We Need an Innovation War, Not a Trade War

In a letter to Secretaries Clinton, Geithner, and Locke, Attorney General Holder, and US Trade Representative Kirk, 19 business groups, including the National Association of Manufacturers, argue that new “indigenous innovation” programs are designed by the Chinese government to find “national champions” of industry that can be advantaged in a variety of sectors, including green technology, and create "barriers to competition."  The Hillicon Valley technology blog over at The Hill notes that this concern comes in the context of rising trade conflicts between the United States and China. 

This attention comes on the heels of increasing concern over China’s leadership in clean energy technology. As noted in this weekend’s New York Times piece on the subject, the country has become the world’s largest manufacturer of wind and solar generation equipment.  Through industrial policy, China is trying to take advantage of the growing export market for power sector equipment of all types, especially clean energy.

We should have expected that China would be a strong competitor in the clean energy sector.  Regardless of the outcome of continuing international climate negotiations, countries from Europe to most U.S. states to China itself have already made unilateral policy choices to increase the use of clean energy technology in the coming decades for a multitude of reasons.  The demand will be tremendous for the manufacture of clean energy technologies, and there is potential for fortunes to be made in their export.

What should the appropriate policy response be?  As the authors of the letter suggest, the US should promote fair access for American goods and services in foreign markets.  Protectionist responses and trade wars have never helped any country grow its economy and create jobs.

But reducing protectionism is not enough to regain the American lead in the clean energy sector.  The US needs to have a policy of its own that encourages innovation and gives the right incentives for US companies to compete globally.  America is a land of innovation, and we should be the ones taking advantage of these new and growing markets, not ceding them to competitors.  Part of the answer is for the US to put a price on carbon. Doing so would encourage innovation in the private sector and provide regulatory certainty for companies to make investments here in clean energy technologies.  American ingenuity is second to none, and Congress needs to work on a climate and energy bill that provides the right framework for our businesses to flourish.

Michael Tubman is a Congressional Affairs Fellow

Copenhagen Accord: Act II

The fuller significance of the Copenhagen Accord became a little clearer this week – and a little murkier too.

The nonbinding deal struck six weeks ago by a couple dozen world leaders left open two immediate questions: exactly which countries would be signing on to it, and just what targets or actions they would be promising.  The parties gave themselves until January 31 to fill in those blanks.

Update: It’s so cold! What happened to global warming?

Science Q&A

The cold weather continues across much of the Unites States, Europe, and central Asia as the Arctic Oscillation remains in a strong “negative” state, forcing cold Arctic air down to the mid-latitudes. A couple of weeks ago I explained why more frequent heavy snowfall events could be a consequence of global warming for mid-latitude areas near large bodies of water, like Washington, D.C., and Syracuse, New York (see figure).

The average amount of annual snowfall has been increasing in Syracuse, New York, for most of the past century. (SOURCE: Increasing Great Lake–Effect Snowfall during the Twentieth Century: A Regional Response to Global Warming? Journal of Climate vol. 16, pp. 3535-3342, Figure 1)

On January 31, I noticed a forecast for lake-effect snowfall around the Great Lakes on Weather.com:  “Lake-effect snows are also possible near the central and western Great Lakes today and tonight.”

Natural Gas and Our Energy Future

We just added a brief on natural gas to its Climate TechBook that helps to explain why natural gas is unique among fossil fuels. Natural gas is both a contributor to climate change (natural gas combustion accounts for about 16 percent of total U.S. greenhouse gas emissions) and an option for reducing emissions since natural gas is less carbon-intensive than coal and petroleum. The United States could actually reduce total greenhouse gas emissions by burning more natural gas if it’s displacing other fossil fuel use (this is particularly the case for fuel switching from coal to gas in power generation).

Like coal, but unlike petroleum, natural gas is primarily a domestic energy resource, with net imports of natural gas constituting only about 13 percent of U.S. consumption and about 90 percent of imports coming from North America. Unlike coal (93 percent consumed for electricity generation) and petroleum (more than two thirds used for transportation), natural gas consumption is more evenly split across the electric power, industrial, residential, and commercial sectors.

The past few years have seen a “revolution” in the outlook for natural gas supply. Until recently, experts thought that the United States would become increasingly dependent on expensive imports of liquefied natural gas (LNG) from overseas, but the recent boom in domestic “unconventional” gas production (driven by shale gas) and the dramatically increased estimate of U.S. gas reserves have led to projections of increasing domestic natural gas production and declining imports.

Natural gas is receiving a lot of attention in the discussion about U.S. climate and energy policy. The gas industry is pressing for favorable treatment in possible climate and energy legislation, with a specific set of policy priorities recently put forth by a major industry lobby group.

