today and urges strong and sustained government support for the deployment of renewable energy. The agency pegs 2009 subsidies for renewables at $57 billion and calls for that to increase to $205 billion by 2035. "The share of modern renewable energy sources, including sustainable hydro, wind, solar, geothermal, modern biomass and marine energy, in global primary energy use triples between 2008 and 2035 and their combined share of total primary energy demand increases from 7 per cent to 14 per cent," according to the agency. Fossil fuel subsidies stood at $312 billion in 2009 and the agency urged that they be eliminated to accelerate the transition to renewables.
I applaud the IEA's call for major public investments in clean energy RD&D and deployment and certainly support the agency's calls to phase out fossil fuel subsidies -- excepting where doing so would expand the already deplorable share of the global population (about 2.4 billion) locked in energy poverty.
But while Hamilton and others focus on the disparity between total subsidies for fossil energy and renewables, the IEA figures are actually a stark reminder of the major price gap that persists between mature fossil energy sources and newer, costlier clean energy alternatives.
Neal Lane, of Rice University former science advisor to President Bill Clinton, showed the slide above in a recent talk at the University of Colorado (which he provided to me today, Thanks Neal!). It shows a number of technologies somehow connected to federal innovation investments and their relationship to the iPod, discussed in an earlier post today.
Apple has long boasted of its culture of innovation, and how this led to such products as the original Mac and the iPod. However, it turns out that, at least in the case of the iPod, Apple had a hidden ally: the US government. During a speech at Tuskegee University, President (and iPod user) George W. Bush told his audience, "the government funded research in microdrive storage, electrochemistry and signal compression. They did so for one reason: It turned out that those were the key ingredients for the development of the iPod." While we have to gratefully acknowledge the efforts of government agencies such as DARPA in some of the fields mentioned by the President, we also feel obligated to point out the accomplishments of private companies in the US and abroad, including IBM, Hitachi and Toshiba -- not to mention the Fraunhofer Institute, which developed the original MP3 codec, and codeveloped (with Sony, AT&T and others) the AAC format used by Apple in the iPod.
The United States and Australia have inked a new partnership to pursue joint solar energy research designed to make solar energy cheap enough to compete with fossil fuels.
Prime Minister Julia Gillard and US Secretary of State Hillary Clinton made the announcement in Melbourne on Sunday, with the Australian government set to commit up to $50 million towards the program.
Ms Gillard said the aim was to make solar power as cheap as conventional energy sources.
"One of the greatest barriers to a broader commercial take up of solar power is its cost and that is specifically what this joint research initiative will address," Ms Gillard told reporters.
"The joint project with the United States is part of an aggressive effort to bring the sales price of solar technology down by two to four times."
Ms Clinton said the program aimed to make solar power competitive with conventional energy sources by 2015.
The price had dropped by 50 per cent in the past three years but there was more work to be done, she said.
"Under this initiative our two governments will share both the costs and the benefits of research and development which will speed up innovation," she said.
Secretary Clinton also pledged a $500,000 grant from the U.S. State Department to support a global survey to identify opportunities to reuse carbon dioxide emitted by power plant and industrial processes, headed up by the Global Carbon Capture and Storage Institute, a recently established research center co-funded by the Australian government.
Solar Powerhouse? Solar irradiation in Australia is among the highest in the world, as this color-coded map from NASA illustrates (darker red areas have the most incoming solar energy). Source: The Age/Reuters
Australia, with perhaps the greatest solar energy potential in the world, has an obvious interest in pursuing affordable, scalable solar power solutions, and has also maintained several long-standing solar research efforts. Can the two new partners accelerate efforts to make solar energy cheap?
