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Overcoming the Barriers to Action

CLIMATE CHANGE: OVERCOMING THE BARRIERS TO ACTION

Remarks by Eileen Claussen

Earth’s Future: Taming the Climate
Columbia University Symposium

April 23, 2004


Thank you very much.  It is a pleasure to be here to celebrate Columbia University’s 250th anniversary.  So let me begin by saying Happy Birthday to one of the world’s finest institutions of higher learning.

On the flight here today, I was thinking about the next 250 years and wondering what will become of Columbia and the wider world in that time. (Given the topic we are here to discuss, along with projections that Manhattan could well be threatened by sea level rise in the years ahead, I decided that Columbia always has a future as a great underwater oceanographic institution.  So all is not lost.)

Yesterday, as all of you know, was Earth Day—or, as the Bush administration referred to it, Thursday, April 22nd.  The 34th anniversary of Earth Day, I believe, provides an important opportunity to acknowledge how far we’ve come since the 1970s.  Our air and water are cleaner, and we have laws to control pesticides, ocean dumping, and hazardous waste disposal.  On the other hand, we still have to endure the music of long-lasting 70s rock bands such as Aerosmith and Kiss.  So I suppose things have not universally improved.  (My apologies to all of the Aerosmith and Kiss fans in the audience.)

Seriously, we have made significant progress on environmental issues since the 1970s—but, obviously, not nearly enough.  And I commend you for commemorating Earth Day yesterday in such an appropriate and public-spirited way, by focusing your attention on an issue where we have not seen significant progress: global climate change. 

During the first day of this symposium, you heard from Michael McElroy and a number of distinguished panelists about the state of our knowledge regarding the climate change issue.  You heard about trends in global temperatures and what this means for the climate.  You heard about ways we can possibly adapt to the predicted changes.  And you heard some ideas about what can be done to slow down or stop climate change. 

My job in this symposium is to try to explain why humanity is doing so little to prepare for the certainty of climate change.  And, because I am genetically programmed to focus on solutions, I will also lay out some ideas for an overall approach that might help us chart a productive path forward on this issue. 

But first a very brief refresher course on why we are here.  We are here because there is overwhelming scientific evidence on three basic points: one, the earth is warming; two, this warming trend is likely to worsen; and three, human activity is largely to blame.

And so the question is: if we know these three things, why are we not acting on that knowledge?  Why are we not doing more to limit those human activities that are the driving force in climate change—namely, our emissions of greenhouse gases stemming primarily from the burning of fossil fuels?

The answer, very frankly, is because we have allowed ourselves to be swayed by a number of tired excuses—excuses put forward, for the most part, by people and interests who plainly want nothing to happen to address the problem of climate change.  The reason, more often than not, is that they have an economic interest in the status quo. 

The first excuse for inaction usually revolves around the issue of scientific uncertainty.  Even though we know that the earth is warming, that the warming will get worse, and that human activities are largely to blame, the fact that we cannot accurately predict exactly how much warming we will see or how quickly it will happen is used unfailingly as a reason for inaction. 

But I submit to you that uncertainty in the science is not a valid reason to hold off on addressing this problem, given what we do know.  The fact that we are uncertain about exactly how climate change will proceed may actually be a reason to act sooner rather than later.  And I will tell you why:

First, current atmospheric concentrations of greenhouse gases are the highest in more than 400,000 years.  This is an unprecedented situation in human history, and there is a real potential that the resulting damages will not be incremental or linear, but sudden and potentially catastrophic.  Acting now is the only rational choice under these circumstances. 

· A second reason to act now is that the risk of irreversible environmental impacts far outweighs the lesser risk of unnecessary investment in reducing or mitigating greenhouse gas emissions.

· Third, it is going to take time to figure out how best to meet this challenge--both the technology and the policy responses.  We must begin learning by doing now.

· Fourth, the longer we wait to act, the more likely it is that the growth in greenhouse gas emissions will continue, and that we will be imposing unconscionable burdens and impossible tasks on future generations.