While some tout natural gas as a “bridge fuel” to a low-carbon future others fear that a “dash for gas” (i.e., fuel switching by electric power generators) could increase demand for and the price of natural gas, thus negatively impacting manufacturers that rely on natural gas for energy and as a feedstock.

Recent analysis by the U.S. Energy Information Administration (EIA) of the climate and energy bill passed by the House in June 2009, illustrates how the projected role of natural gas in reducing U.S. greenhouse gas emissions depends in large part on the use of offsets under cap and trade and the relative cost and commercial availability of low-carbon technologies (e.g., wind, solar, carbon capture and storage, and nuclear power). When low-carbon technology deployment and offsets are constrained, EIA finds a much heavier reliance on natural gas for electricity generation under cap and trade, but the new outlook on U.S. natural gas supply means that even this pessimistic scenario does not lead to major increases in projected natural gas prices.

A new modeling analysis from Resources for the Future (RFF) sought to quantify the implications of the dramatically expanded U.S. natural gas supply. RFF researchers found that without new energy and climate policy, more abundant and less expensive natural gas could actually mean slightly higher U.S. greenhouse gas emissions in 2030 than would otherwise be the case (as cheaper natural gas competes with non-emitting energy sources and increases total energy consumption).

This last point brings us back to the overarching importance of implementing a policy that puts a price on carbon, as a greenhouse gas cap-and-trade program would do. Putting a price on carbon would harness market forces to drive the deployment of a portfolio of low- and lower-carbon technologies and fuels, including increased natural gas use to the extent it can cost-effectively reduce emissions.

Steve Caldwell is a Technology and Policy Fellow

Experts Debate Emissions and Driving

Transportation experts gathered in Washington last week for the Transportation Research Board’s 89th annual meeting. With over 10,000 participants and 600 sessions, it is hard to draw any crosscutting conclusions from the conference. With an eye on climate change, however, the TRB meeting indicated the transportation community is engaged and ready for reform. One of the conference’s hot topics addressed the potential to reduce greenhouse gas (GHG) emissions by limiting vehicle miles traveled (VMT). VMT is one of the four major influences on transportation GHG emissions. The others are vehicles, fuels, and the overall efficiency of our transportation system. We need policies to address all four.

At a session entitled “Vehicle Miles Traveled Reduction Targets: Will This Strategy Get the Desired Results?,” the participants debated the effectiveness of VMT targets on reducing GHG emissions. Reducing driving may have been unimaginable in the previous era of urban sprawl and Eisenhower’s interstate highway system, but a confluence of interests in promoting livability and combating climate change has ushered in a new way of thinking about transportation. The idea of limiting VMT is not without its critics, however. Research is ongoing as to how much VMT can really be reduced, on the precise relationship between VMT and GHG emissions, on the costs and benefits of transportation alternatives, and on the distribution of those costs and benefits geographically and by income class.

Perhaps it was the panelists’ connection to the glory days of transportation in the United States or their own economic analyses, but they were mostly skeptical with respect to the efficacy of using VMT targets to reduce GHG emissions. As one speaker put it, “VMT is about technology versus behavior,” meaning lawmakers would use VMT targets to affect behavior due to a lack of confidence in technology.

Another speaker defined VMT targets and the subsequent effects on land-use policy as a “blunt instrument.” They argued VMT reductions would force a reorientation of the population in the United States without necessarily reducing GHG emissions. Furthermore, one panelist claimed VMT targets would be highly regressive.

The lone advocate for VMT targets acknowledged some of these detractions, but strongly pushed for the policy as a “good starting point” towards greater land-use reform. His research showed an economic benefit (i.e., jobs) from spending less on transportation, since people tend to spend that extra money on more labor-intensive products. He also highlighted polls and recent trends indicating that people want to live closer together. Lastly, the co-benefits of reducing VMT including improved safety and reduced congestion make the policy worthwhile even without considering the environmental benefits.

The panelists agreed on some things – for example, that researchers do not fully understand transportation behavior, and that there are substantial co-benefits of reducing VMT. They also agreed that a VMT tax would be preferable to the current Federal gasoline tax as a means of maintaining the surface transportation system, though they disagreed over its effects on GHG emissions. Enacting that policy, however, is politically challenging.

A proposal by Rep. James Oberstar (D-Minn.) to reform fundamentally the current transportation system stalled in 2009, and the legislative prospects in 2010 are unclear. In the absence of comprehensive reauthorizing legislation, action by the Administration – for example, through the Federal budget and U.S. Department of Transportation (DOT) rulemaking – will be critical, as will state and local innovation. We could begin to see this needed leadership from the Administration in the form of the President’s budget, which is set for release on February 1st. DOT does have some discretion to improve federal transportation programs under its existing legislative authorities, and the President’s budget could include such reforms. The President could also propose more significant changes, but that would require Congressional approval.

Nick Nigro is an Innovative Solutions Fellow