In an effort to develop a truly effective post-cap and trade climate strategy, policy is not the only aspect that requires deep reflection - philanthropists, too, must reconsider the best way to channel grants in order to successfully fund solutions to climate and energy challenges. Breakthrough's Director of Climate and Energy Policy Jesse Jenkins recently spoke to a foundation about re-thinking philanthropic efforts in a post-cap and trade policy environment, offering insight into how policy makers, activists, and philanthropists, alike, must re-orient away from the focus on limits and toward an approach that harnesses human ingenuity to directly confront the scale of the global climate and energy challenge.
Despite rising national debts, would national governments be wise to borrow today to fund investments in infrastructure, clean energy, and innovation to be enjoyed by -- and paid back by -- a richer, more well-off generation tomorrow?
Here's an interesting argument from our friends across the pond at the UK-focused Political Climate blog, making the case that despite rising deficit concerns and austerity measures in the UK and elsewhere, borrowing from the future may still actually be an appropriate way to pay for clean energy innovation today:
Against this background, it may sound mad to argue for more public borrowing in order to pay for investments in low carbon technologies and infrastructure, but that is what I am going to do in this post.
Let's start with the rationale. ... The starting point is that in advanced economies successive generations tend to get better off over time. For example, at the depths of the 1930s depression Keynes observed that despite the general gloom, he was confident that 100 years in the future, people might be eight times better off in real terms. And indeed average GDP per capita in the UK is now already about 5 times what it was in the 1930s. By extension, we would normally expect future generations to be better off than us in GDP terms.
... [Furthermore, if] we in this generation mitigate climate change, we will allow future generations to have a higher standard of living than they would have if we did nothing. We are very slowly beginning to do this, with policies being introduced to encourage us to invest less in conventional capital (e.g. fossil fuel power stations) and more in investments that effectively maintain natural capital (like renewable energy).
At the moment we are paying for these more expensive investments through reduced consumption, in the form of higher energy bills. If instead we were to borrow a certain amount of money from future generations (who will have to repay through their taxes) and use this money to pay the extra cost of renewables, carbon capture and storage and so on, then the theory says it should be possible to make both our generation and future generations better off. ...
Support for a technology-first approach to America's energy and climate needs is rapidly growing in the wake of the October 14 release of the "Post-Partisan Power" proposal by scholars at the Brookings Institution, AEI and Breakthrough Institute. Here is a sampling of the many reactions and widespread discussion generated by the report...
Joshua Green, Atlantic Monthly & Boston Globe: "Unlike most of what gets introduced just before an election, this was not a soon-to-be-forgotten political ploy, but a long-term project to accomplish what Congress and the president could not: put the country on the path to a clean energy future."
David Leonhardt, New York Times: [T]he death of cap and trade doesn't have to mean the death of climate policy. The alternative revolves around much more, and much better organized, financing for clean energy research. It's an idea with a growing list of supporters, a list that even includes conservatives -- most of whom opposed cap and trade."
Tim Mak, Frum Forum (a site started by former Bush speechwriter David Frum): "If Americans want to fight the challenges of climate change and reduce their dependence on foreign oil, this piece sets a good baseline for discussion."
Ezra Klein, Washington Post: "It's not that PPP is a sure thing, nor that it will pass Congress anytime soon. The Tea Party Republicans will need to sow their wild and crazy oats for awhile before they feel any need to tack to the center. But when they do, they aren't going to embrace cap and trade. They might, on the other hand, embrace a limited and direct approach to energy innovation."
Michael Levi, Council on Foreign Relations: [T]his idea may well make a lot of sense... most of the paper is actually a smart and thoughtful discussion of how to do energy innovation policy right".
Kirsten Powers, New York Post: " If America wants to remain the leader of the world economy, Washington has to attack this issue."
Bryan Walsh, TIME Magazine: "A truly bipartisan approach on energy and climate won't be easy--sometimes, especially right before an election, it seems completely impossible--but it's the only approach we can hope for, if we still hope."
Nature: "[G]iven the lack of consensus in other areas, long-term R&D intended to bring the cost of clean energy down might well be one area where lawmakers will be able to agree."
