Climate

Can We Stop The Collapse of Federal Clean Energy Support Without Talking About Climate Change Or A Carbon Price?

In the next two years — assuming Congress doesn’t act — the vast majority of federal support in place for clean energy in the U.S. will be gone.

As a well-researched but jaw-droppingly incomplete new report posted by the Brookings Institution points out, spending levels for deploying clean energy technologies aren’t being gradually phased out; the industry is getting pushed off a cliff wearing cement shoes.

For those of us who care about clean tech and don’t just want to buy it all from China, the central question is: What can possibly be done to maintain and indeed expand federal support for clean energy in an era where exploding federal deficits and debt have, unsurprisingly, come to dominate the political debate — an era where one political party has proposed cutting most every clean energy program sharply.

One of the most important insightful statements I’ve ever heard on this subject came, unsurprisingly, from Henry Waxman (D-CA), the Ranking Minority Member of the Energy and Commerce Committee, in his opening statement for an oversight hearing on “Solyndra and The DOE Loan Guarantee Program.” In rebutting the standard GOP attack on the argument that Solyndra “shows the folly of federal investments in solar and other clean energy technologies” and that “the government should not pick ‘winners’ and ‘losers’ in the energy marketplace,” Waxman explained:

This sounds superficially appealing, but there is a fundamental flaw in their logic.  The majority of Republicans on this Committee deny that climate change is real. If you are a science denier, there is no reason for government to invest in clean energy.

That final sentence cuts through the fog of this debate like the Fresnel lens of a lighthouse lamp. For science deniers, clean energy is just another special interest, hardly different from, say, natural gas or, for them, even oil and coal.

ACC temps

The essential rationale for government action, as progressives and climate hawks know, is that we must start rapidly getting off of fossil fuels ASAP to preserve a livable climate — to maintain a carrying capacity anywhere near the projected mid-century population of this planet — by limiting warming to under 4°F. Indeed, we know that even if we miss that target, the shift is inevitable by midcentury, else we face warming far beyond 10°F globally — beyond 13-18°F over most of U.S.! — with multiple, simultaneous catastrophic consequences that  are almost beyond imagining.

Put another way, the reason the government needs to act in the energy marketplace is that clean energy has huge benefits to the nation and public health that are not reflected in its relative cost to fossil fuels (See, for instance, Economics Stunner: “Oil and Coal-Fired Power Plants Have Air Pollution Damages Larger Than Their Value Added.” Natural Gas Damage Larger Than Its Value Added For Even Low CO2 Prices.)

That’s why the single most obvious government policy for federal support of clean energy — one that mainstream economists (and think tanks) across the political spectrum have embraced — is a price on carbon.

So you would think that a 64-page report on clean energy policy by leading think tanks would have a big focus on climate change and a carbon price, particularly a report titled “Beyond Boom and Bust: Putting Clean Tech on a Path to Subsidy Independence.” After all, the only true way to achieve subsidy independence is for the price of fossil fuels to reflect their actual harm to humans. Until that happens, subsidies would seem inevitable. Once a rising price happens, most clean energy advocates would be happy to start phasing out virtually all subsidies.

And yet this report has no mention whatsoever of the words “climate change” or “global warming.”  Indeed,  the word “pollution” never appears. The report offers no actual rationale for why the government should be in the clean energy business at all, other than a passing reference to the tens of  thousands of jobs the sector has created. But, of course, oil and gas create jobs, too, albeit unsustainable ones.

Even more amazing, while the report devotes a full 20 pages to its policy recommendations section, “Putting Clean Tech on a Path to Subsidy Independence,” and offers some theoretically terrific ideas, it devotes not one single sentence to a carbon price. The phrase “carbon price” never appears.

It’s as if the whole notion of global warming and the cost of pollution and pricing carbon had been carefully scrubbed from the report. Yet those concepts represent a core rationale — if not the sine qua non — for writing a 64-page report  on federal intervention in the  energy marketplace to support clean energy.

