A new report, Post-Partisan Power, puts forth several interesting ideas for how the United States can accelerate technological progress to advance U.S. energy security and global climate protection. The authors are Steven F. Hayward of the American Enterprise Institute (AEI), Mark Muro of the Brookings Institution, and Ted Nordhaus and Michael Shellenberger of the Breakthrough Institute. The report has created a buzz, in part because of the “man bites dog” nature of the story – Brookings and AEI agree on something! And they are saying “post-partisan” out loud in these hyper-partisan times.
The authors recommend a number of initiatives that ought to be no-brainers – invest more in energy science and education, overhaul the energy innovation system by increasing funding for the new Advanced Research Projects Agency-Energy (ARPA-E) and developing regional energy innovation centers, reform energy subsidies, use military procurement and competitive deployment to drive innovation and price declines, and pay for all this through a very small carbon tax or electricity fee. The major critique of the report, best articulated by Harvard economist Rob Stavins, is that these recommended steps are necessary but not sufficient – i.e., it is all very well for the government to invest in these technologies, but we also need to create a market for them through a strong carbon price or serious greenhouse gas reduction requirements.
The authors have responded that they didn’t mean to imply that their recommendations include all we need to solve our energy and climate problems. However, their subtitle, “How a limited and direct approach to energy innovation can deliver clean, cheap energy, economic productivity and national prosperity,” makes it sound an awful lot like they did. And their opening critique of “both sides of the debate” on climate and energy is dismissive of pricing in general and cap and trade in particular – noting, for example, cap and trade’s defeat in the Senate but not its victory in the House, and saying pricing has not succeeded in reducing emissions in Europe, when in fact it has. But let’s set that aside for the moment.
The more intriguing question this report raises for me is why the energy and climate debate is so stuck and why even the modest proposals described in “Post-Partisan Power” face an uphill battle.
The report’s authors lament our irrational energy subsidies and dysfunctional federal support system for energy innovation, and I agree substantively with their critique and their proposed fixes. But this irrationality and dysfunctionality have persisted for a long time. Each energy source has a powerful constituency for federal subsidies and tax breaks. And for each DOE lab in the current national network that does most of our federal energy research, powerful regional interests protect the status quo.
Similarly, policy analysts have made an airtight case for decades that pricing policies are both effective and cost-effective at reducing emissions, but for the most part politicians and the public have resisted such policies. We seem to prefer our regulatory costs to be high and hidden rather than low and transparent.
What is going on? I’m not sure, but I can think of at least two partial answers. The first is our political system’s focus on the size of government rather than its efficacy. The “great debate” in this election is whether the government should be bigger or smaller, not whether government is effectively doing whatever tasks it is assigned. The key critique of cap and trade was that it was a tax and that it looked like too much government, when the debate should have been about its efficacy in reducing emissions and minimizing costs. We measure success or failure of federal action with respect to a particular energy source by the size of the budget or tax breaks devoted to it, not whether such action is effectively driving innovation or bringing down technology costs. Hayward et al. suggest we fix this through better program design, but that will not be easy. It requires a transformation of our nation’s political thinking at a very deep level.
The second answer is specific to the energy system. It is an inconvenient truth that fossil fuels have some really attractive characteristics as energy sources. They are abundant, seemingly cheap (if one doesn’t take into account their environmental or energy security impacts, and of course the market price does not do so), and “energy-dense” (meaning they can produce a lot of energy per unit of volume and mass). They have also been used for a long time, and their use has co-evolved with extensive fuel distribution infrastructure and fuel-using equipment. Thus, shifting away from these fuels requires displacing a suite of interdependent incumbent technologies.
This problem is really different, in kind and in scale, from any the U.S. government or the U.S. economy has wrestled with before. It is not like computer innovation, where a new set of technologies created new markets for new services; or airplanes, in which military procurement dominated an emerging market. To move away from the energy system we have, which meets our private needs very nicely, to one that may have lower social costs but higher private ones (at least for some transitional period), is going to be very difficult. Hayward et al. hope that we can eat our cake and have it, too, by finding new technologies that have both lower social costs and lower private costs. But substantially increasing government investment won’t guarantee this outcome – certainly not by itself. Rather the United States must make climate protection and national security a priority, and develop and implement a conscious, ambitious, and comprehensive national strategy with full public support. This is a daunting challenge.
Judi Greenwald is Vice President for Innovative Solutions