Case Western professor Jonathan Adler writes: "While not without flaws, the proposal represents a serious alternative to politically-moribund cap-and-trade proposals and the regulate-everything mindset that produced the Waxman-Markey bill."
Newsweek: "Cap-and-trade is on life support, but its weakness is giving other ideas room to breathe. Emerging proposals focus on investment in clean energy, pitched to the public with a narrative that omits a doomsday point of view about global warming and instead focuses on more practical considerations like job creation or the need to stop certain types of pollution."
All that convergence around a politically centrist, technology-first approach alarmed some climate warriors on left and right.
Climate skeptic Steven Milloy of Green Hell blog (and Junkscience.com) wrote: "The left isn't oscillating at all. They are focused on establishing a one-world socialist paradise. Whatever path gets the comrades there, they'll follow. Global warming has just been there most successful gambit to date."
Said Grist.org's David Roberts: "The Republican Party don't want to spend government money on clean energy, Hayward notwithstanding."
Joe Romm, ClimateProgress.org: [It] should also be obvious we're not going to get a massive federal clean energy program either."
Not all long-time climate warriors were sour on the proposal.
While EDF chief economist Nathaniel Keohane reiterates that "we need both cap and trade and sustained investment in clean energy R&D," he went on to tell the New York Times' David Leonhardt, "if it turns out that we can't get cap and trade in the near term, we need R&D investment all the more."
Harvard's Robert Stavins still insists "there is no other feasible approach that can provide meaningful emissions reductions" beyond cap and trade, but he acknowledges: "New path-breaking technologies will be needed to address climate change, and public support for private-sector or public-sector R&D will be crucial to meet this need."
MIT's Michael Greenstone, a long-time cap and trade supporter, isn't so sure about the real-world viability of the policy he once advocated. "The first best hope was getting a world price for carbon, and that now looks remote in the coming years," he told Leonhardt. "But there are ways in which the other options may be preferable to a price only in the U.S." Greenstone endorses the need for $25 billion in clean energy R&D investments and rightly explains, "All the action is really going to be occurring in developing countries" who will need clean and affordable energy to power their economic growth.
In a second post, Washington Post's Ezra Klein looks the realpolitik in the face as well and concludes: "The best of all worlds would've been a price on carbon married to a big investment in clean-energy research. But this is not the best of all worlds. This is our world. And this [technology-first proposal] ... might be our last, best chance to protect it."
Update The Washington Post editorial page endorses Post-Partisan Power's call for a bipartisan energy innovation strategy, noting: "Even if cap-and-trade had passed, the logic goes, the government would still have had to invest in scientific research to make green energy affordable; might as well make those investments, anyway ... incremental action is better than none."
When policies on emissions reductions collide with policies focused on economic growth, economic growth will win out every time. Climate policies should flow with the current of public opinion rather than against it, and efforts to sell the public on policies that will create short-term economic discomfort cannot succeed if that discomfort is perceived to be too great. Calls for asceticism and sacrifice are a nonstarter.
The "iron law" thus presents a boundary condition on policy design that is every bit as limiting as is the second law of thermodynamics, and it holds everywhere around the world, in rich and poor countries alike. It says that even if people are willing to bear some costs to reduce emissions (and experience shows that they are), they are willing to go only so far...
To succeed, any policies focused on decarbonizing economies will necessarily have to offer short-term benefits that are in some manner proportional to the short-term costs. In practice, this means that efforts to make dirty energy appreciably more expensive will face limited success.
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The unavoidable reality is that policy makers and those they represent are committed to sustaining economic growth, bringing populations out of poverty, and expanding access to energy. Emissions reduction goals will not be achieved by policies that seek to stimulate innovation by constricting, much less by reducing, economic activity.
Throughout American history, federal investments in areas like science and technology have been a long-term driver of national prosperity under presidents both Democrat and Republican.