No doubt purely coincidentally, here is the list of authors:

UPDATE: Obviously, the presence of the four Breakthrough Institute authors, including the two famous founders, will inevitably leave the impression with some that this is a BTI show. Originally, the Brookings website had this clarification: “Editor’s Note: Mark Muro is the  lead contributor of the paper.” Now Brookings has updated its website to read “Mark Muro is one of the principal authors of the paper.

No doubt the involvement of Brookings and WRI explains why, in a narrow sense, the report is excellent, with great charts and factoids on how President Obama sharply increased clean energy support in the recovery act, and how that is all set to disappear if Congress doesn’t act.

Whatever one thinks of the Breakthrough Institute, they have made clear they believe environmentalists are to blame for recent failures in energy policy, by talking too much about the climate and pushing policies built around carbon pricing. Their work inspired me to come up with a new term, “climate science ignorers.”

Since the new study offers not two words of explanation for why it ignores climate change or even why it fails to consider a carbon price, let’s look at how Shellenberger and Nordhaus make the case.  In an October piece, they blame Australian greens for even passing a modest carbon price, and use that to then launch an attack on everyone, everywhere who supports a carbon price:

While the [Australian] Liberal Party has, like the Republican Party, behaved badly and rejected good science in reaction to bad policy, the real blame for the inevitable policy failure lies with the green movement. In Europe, the US and Australia, environmental NGOs and the center-left generally has grossly oversold the impact of pricing carbon, the readiness of renewable energy, and the political sustainability of their schemes.

Though some greens try to fudge the numbers, no climate or energy analyst today can credibly claim that renewables are cheap enough to compete broadly with fossil fuels. Solar is three to five times more expensive than coal, and that’s not counting the high cost of storage and transmission. No nation — not Australia, not Germany, not China — will raise carbon prices significantly enough to make solar and wind competitive with coal, much less natural gas.

Let’s set aside the untenable statements about the competitiveness of solar and wind today — new solar isn’t 3 to 5 times as expensive as new coal (although it is much more expensive than existing coal and will be for many decades, which of course is why you need a carbon price if you care about a livable climate).

Their argument doesn’t actually make any sense at all — if one doesn’t ignore climate science. No serious independent analyst believes we could stabilize at non-dangerous levels without a serious carbon price.

The International Energy Agency (IEA) noted back in 2008 that just to stabilize at 550 ppm (roughly 3°C or 5.4F warming), which would likely still be catastrophic for humanity, you’d need a price of “$90/tonne of CO2 in 2030.” You need a 2030 CO2 price of “$180/tonne in the 450 Policy Scenario.”

I can see someone arguing, as BTI does in their piece, that such prices are politically difficult and even implausible, but the weird thing about this new report is that it never even bothers to. It simply ignores one of the most obvious policies to advance clean energy without offering any reason at all.

And yet the report offers suggestions that are at least as politically difficult and even implausible:

… policy makers should steadily scale up investment in clean energy RD&D to at least triple today’s levels.

Of course they should. I and others have been arguing that since Reagan gutted the R&D budget  for renewables and efficiency. Heck, we should sharply increase federal spending on education and infrastructure. But that isn’t going to happen because of something called the deficit. Well, actually, it’s not going to happen because Republicans have opposed massive expenditures in clean energy for longer than they have opposed a carbon price and indeed  have slashed clean energy pretty much every time they are in charge, starting with Reagan and continuing with the Gingrich Congress. It is now the budgetary policy of the House GOP.

But this report never mentions the words “deficit” or “national debt.”

My point has always been that if you are going to pursue a politically difficult policy, you should at least pursue one that will put you on the path to averting climate catastrophe, which the policies in this paper, however admirable, won’t do.

I’d also add that there is considerable bipartisan support for a carbon price — see here.

The report notes that by 2014, federal spending will be down by 75% compared to the highs of 2009.

Of course, the huge boost in 2009 was due to the stimulus package — opposed by every Republican in the House and the overwhelming majority in the Senate. No one really expected us to maintain such a high level of spending over a long period of time — absent a climate bill with a carbon price that paid for such spending. But the list of programs and expenditures that will soon be phased out (or already have been phased out) is stunning: Manufacturing tax credits, production tax credits, loan guarantees, grants for project deployment, and a variety of other direct expenditures for energy efficiency, electric vehicles and renewable energy research.

