Innovation in Climate Policy

To meet the kind of emission reduction targets the planet needs, we’re obviously counting on a health degree of innovation coming into play. The expectation is that human ingenuity can and will develop some new ideas about ways to generate clean energy, as well as new ideas about how to use energy more efficiently. This is particularly true when you think about the situation in the developing world. We’re hoping to see places like China and India be able to start operating in a climate-constrained way, but we also want to see a continuation of the kind of rapid growth in Asia that’s done so much to reduce the poverty rate around the world. The most plausible mechanism for that to happen would be for the developed world to devise some new technologies that, though they may involve high R&D and startup costs, can be deployed reasonably cheaply once in place.

The Brookings Institution has a recent report out calling for $20-30 billion per year in federal investment in energy innovation. Mark Muro observes that the Waxman-Markey bill, in its current version, involves just $9 billion to this purpose. This is, of course, one of the costs of needing to give in to industry demands that a substantial swathe of carbon permits be given away rather than auctioned off. That leaves the short-term emissions target in place, but it deprives us of revenue that can be used for measures—like R&D—that ease the transition. I take it that that door is already shut at this point, but Muro observes that the Department of Energy’s FY 2010 budget request would, if passed, “begin to build a powerful energy-innovation system in the United States by broadly engaging the scientific community through the funding of Energy Frontier Research Centers, conducting transformative research through ARPA-E, and starting eight of its own ‘energy innovation hubs’ for translational research to get new energy technologies into the market.”

I have a feeling a Green Development Bank could help here too.