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Archive for June, 2009

By Johanna Peace, Breakthrough Fellow

The American Clean Energy and Security Act (ACES) that passed by a margin of 219-212 in the House on Friday needs a major makeover in the Senate in order to redress its critically insufficient provisions for funding clean energy R&D, according to Mark Muro, policy director at the Brookings Institution’s Metropolitan Policy Program.

In a Brookings article criticizing the climate bill, Muro argues:

“While a $20 to $30 billion a year R&D outlay would be optimal, Waxman-Markey would invest just 1.5 percent of the 40-year revenue stream of the cap-and-trade system in the R&D efforts of ARPA-E and the innovation hubs–which comes to just $1.4 billion a year or so at accepted permit price forecasts… The bottom line: Reps. Waxman and Markey did well to install several crucial innovation provisions in the House bill, but the political trades that were required to pass it have left far too little revenue behind for the most crucial use of cap-trade money–investments to catalyze a radically cleaner energy future.”

Muro’s points reaffirm Breakthrough Institute’s analysis, which has shown how ACES invests far more cap and trade revenue in polluting industries and foreign offsets than it does in building new clean energy industries in the U.S.

Muro mentions that some ACES provisions — such as the funding it would direct toward ARPA-E and the eight regional “Energy Innovation Hubs” it would establish — constitute a modest start toward the kind of public investment that will promote the development and commercialization of clean energy technologies. Breakthrough Institute, too, has pointed to some of the same provisions as promising — but only if they are adequately funded.

But they’re not. Important as their mere presence may be, these tiny
“slivers of the 40-year revenue stream” of the ACES cap and trade
system remain a “paltry” fraction of the public investment the United
States will need to propel a transition to a prosperous, clean energy
economy.

(more…)

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nuclear-powerThe American Clean Energy and Security Act passed in the House this Friday by a narrow margin of 219-212, and US lawmakers immediately began patting themselves on the back. Rep. Henry Waxman touted the bill as “decisive and historic action to promote America’s energy security and to create millions of clean energy jobs that will drive our economic recovery and long term growth.”

International observers joined in the praise, expressing levels of support varying from China’s cautious endorsement to the EU’s enthusiastic approval; some hailed the bill as a sign of commitment by the US, likely to encourage efforts toward a workable international climate treaty in Copenhagen. Coverage in the UK’s Guardian introduced ACES favorably as “a milestone,”  “the first time either house of Congress had acted to reduce the carbon emissions that cause climate change,” and quoted environmentalists who called the bill “a signature achievement.”

Criticism of Cap and Trade

But not everyone’s so excited. Among the few critics speaking up against Waxman-Markey, Todd Darling wrote in the LA Times that the newly passed climate bill is full of “smoke and mirrors.” We only have to look to Europe to see the “critical weakness” of a cap and trade plan that gives away too many pollution credits, Darling argues; and since ACES gives 85% of credits to polluting industries for free, it won’t establish a strong carbon market, won’t result in emission reductions, and won’t generate money to fund new technology. (more…)

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Earlier today, Congressman Henry Waxman was asked to directly respond to the Breakthrough Institute’s analysis of the American Clean Energy & Security Act (ACES) during an interview on the Montel Williams Across America radio show. His segment came after my interview on the same show, where I highlighted Breakthrough’s analysis and spoke about some of our concerns with the bill.

Here is a transcript of his response (starting at 8:00 minutes, podcast available here). Rep. Waxman is Chairman of the House Committee on Energy and Commerce and lead author of the ACES climate bill:

Montel Williams: “Teryn Norris from the Breakthrough Institute and several other people say that this [bill] is based on credits that would be given out and traded by companies to meet their carbon footprint – I’m being told that 85% of these are being given away when they could have been auctioned off, which would have been a revenue source that could have been put toward more forms of renewable energy. Why did we decide to give away these credits rather than auction them off?”

Congressman Waxman: “We’re giving away the credits to utilities in order to protect ratepayers. The credits they won’t have to pay for won’t be charged to ratepayers, both individual consumers and businesses… So this is a way to be fair to the consumers.

The essence of the legislation is that we’re going to get reductions and we’re going to have a limit on carbon emissions and those limits go down. As we try to squeeze down the amount of carbon year after year we want it done in a way that hurts the consumers as little as possible and we think for the most part we’ve protected most people. And we want it done in a way that can produce the result in the least expensive way, so there are offsets that can be purchased.