“In the absence of legislative action to extend or replace current subsidies, America’s clean tech policy system will have been largely dismantled by the end of 2014,” write the report’s authors.

Again, what precisely are the chances of legislative action either to extend the current subsidies or reform them, as this report argues for?

The authors of this report argue for a re-design of deployment incentives so that they’re more innovation-based, along with an expansion of R&D programs to grow the pool of new cost-competitive technologies coming into the market.

Some of the ideas are good, but in total they are certainly less plausible than a carbon price — because at least a carbon price will reduce the deficit, which is something everybody wants. Indeed, as two Democratic and two (former) Republican House members have argued, a carbon price could be part of a grand bargain debt deal where everybody gets something that they want and everybody agrees to something they don’t really want.

Dave Roberts at Grist notes that:

The report’s ideal subsidies would:

  • explicitly incentivize innovation and cost cutting
  • not “choose winners” a priori, but be allocated based on objective, transparent criteria
  • phase out based on set metrics of market maturity or cost
  • be tailored to technologies at different stages of development
  • minimize transaction costs
  • be long-term

Other than the third bullet, all of those are perfectly achieved by a carbon price. Indeed,  a carbon price is the policy that best avoids “choosing winners” if  you think that is a political problem. And it is well known among economists that a carbon price would minimize transaction costs compared to essentially any other policy imaginable.

Yet the report is silent on the topic.

I would also add that another glaring omission from this study is any mention of the sharp increase in venture capital investment in clean energy since the 1990s. There is only one sentence on venture capital and that is linked to a Third Way study that many have questioned.

My point in raising VC spending is that one more advantage of a rising carbon price is that it would greatly incentivize the private sector to increase VC and other funding in research, development, demonstration, and  deployment. It would be the single biggest and best way to deal with the commercialization “valley of death” that this study repeatedly talks about.

I have long been for many of the policies in this paper, and I still am. But I think it is pretty clear that a return to high levels of government clean energy subsidies (even better designed ones) is at least as implausible as a carbon price and probably more so. Indeed, it may not be possible to get higher subsidies for certain kinds of low carbon energy without a carbon price to pay for them. And, in any case, adopting every single policy in this report won’t put the nation or the world on a sustainable trajectory.

We could well get a carbon price before it is actually fashionable to talk about climate change again. But as for whether we can actually solve the climate problem without talking about climate, I’d have hoped that question was answered during the climate bill debate. As columnist Ezra Klein put it,

I’m just not sure how you do a response to climate change if you can’t really say the words “climate change.”

We don’t know why the authors of this 64-page report want to maintain high levels of government support for clean energy because they don’t explain themselves. But assuming it has something to do with climate change, let me associate myself with Klein’s comment.

26 Responses to Can We Stop The Collapse of Federal Clean Energy Support Without Talking About Climate Change Or A Carbon Price?

  1. prokaryotes says:

    End times near for U.S. support of cleantech

    About two years ago Dan Reicher, Google’s then director of climate change and energy initiatives said: “we’re staring at the biggest cliff we’ve ever faced in renewables when the stimulus runs out in 18 months.” Now it looks like the end times are near for U.S. support for cleantech, at least according to a report out from the Breakthrough Institute, the Brookings Institution and the World Resources Institute.

    The report says that after a rise in cleantech support and clean power installations between 2006 and 2011, tens of billions of dollars will suddenly come to a screeching halt and tax breaks for clean power are also in danger of expiring. As the New York Times noted: “there will be a estimated 75 percent decline in federal clean technology spending by 2014 from a peak of $44.3 billion in 2009.”

    The drop in U.S. support is particularly unfortunate as various clean power technologies are still more expensive than fossil fuel-based power, but some are on the brink of grid parity, like solar, with its drop in solar cell prices.

