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Archive for April, 2009

To Make Clean Energy Cheaper, U.S. Needs Bold Research Push

By Mark Muro and Teryn Norris
Yale Environment 360
April 30, 2009

Energy Secretary Steven Chu recently called for “Nobel-level” breakthroughs and a “second industrial revolution” in energy technology to overcome the world’s interlinked energy and climate challenges.

Chu’s implication: We currently lack the technologies we need to fully avert catastrophic global warming. His admonition: America must dramatically accelerate the development of clean energy technology.

Chu has it right.

The task is clear: To renew the U.S. economy, respond to global climate change, foster the nation’s energy security, and help provide the energy necessary to sustainably power global development, America must transform its outdated energy policy. Innovation and its commercialization must move to the center of energy system reform. The nation must move urgently to develop and harness a portfolio of clean energy sources that are affordable enough to deploy on a mass scale throughout the U.S. and the world. In short, we must make clean energy cheap.

Putting a price on carbon will take us part of the way, but not nearly far enough. To make the revolutionary shift to a low-carbon economy, we propose a bold new research paradigm: the creation, over time, of several dozen renewable energy research hubs around the nation. These centers — known as energy discovery-innovation institutes, or e-DIIs — would be established with a combination of federal, state, university, and private funds and would take the lead in accelerating the development of reasonably priced alternative energy technologies and bringing them to the marketplace.

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By Teryn Norris & Jesse Jenkins

Today, President Obama announced a new national energy education initiative to inspire and train tens of thousands of young Americans “to tackle the single most important challenge of their generation — the need to develop cheap, abundant, clean energy and accelerate the transition to a low carbon economy.”

Last summer, we developed a proposal for a National Energy Education Act (NEEA) to launch a major new federal initiative supporting clean energy-related education, in collaboration with our Breakthrough Generation Fellows. We published the proposal in two newspaper op-eds, including the SF Chronicle and Baltimore Sun, and it was later featured in Mother Jones magazine, congressional testimony, and online interview. We also submitted a fact sheet and strategy brief to the Obama campaign and called upon young people to advocate for NEEA.

President Obama’s new energy education initiative, announced today at the National Academy of Sciences, takes a very similar approach. As he declared today:

“There will be no single Sputnik moment for this generation’s challenges to break our dependence on fossil fuels… But energy is our great project, this generation’s great project… the Department of Energy and the National Science Foundation will be launching a joint initiative to inspire tens of thousands of American students to pursue these very same careers, particularly in clean energy. It will support an educational campaign to capture the imagination of young people who can help us meet the energy challenge… And it will support fellowships and interdisciplinary graduate programs and partnerships between academic institutions and innovative companies to prepare a generation of Americans to meet this generational challenge.”

This new initiative is a big step in the right direction, and we applaud President Obama and his administration for their commitment to inspiring and training the next generation of clean energy innovators. As we wrote in the San Francisco Chronicle last July:

“It is imperative that we transform our nation’s universities, colleges and vocational schools into multidisciplinary hubs of clean energy innovation… Today, a National Energy Education Act would equip a new generation of Americans with the highest-caliber human capital, inspire them to tackle energy as their generational undertaking, and pave the way for new industries and technologies that will drive the U.S. economy for decades to come.”

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The following is the introduction to the Breakthrough Institute report, Case Studies in American Innovation: A New Look at Government Involvement in Technological Innovation. You can download the full report here or read more excerpts from the document here.

It is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply.”  –International Energy Agency (World Energy Outlook 2008)

Summary

Technology is a cornerstone of American prosperity, the primary source of our economic competitiveness, and a constant presence in our everyday lives. From the 19th century’s advances in manufacturing and transportation to today’s cutting-edge developments in biotechnology and computer science, Americans have been world leaders in creating, producing, and deploying innovative technology. Nobel Laureate Robert Solow’s classic 1956 economic model of productivity growth demonstrated that technological progress drove at least 80% of economic growth in the United States between 1909 to 19491, and innovation continues to be perhaps the most powerful engine of our prosperity.

Today, America and the world are in energy crisis. Energy prices are escalating, foreign energy dependency is increasing, global warming continues unabated, and all across the world there are billions of people who continue to live without access to energy. The single greatest solution to these crises is to once again harness America’s forces of innovation to make clean energy technology both cheap and abundant.