Throughout American history, strategic government investments in areas like education, technology, infrastructure, and energy catalyzed the entrepreneurship and innovation that has paved the way for so many of the great American technological and economic successes of the 20th century. In the words of conservative New York Times columnist David Brooks, the American story is one of "limited but energetic governments that used aggressive federal power to promote growth."
The new report calls for increasing federal innovation investment from roughly $4 today to $25 billion annually, and using military procurement, new, disciplined deployment incentives, and public-private hubs to achieve both incremental improvements and breakthroughs in clean energy technologies. The authors point to America's long-history of bi-partisan support for innovation.
Writes David Leonhardt in today's New York Times, "the death of cap and trade doesn't have to mean the death of climate policy. The alternative revolves around much more, and much better organized, financing for clean energy research. It's an idea with a growing list of supporters, a list that even includes conservatives -- most of whom opposed cap and trade."
Mark Muro of Brookings tells Politico the proposal's four parts "are broadly popular, provide a very broad and appealing American vision of economic transformation and are certainly far more doable than a global pricing system at this point." Added Steve Hayward of American Enterprise Institute, "The entire climate and energy agenda that we've been talking about for several years now has hit a dead end, so it's time to hit the reset button."
The new report calls for increasing federal innovation investment from roughly $4 today to $25 billion annually, and using military procurement, new, disciplined deployment incentives, and public-private hubs to achieve both incremental improvements and breakthroughs in clean energy technologies. The authors point to America's long-history of bi-partisan support for innovation.
Writes David Leonhardt in today's New York Times, "the death of cap and trade doesn't have to mean the death of climate policy. The alternative revolves around much more, and much better organized, financing for clean energy research. It's an idea with a growing list of supporters, a list that even includes conservatives -- most of whom opposed cap and trade."
Mark Muro of Brookings tells Politico the proposal's four parts "are broadly popular, provide a very broad and appealing American vision of economic transformation and are certainly far more doable than a global pricing system at this point." Added Steve Hayward of American Enterprise Institute, "The entire climate and energy agenda that we've been talking about for several years now has hit a dead end, so it's time to hit the reset button."
As the Times's Leonhardt explains the new post-partisan proposal, and the growing energy innovation consensus surrounding it, "reflect[s] the political reality that raising the cost of dirty energy is unpopular, especially when the economy is so weak. Finding the money to make clean energy cheaper, even when government budgets are tight, will probably be an easier sell."
While cap and trade legislation became embattled by partisan wars over climate science and compromised to the point of inefficacy, Leonhardt reminds readers that there is a successor strategy waiting, if one only turns to the long, bipartisan history of American technological leadership.
"[H]istory shows that government-directed research can work," Leohardt writes.
"The Defense Department created the Internet, as part of a project to build a communications system safe from nuclear attack. The military helped make possible radar, microchips and modern aviation, too. The National Institutes of Health spawned the biotechnology industry. All those investments have turned into engines of job creation, even without any new tax on the technologies they replaced.
"We didn't tax typewriters to get the computer. We didn't tax telegraphs to get telephones," Breakthrough Institute's Michael Shellenberger told the Times. "When you look at the history of technological innovation, you find that state investment is everywhere."
And in that history, lies a new path forward to deliver clean cheap energy, economic productivity, and national prosperity.
By Steven F. Hayward, American Enterprise Institute; Mark Muro, Brookings Institution; Ted Nordhaus and Michael Shellenberger, Breakthrough Institute
If ever there were a time to hit the reset button on energy policy, it is today. Congress is set to adjourn without taking substantive, long-term action on either climate or energy. While conservatives may be celebrating the death of cap and trade, the truth is that the right's longstanding hopes for the expansion of nuclear power and oil production have also run aground, foundering on the high cost of constructing new nuclear plants and the impacts of the devastating oil spill in the Gulf of Mexico. As a result, energy policy is at a standstill, despite overwhelming public support for accelerating the move to clean, affordable energy sources and tapping fast-growing clean energy industries to create jobs and wealth in the United States.