    Of course, the fossil fuel industry received decades and billions of support over the years. GigaOM Pro analyst Adam Lesser looks into a report from Roger Bezdek, a 30-year energy consultant, and found that $837 billion (in 2010 dollars) in incentives were expended over the past 60 years with oil, coal and natural gas getting 70 percent of that, or $594 billion. Oil alone was the big winner with $369 billion by itself while renewable energy, defined primarily as solar and wind, has received $74 billion, about what nuclear has received. http://energyclean.net/item/renixx-renewable-energy-index.html

  2. prokaryotes says:

    Obama has to step in and set up a task force for rescuing the future. If this not happening, China will become dominator of the future energy monopoles.

  3. Sundance says:

    China’s future energy monopolies may not include wind and solar.

    “China will accelerate the use of new-energy sources such as nuclear energy and put an end to blind expansion in industries such as solar energy and wind power in 2012, Chinese Premier Wen Jiabao says in a government report published on March 5.

    China will instead develop nuclear power in 2012, actively develop hydroelectric power, tackle key problems more quickly in the exploration and development of shale gas, and increase the share of new energy and renewable energy in total energy consumption.”

    http://www.elp.com/index/from-the-wires/wire_news_display/1621584677.html

  4. M Tucker says:

    Since:
    “…the Breakthrough Institute…made clear they believe environmentalists are to blame for recent failures in energy policy, by talking too much about the climate and carbon pricing.”

    And since:
    “…this is a Breakthrough Institute show…”

    Is it really so surprising that the report “…ignores climate change [and] fails to consider a carbon price…”?

    We have nothing even remotely approximating bipartisan support in congress for addressing climate change. Not only are the Republicans in both houses opposed to any bill that would address climate change but they are violently opposed to subsidies to support wind and solar. The only subsidies they support are for the fossil fuel industry.

    So I am not at all surprised that no one wants to mention climate change and certainly no one wants to call for a price on carbon. Of course you cannot meaningfully address climate change without mentioning climate change but the alleged “…considerable bipartisan support for a carbon price…” is an illusion. The Republicans who might support a carbon price to “…help America address two of its biggest long-term problems, global warming and the national debt.” are not currently serving in government. Those actually in a position to draft legislation dismiss the science.

  5. pinroot says:

    I think a better question is “Can we stop the wasting of federal tax dollars on clean energy failures?” Solyndra (over $500 million wasted) and Solar Trust for America ($2.1 billion wasted) come to mind.

  6. Sasparilla says:

    Excellent article Joe. I hope we have a clean energy industry by 2016 (beyond just installers). I’m sure the Koch’s are getting the “Mission Accomplished” banner printed up.

    The idea of a carbon tax as part of the deal regarding the expiration of the Bush Tax Cuts at the end of the year is very good – that is probably the only place for the foreseeable future that it could happen at the Federal level.

    Unfortunately a carbon tax would need a serious supporter(s) at the negotiating table to force it into the agreement and the only people I know of who’d do that are Democrats in the House (who won’t be at the table) while there will be Koch lobbied and feared interests at the table definitely not wanting such a thing. I can’t see Obama pushing it with any seriousness, loved to be wrong on that.

    A really, really big long-shot for the negotiations after the end of the election this year….Definitely worth some prayers.

  7. Unfortunately, we can not separate policy from politics. Even the King of Climate Flip-Floppers, Rep. Fred Upton (R-MI) is being challenged from the right. Another 2 years,

    I only see a bleak future where transition communities are our hope of recovery.

  8. Sasparilla says:

    Very well said prokaryotes. I think its definitely lining up to be that way for solar producers (not the installing) here in the U.S..

  9. Frank Zaski says:

    It would be helpful to compare the sum of the many direct and indirect subsidies to coal vs. what will be left for RE in 2014.

    Subsidies to COAL will continue including: tax breaks: expensing of exploration and development costs, depletion allowance, capital gains treatment for royalties, selling mining rights for a song, subsidizing railroads that primarily carry coal plus related roads, bridges, seaports, river dredging, locks and dams.

    Coal accounts for 58% of barge cargo on the Ohio River. http://outreach.lrh.usace.army.mil/Industries/Coal/default.htm

    And, US taxpayers pay for 90% of inland waterway locks and dam construction and maintenance. The industry wants 95%. http://www.iwla.org/index.php?ht=d/sp/i/5034/pid/5034

    Peabody will ship Illinois basin coal to China on barges down the Kaskaskia River to the Mississippi. The US Corp of Engineers is proving the dredging. Guess at whose expense?

