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.
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.