Here's the latest in our irregular Friday Factoids series, provided as usual without comment...
According to the U.S. Energy Information Administration, the statistics and forecasting agency of the U.S. Department of Energy, a substantial price gap remains between the levelized cost of new renewable electricity sources and conventional fossil fuel power plants. Their cost estimates are for new power generation equipment constructed in 2016 and reported in 2008 constant dollars (see graphic below).
Electricity from new onshore wind power, for example, is 49% more expensive than electricity from new conventional coal-fired power plants, and 80% more expensive than electricity from a conventional natural gas-fired combined cycle power plant, according to EIA estimates. Wind power built offshore is 28% more costly than onshore wind, says the EIA.
Electricity from new utility-scale solar photovoltaic (PV) power plants and solar thermal power plants are roughly 5x and 3x more expensive, respectively, than natural-gas fired combined cycle power plants, and roughly 3x and 2x more expensive, respectively, than conventional gas-fired combustion turbines, according to EIA figures.
[Originally published 10.28.10 in The New Republic.] President Obama's strategy for economic renewal through clean energy was flawed from the start, too over-reliant on cap and trade and public works programs to retrofit buildings for energy efficiency. To succeed, a new industrial economy requires large, sustained investments in innovation and manufacturing like the kinds that built America's information technology and biomedical industries.
An abridged version of this article appears in the October 28, 2010 print edition of The New Republic (and online here, subscription required)
In August 2008, then-candidate Barack Obama traveled to Lansing, Michigan, to lay out an ambitious ten-year plan for revitalizing, and fundamentally altering, the American economy. His administration, he vowed, would midwife new clean-energy industries, reduce dependence on foreign oil, and create five million green jobs. "Will America watch as the clean-energy jobs and industries of the future flourish in countries like Spain, Japan, or Germany?" Obama asked. "Or will we create them here, in the greatest country on earth, with the most talented, productive workers in the world?"
Two years later, the answer to that second question appears to be no. Obama's environmental agenda is in tatters. His green jobs plan has done little to make a dent in unemployment, which persists at close to 10 percent. Obama's signature environmental initiative, cap-and-trade, died in the Senate in July. And, during the first year of Obama's tenure, China massively outspent the United States on clean-energy technology.
The story of how Obama's green agenda came up empty is more complicated than the one conventionally told by Democrats and greens, who imagine that cap-and-trade would have been transformational had Republicans and global-warming deniers not gotten in the way. In truth, the president's strategy was flawed from the start. Cap-and-trade would not have birthed a domestic clean-energy economy -- indeed, it wasn't designed to. Meanwhile, the administration's green stimulus spending was split between short-term, if worthy, investments in green technology, to which far too little money was allocated, and over-hyped public-works projects that would never have delivered the new industrial economy Obama promised as a candidate.
At a time of continued economic distress, America should embrace regional innovation clusters as a new paradigm for collaboration, innovation, and economic prosperity.
As new reports confirm a stark decline in long-term U.S. economic competitiveness, the United States needs a new economic paradigm to refocus economic policy and rebuild its damaged economy. That new paradigm should focus on strengthening America's "regional innovation clusters," according to a new report authored by Mark Muro and Bruce Katz of the Brookings Institution Metropolitan Policy Program.
First defined by Harvard Business School professor Michael Porter twenty years ago, clusters--geographic concentrations of interconnected firms, suppliers, educational institutions and other supporting organizations--have staged a comeback in economic policymaking at different levels of government and are now widely viewed as important to accelerate innovation and therefore economic growth. According to the new study, The New Cluster Moment: How Regional Innovation Clusters Can Foster the Next Economy, clusters offer an attractive new economic paradigm for three particular reasons.
Growing empirical evidence that energy efficient technologies may drive greater energy consumption, not less, demands a new look at the role of energy efficiency in efforts to mitigate climate change.