  10. Brian R Smith says:

    Joe, thanks for showing again the need to look closely at what policy arguments say and, especially, don’t say.. and to hold policy statements accountable in terms of leading to paths that will “put the nation or the world on a sustainable trajectory.”

    Holding feet to fire, whether it’s policy pundits or Congressional/ corporate/ media dis-informers, is vital, and no one does it better than CP & CAP. Having said that..

    .. Aren’t we screwed on essential federal policy and legislative goals if the conversation doesn’t a)actually succeed in waking up the broader public to climate/energy/economics reality and b) mobilizing them as the electorate? In 2012? Don’t we have to take it there with every tool in the box?

    There is a lot of action in this direction, 350.org being the most visible example. There are 1000’s of state, regional and local orgs working on environmental issues & actions. Greenpeace USA has 250k members, the Audubon Society has 600k members. Business/environmental collaborations, mayors & city planners, academics, students… you start adding everybody up and they number in the millions, perhaps 10’s of millions. Of voters.

    (Direct to this, the League of Conservation Voters has 340k members, the League of Women Voters has 140k.)

    What we have is a huge number of issue-specific constituencies which, if tied together as actors in a strategic effort to redirect the public discourse could have a major impact on the balance of the next Congress.

    The January 22, 2011 CP Open Thread question question was “How can we create a grassroots climate and clean energy movement?” “And what can ClimateProgress do to help?” There were 175 comments, including this from Robert
    Brulle: “It would really be nice to hear from the “leaders” of the environmental movement on this topic. They are employed full time by our contributions to do just this. What are their thoughts and how are they putting them into action???” If there was follow-up on the topic I missed it.

    Coordination and collaboration on messaging, and bringing the complexity of issues to the public in the MSM is critical.

  11. Theodore says:

    I do not believe it is right to compare the cost of solar electricity to the cost of coal-fired electricity directly as they now exist. The cost of solar electricity will be known only when it is produced on a scale comparable to the scale of coal. If the market share of solar and coal were reversed, it is quite certain that the cost of both would be radically different than is now the case. The economies of scale in the solar power industry are not even beginning to find their true potential for cost reduction. Coal-fired electric power is an extremely mature and optimized industry, while solar electric power is still in an embryonic state of development. When solar power matures it will be cheaper than coal even without counting externalities. If externalities are included, there may be a 3 to 1 cost ratio favoring solar.

  12. Solar Jim says:

    I wonder what the chance is of getting Brookings support for a report titled “Beyond Explosive Booms, Financial Busts, Nuclear Meltdowns and Ecologic Collapse: Putting Mined Explosives on a Path to Subsidy Independence.”

  13. Leif says:

    Stop profits on the pollution of the commons, the rest is easy. It is madness for a society to reward the few to pollute the environment of all. No world can withstand the onslaught of capitalism if it is rewarded for rapping and pillaging all to be had. Enough already! STOP!!!…

  14. prokaryotes says:

    Interesting .. also knowing what cake is at stake here, this very well could just be a trick to manipulate the US politics further :)

    I found this interesting, from your link:

    According to a report from the China Electricity Council on the performance of China’s power industry in 2011, the average operating hours of hydropower generating facilities decreased 376 hours to 3,028 hours in 2011 due to severe drought, the lowest level of the past 20 years.

  15. prokaryotes says:

    Meanwhile China’s state-owned utilities have raced far ahead of Beijing’s official goals for renewable energy. More than 40 GW of wind power was installed by the end of 2010, smashing the 5 GW target set by Beijing three years earlier.
    China’s investments could transform the country by midcentury. A Lawrence Berkeley National Laboratory report projects that China could install as much as 550 GW of nuclear capacity and 970 GW of wind, hydro, and solar power by 2050. Combined with energy efficiency upgrades, that surge of low-carbon electricity would slash China’s annual CO2 emissions from power generation to nearly one-fifth their current level.
    Yang sees a possibility that China’s central planners could build enough momentum within a decade to leave the United States behind if Washington doesn’t adopt carbon-reduction measures to drive its economy off coal. “If the U.S. policymakers continue to postpone,” says Yang, “the U.S. may someday find itself unable to catch up.” http://spectrum.ieee.org/energy/nuclear/china-doubles-down-on-nuclear-power

  16. Roger says:

    Brian,
    You raise good points. I’ve often wondered about some of the same things.