But to harness this solution we must take a new look at the process of innovation and determine the best mechanisms to catalyze and accelerate technology development. This requires looking beyond both the mythos of the lone American inventor and the market fundamentalist ideology that has dominated American politics in recent decades. Instead, we must look closely at several key American technologies and unearth the historic and seemingly ubiquitous government investments that fueled their development.

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Case_studies_american_innovation.jpgIn a new report released today, the Breakthrough Institute illuminates the stories behind the invention and diffusion of ten technologies that are everyday facets of our modern lives and offers a new look at government involvement in technological development.

The conventional wisdom on climate change — from Thomas Friedman to the country’s largest environmental organizations — is that cap and trade regulation and carbon pricing is the best way to promote clean energy innovation. However, a growing number of experts are challenging this assumption, recognizing the importance of direct, large-scale public investment to achieve developments in clean energy technology. The outcome of this debate and the correct emphasis on public investment and regulation may determine the course of U.S. and global climate policy.

The new Breakthrough Institute report, Case Studies in American Innovation, presents ten case studies showing that public investment and active government support has been one of the greatest forces behind the nation’s technology development and economic growth. Indeed, public investment in the U.S. was largely responsible for railroads, airplanes, microchips, personal computers, and the birth of the Internet — all of which drove long-term economic development. This evidence not only challenges conventional wisdom on climate policy, but also on national economic policy, which has been dominated for three decades by neoclassical economists.

You can download the full document here or read the following excerpts from the new report on our blog here:

This report is a product of the 2008 Breakthrough Generation Summer Fellowship Program.

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The Geithner-Summers banking plan has received much criticism (e.g. see Stiglitz and Johnson), but today Jeffrey Sachs issued one of the harshest critiques yet. Basically, the Geithner-Summers plan could allow banks to commit fraud by bidding on their own toxic assets and walking away with huge amounts of taxpayer money. Sachs sums it up here at the Huffington Post:

Insiders can easily game the system created by Geithner and Summers to cost up to a trillion dollars or more to the taxpayers.

Here’s how. Consider a toxic asset held by Citibank with a face value of $1 million, but with zero probability of any payout and therefore with a zero market value. An outside bidder would not pay anything for such an asset… Suppose, however, that Citibank itself sets up a Citibank Public-Private Investment Fund (CPPIF) under the Geithner-Summers plan. The CPPIF will bid the full face value of $1 million for the worthless asset, because it can borrow $850K from the FDIC, and get $75K from the Treasury, to make the purchase! Citibank will only have to put in $75K of the total.

Citibank thereby receives $1 million for the worthless asset, while the CPPIF ends up with an utterly worthless asset against $850K in debt to the FDIC. The CPPIF therefore quietly declares bankruptcy, while Citibank walks away with a cool $1 million. Citibank’s net profit on the transaction is $925K (remember that the bank invested $75K in the CPPIF) and the taxpayers lose $925K. Since the total of toxic assets in the banking system exceeds $1 trillion, and perhaps reaches $2-3 trillion, the amount of potential rip-off in the Geithner-Summers plan is unconscionably large.

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By Teryn Norris & Jesse Jenkins
The Huffington Post

If Democrats want to win on climate policy, they must think fast and move quickly to regain control of the debate. Last week was the opening round of the national climate fight, and the Democratic Congress was nearly knocked out.

It began on Tuesday with the introduction of a major climate bill by Democratic Congressmen Waxman and Markey. The proposal made a fateful choice: it threw out President Obama’s “Apollo” plan for investing $150 billion in clean energy and focused instead on meeting the demands of leading environmental organizations, emphasizing cap and trade regulation and a laundry list of electricity and efficiency standards.

The response to the legislation was swift and harsh, with Republicans deftly maneuvering to secure the political high ground. Senator Thune (R-SD) introduced a budget amendment declaring that any climate legislation should “not increase electricity or gasoline prices,” which quickly passed 89 to 8. Senator Ensign (R-NV) then proposed an amendment stating that climate policy should not result in higher taxes on the middle class, passing unanimously (98-0). These votes effectively put all but a handful of Democratic Senators on the record opposing policies to raise the price of dirty energy — the central purpose of cap and trade regulation at the heart of the Waxman-Markey bill.

What went wrong? The Democratic Congress made a critical mistake in following the direction of leading green groups like Environmental Defense Fund and the Natural Resources Defense Council. By tossing out Obama’s energy investment plan and focusing on carbon pricing and regulation, Democrats allowed Republicans to quickly and easily frame the entire debate around increased energy prices and economic costs. That’s a fight Republicans take up with relish — and one they will surely win.

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