One of the most curious facts about energy is that economies continue to use more of it even as they use it more efficiently. This strikes us as strange because it has become an article of faith that making cars, buildings, and factories more energy efficient is the key to cheaply and quickly reducing energy consumption, and thus pollution.
But energy experts have never seen this as particularly mysterious. As energy historian Vaclav Smil notes, "Historical evidence shows unequivocally that secular advances in energy efficiency have not led to any declines of aggregate energy consumption." A group of economists beginning in the 1980s went further, suggesting that increasing the productivity of energy would increase economic growth and energy consumption. Efficiency advocates dismiss the evidence of rebound in energy use pointing to direct behavioral changes at the household or business level that are easiest to measure. But the most significant energy rebounds are indirect -- in the production of energy, raw materials, and consumer goods -- not in the "end use" of consumer products.
Below, a leading energy economist, Harry Saunders, explains why energy efficiency does not decrease energy consumption in the way we conventionally understand it. In the process, Saunders clarifies the controversy over his recent co-authored study for the Journal of Physics, which reviews 300 years of lighting history to predict the impact of new solid-state lighting technologies (e.g. LEDs). Against the widespread belief that new lighting technology will reduce energy consumption, Saunders and his colleagues found that they will likely increase it -- greatly expanding the global use of lighting in the process, especially in developing countries. Saunders clarifies some important questions, and explains the basics of "the rebound effect."
With the new study, rebound has firmly moved from the theoretical to the empirical, and the implications of it must now be dealt with by all of us who were counting on efficiency to be an easy way to reduce greenhouse gas emissions.
-Michael Shellenberger, President, Breakthrough Institute
Why Energy Efficiency May Not Decrease Energy Consumption
By Harry Saunders
I recently co-authored an article for the Journal of Physics ("Solid-state lighting: an energy-economics perspective" by Jeff Tsao, Harry Saunders, Randy Creighton, Mike Coltrin, Jerry Simmon, August 19, 2010) analyzing the increase in energy consumption that will likely result from new (and more efficient) solid-state lighting (SSL) technologies. The article triggered a round of commentaries and responses that have confused the debate over energy efficiency. What follows is my attempt to clarify the issue, and does not necessarily represent the views of my co-authors.
A new report by the National Academies paints a grim picture of U.S. economic competitiveness in the 21st century knowledge economy. Major and sustained public investments in education, research, and innovation are key to reversing a long-term decline in global competitiveness.
A new National Academies report released last week confirms what many concerned with U.S. economic competitiveness have warily suspected: America's competitive standing in the 21st century global economy has deteriorated markedly in the last five years.
The outlook has only worsened since the publication of the original report, according to the Gathering Storm committee, which includes leading academics, CEOs, and science and technology experts. For those concerned about America's ability to create lasting, high-paying, high-quality jobs in a time of economic distress, the report's conclusion is disheartening:
"America's competitive position in the world now faces even greater challenges, exacerbated by the economic turmoil of the last few years and by the rapid and persistent worldwide advanced of education, knowledge, innovation, investment, and industrial infrastructure. Indeed the governments of many other countries in Europe and Asia have themselves acknowledged and aggressively pursued many of the key recommendations of Rising Above the Gathering Storm, often more vigorously than has the U.S."
The simple mathematics are that the world needs one nuclear-plant equivalent of carbon-free energy coming on line every day between now and midcentury. The reality is that scaling clean energy sources at that pace is going to require serious technological innovation and sustained commitment to fielding and improving clean energy technologies.
Pacala and Socolow (8) analyzed a scenario that envisioned stabilizing atmospheric concentrations of CO2 at 500 ppm within 50 years. They found that reaching that goal required the deployment of seven existing or nearly existing groups of technologies, such as more fuel-efficient vehicles, to remove seven "wedges" of predicted future emissions (the wedge image coming from the shape created by graphing each increment of avoided future emissions). Those seven wedges, each of which represents 25 gigatons of avoided carbon emissions by 2054, are cited by some as sufficient to "solve" climate change for 50 years (9).