    Seems as if we’re losing some of our ability to self-organize. I don’t think there were so many distractions back in, say, 1775.

    One key: it’s all too subtle. Another: human greed and ignorance know few bounds. And another: inability to focus on one goal.

    My suggestion? Everyone focus on the man at the top: President Obama has the power to clear up most of the climate change confusion in one good Oval Office speech.

    You can call the White House comment line M-F, 9-5, at 202-456-1111. Suggest that President Obama give a “State of the Climate” address on Earth Day.

    If Americans knew the true extent of the threat they face from climate change, starting with failed crops, they’d support his leadership in doing what we need to do.

  17. prokaryotes says:

    China’s nuclear power plant review: ‘problems in 14 areas’ found
    Should we be concerned? A nuclear official said in passing this weekend that problems in 14 areas need to be resolved. In the wake of Fukushima, a shade more transparency would be welcome. http://www.csmonitor.com/World/Global-News/2012/0312/China-s-nuclear-power-plant-review-problems-in-14-areas-found

  18. John Tucker says:

    Fighting Climate change needed to be a war.

    Approached with expenditure or at least communal intensity like WW1 and 2 combined with also most of the infrastructure building of the last century.

    So far in reality its been approached like a lukewarm beautification project.

  19. John Tucker says:

    Also I am very uncomfortable with this “Boom and Bust” oversimplified tag-line no matter how necessary it may seem.

    Its not really a “boom or bust” issue as the outcome isn’t a financial goal at all and may indeed sometimes seem to run counter to one.

    Just allowing it shifts the foundation of reasonable argument on the matter.

    When have we fraught any war worth fighting or made any innovative scientific ground with a financial goal in mind?

    Framing this exclusively as an issue in financial terms makes me think first off, you really don’t understand/care about the implications of climate change.

  20. John Tucker says:

    China still has big plans wind and solar; far, far more than we do. Just not poorly planed and inefficiently installed wind and solar.

    They also do as you said, have ambitious nuclear install plans as well.

  21. Raul M. says:

    A price on carbon could be done at a local level.
    It would be a surprise to many that it could be arranged to improve their local situation but many would already know that it would make for a cleaner more functioning community.
    You know that communities came to demand garbage pickup once the people knew of cleaner streets.

  22. John Tucker says:

    BTW

    Id also think about adding some kind of call for a more nationally controlled rate structure when advocating a carbon price. I wouldn’t leave that up to the kindness and ethics of the energy industry.

  23. Raul M. says:

    UV index “looks” to be rising to the extreme levels in south Florida again today.
    Maybe the insurance industry would think that contact lenses that block UV rays is a good thing for the little leagues and scouts.
    The service industries also may spend much time outdoors. You know those worker types who need to be doing delivery driving etc.
    Linemen and etc.
    Yep, those contact lenses do block UV rays and greatly help to prevent sun burnt eyes so that people may see.
    The contact lenses work well even without correction and those lenses are much less expensive than ones with vision correction.
    Enjoy the concept of things improving by dealing with the causes and effects of garbage just floating around in the air. You know people could pay for that garbage cleanup and adaptation.

  24. Mike Roddy says:

    The Breakthrough Institute is an oil company store. Their disregard of facts, as evidenced by their claim that solar is “3 to 5 times more expensive than coal” is typical. And while greens deserve criticism, it’s for being too much like TBI, not the opposite.

  25. Bill Woods says:

    Solar Trust didn’t get any federal money. They were offered a loan, but dropped it when they gave up building the solar thermal plant it was for.

  26. Bill Woods says:

    This “falling off a cliff” characterization assumes that $40 billion/yr was the norm during the preceding years. I kind of doubt that. More likely the 2009-11 years were the exception, with a big chunk of the stimulus bill devoted to energy.