(more…)

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Earlier today, National Public Radio’s Morning Edition ran a special feature on the Breakthrough Institute and our work on climate and energy policy. In case you missed it, you can listen to the story and read the article here:

Listen to NPR’s feature on the Breakthrough Institute

Since its founding, the Breakthrough Institute has worked to advance a progressive politics and policy agenda capable of overcoming climate change and unleashing a new era of prosperity and opportunity. For NPR listeners new to Breakthrough, we’ve posted a welcome page for you here.

NPR’s story comes at a critical moment for climate and energy policy. This Friday, the House will vote on the American Clean Energy & Security Act (ACES). Over the past month, the Breakthrough Institute has released 14 quantitative analyses of ACES. Our research shows that ACES would:

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Modern neoliberal market theory dictates that, in order to solve the climate challenge, we need to hand the problem over to the markets.

The market, unencumbered by government interference, will then pick the most promising technological advances and, combining rapid technological development with efficient allocation of emissions reductions, will swiftly and economically solve the problem.  This is the way America developed its massively superior economy in agriculture, industry, and, most recently, computer science and biotechnology.

Or so the story goes.

According to Fred Block, a Breakthrough senior fellow, not only have government agencies been behind most of the major technological innovations of the past half-century, but that the role of government support, especially relative to corporate R&D, has increased significantly in the past twenty years.

Dr. Block performed a deep study into the public incubation of new technologies.  Focusing on groups like DARPA, NSF, and ATP (all agencies that fund scientific research and innovation), Block’s statistical analysis reveals modern invention’s huge dependence on government research.

The public perception.  Government often plays a huge role in bridging the "Darwinian Sea" that might otherwise kill off very valuable innovations.

The public perception. Government often plays a huge role in bridging the "Darwinian Sea" that might otherwise kill off very valuable innovations.

Well, so maybe the government is funding basic research at its national labs, but the actual process of commercialization and deployment takes place entirely within the private sector, right?  As Block shows, it turns out that this assumption is false as well.  Government agencies have historically played a significant role in the commercialization of new technologies – helping to bridge the so-called “Technology Valley of Death” with procurement contracts and loan guarantees.  Some firms even receive direct capital from government-sponsored venture capital funds like In-Q-Tel at the CIA and OnPoint at the Army.

What am I getting at here?

While the public perception of government research and development focuses on waste and failure, the truth is that a variety of government agencies sponsor a significant portion of our nation’s major innovative output.  We would be wise to study the way that government innovation works and understand how to successfully grow it while also capitalizing on the strengths of the marketplace.

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The American Clean Energy and Security (ACES) bill, also known as the Waxman-Markey bill, will be discussed in the House of Representatives this week, and a vote will likely take place by Friday, June 26. This bill is a crucial piece of legislation: it will largely determine whether or not the US can succeed in its quest for energy independence, drastic reduction of carbon emissions, economic sustainability, and, ultimately, damage control on climate change. The bill also has the potential to impact developing countries both in economic and in political terms — depending on the economic and energy outcomes of the bill, emerging economies will either see in the US a beacon of boldness and a leader in clean energy deployment, or, alternatively, a country that promises but fails to deliver.

DOEA study on the political economy of France from 1945 to 1975 (a period of impressive economic growth in most of Western Europe, dubbed “The Glorious Thirty” in France) sheds light, albeit indirectly, on the challenges we face as a nation, as well as on potential solutions. Governance Culture and Development: A Different Perspective on Corporate Governance, by Nicolas Meisel, studies post-war France and shows how, in spite of its poor governance standards (high levels of corruption, etc.), the country was able to enjoy considerable economic growth. (more…)

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SignFostering innovation through public investment is an important strategy for achieving a transition to a clean energy economy by 2050. Strategic, yes, but definitely not the whole story.

In order to fund innovators you need a society that engenders innovation. One major way to produce innovators is through high quality education. Rigorous science, engineering, and mathematics programs that inspire young students to approach the climate change dilemma with a sense of possibility and creativity are necessary to improve the potential for success in the clean-tech industry. Creativity, of course, is the operative word.

“[C]reativity has come to be the most highly prized commodity in our economy,” explains Richard Florida in his book, The Rise of the Creative Class. He expands the innovation economics theory of a “knowledge economy” to the more inclusive, “creative economy,” naming creativity as the driving force in our economy and our society, today. (more…)

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