Unfortunately, the original wedges approach greatly underestimates needed reductions. In part, that is because Pacala and Socolow built their scenario on a business as usual (BAU) emissions baseline based on assumptions that do not appear to be coming true. For instance, the scenario assumes that a shift in the mix of fossil fuels will reduce the amount of carbon released per unit of energy. This carbon-to-energy ratio did decline during prior shifts from coal to oil, and then from oil to natural gas. Now, however, the ratio is increasing as natural gas and oil approach peak production, coal production rises, and new coal-fired power plants are built in China, India, and the United States (10).
The enormous challenge of making the transition to carbon-neutral power sources becomes even clearer when emissions-reduction scenarios are based on arguably more realistic baselines, such as the Intergovernmental Panel on Climate Change's "frozen technology" scenario ( 11, 12). Capturing all alternate energy technologies, including those assumed within this BAU scenario, means that a total of ~18 of Pacala and Socolow's wedges would be needed to curb emissions (13) (see the figure). And to keep future warming below 2°C, even under the Davis et al. age-out scenario, an additional 7 wedges of emissions reductions would be needed-- for a total of 25 wedges (see the figure).
Instead of raising the price of fossil fuels, Gates argues that the time has come to shift our attention to raising the revenues necessary to fuel innovation and make clean energy cheap.
In a new interview with Technology Review, Bill Gates nails the global energy and climate challenge and discusses the need for dramatic increases in energy innovation funding to make clean energy cheap.
In a climate discourse dominated by emissions targets and carbon caps, Gates has provided a refreshing and clear-eyed look at the first-order importance of direct public investment to develop clean, affordable technologies to replace fossil fuels on a global scale.
In this new interview, Gates discusses why dismissing the difficulty of the challenge is counter-productive, and argues that carbon pricing can never drive the dramatic innovation required to transform the global energy system. Instead of raising the price of fossil fuels, Gates argues that the time has come to shift our attention to raising the revenues necessary to fuel innovation and make clean energy cheap.
Below the fold, you can find excerpts from Gates' interview, which can be read in full here.
For more, the NYTimesAndy Revkin and TIME magazine's Bryan Walsh each spotlight the interview here and here, respectively.
The American Recovery and Reinvestment Act has funded breakthrough innovation and new growth industries that are driving down the cost of clean energy and building the foundation for competitive 21st century U.S. industries, according to a new White House reportreleased today on the impacts of the U.S. stimulus bill.
Yet while the White House report highlights the considerable clean energy momentum established by the Recovery Act, it also inadvertently raises the specter of an impending clean tech funding cliff which risks sending U.S. clean energy industries into deep freeze as stimulus funds begin to expire over the coming months.
New legislation introduced by Republican Representative Devin Nunes (CA) and backed by several GOP House members would invest billions into renewable energy deployment, signaling an opportunity for bipartisan support for clean energy technology policies.
Over at CNBC, reporter Trevor Curwin has been one of the first to note the significance of the Republican bill, which Nunes' says could "potentially provide hundreds of billions in financing" for renewable energy over the next several decades.
There's been some change over at WhiteHouse.gov's energy and environment page, but probably not the kind we had in mind when we heard President Obama's oft-repeated campaign slogan, "Change You Can Believe In."
A number of (as yet unfulfilled) energy and environmental policy pledges have been removed from the WhiteHouse.gov page in recent weeks.
Chief among them: President Obama's pledge to "invest $150 billion over ten years in energy research and development to transition to a clean energy economy," once a central plank in Obama's energy and environment platform, and a feature of his first national budget proposal (in FY2009).
"What determines success in industrial policy is not the ability to pick winners but the capacity to let the losers go." - Dani Rodrik, as quoted in a Businessweek article evaluating the future of industrial policy and clean energy...