· Fifth, there is an obvious lagtime between the development of policies and incentives that will spur action and the results.  So even if we do not wait, we will be waiting. 

· And, last but not least, we can get started now with a range of actions and policies that have very low or even no costs to the economy.

This brings me to the second tired excuse that is used to argue for inaction in the face of climate change: the costs will be too high.  This argument ignores the fact that if we do this right—and if we start sooner rather than later—we can minimize those costs.  And, more important, we can minimize the very real economic costs of doing nothing.

Next week, the Pew Center will be releasing a report that weighs the potential costs of climate change in relation to the potential benefits.  Yes, in the short term, there may be scattered economic benefits in sectors such as agriculture resulting from higher temperatures and more rainfall.  However, our research shows that these benefits begin to diminish and eventually reverse as temperatures continue to rise.  In other words, the potential economic damage from climate change far outweighs any short-term economic gain.

What kind of economic damage are we talking about?  In 2002, the United Nations Environment Program released a report done in collaboration with some of the world's largest banks, insurers and investment companies. The report found that losses resulting from natural disasters appear to be doubling every 10 years and, if this trend continues, will amount to nearly $150 billion over the coming decade.

Over the last two years alone, we have seen horrific wildfires in the western United States and devastating flooding in central Europe and China. These are the kinds of events scientists predict will occur more frequently or with more intensity in response to climate change.  Of course, it is impossible to conclusively link any one of these disasters to the broader warming trend, but we may be getting an idea of what’s to come.  And we cannot allow those who argue that addressing this problem will cost too much to ignore the potentially devastating costs of allowing climate change to proceed unchecked.

What’s more, the costs of acting to address climate change can be kept at a manageable level—if we use economic instruments wherever possible; if we act thoughtfully and in phases, so that we allow for capital stock turnover and the development of new technologies; and if we provide certainty for the private sector to make wise investments and create new climate-friendly businesses. 

Responding to climate change does not have to wreak economic havoc.  A recent MIT study assessing the costs of the Lieberman-McCain Climate Stewardship Act found that a modest, national emissions trading system would cost less than $20 per household per year.  In addition, a significant number of companies are showing that they can meet ambitious targets for reducing their emissions—targets of 10 percent, 25 percent, even 65 percent below 1990 levels—at minimal or no cost.  I repeat: at minimal or no cost.   Some companies are even saving money.  For example recently announced that it had achieved its target of a 10-percent reduction in emissions eight years ahead of schedule—and at a savings of roughly $600 million due to more efficient energy use and streamlined production processes.

So while I would not argue that addressing climate change over the next 50 years is free, I do believe that with care and pragmatism, we can do what we need to without breaking the bank. Cost should not be a reason not to act.

A third excuse that we have allowed to stifle action against climate change is that the United States should not be asked to bear the economic costs of reducing our emissions while other countries, notably China and India, get a quote-unquote “free ride.”  In other words, why should we have to do all this hard work if other people do not?

This argument is weak enough when you consider that we can reduce our emissions in economically feasible ways.  It’s weaker still when you recognize that the United States already is lagging behind in the global technology race, with big implications for U.S. jobs.  Our dallying over climate policy is ceding to Europe and Japan – which have already agreed to emission caps – the lead in developing climate-friendly technologies.  And I say we should worry less about China and India attracting the polluting technologies of the last century, and worry more that we won’t be selling them the technologies of the 21st century. 

The fact that developed countries should act first to reduce their emissions is enshrined in the United Nations Framework Convention on Climate Change (which the United States is a party to, thanks to the signature of our first President  Bush: George H.W.).  Why did the United States agree to this?  Because developed countries are responsible for most of the greenhouse gases in the atmosphere and therefore should reduce their emissions first.  And, because developed countries are far wealthier than developing countries, we have the means to take action now.  

This is not to say, of course, that developing countries should have no responsibilities.  Just as the United States and other developed nations will need to become more carbon-friendly as we turn over our capital stock, so must developing countries develop in more carbon-friendly ways.  But to expect, or even to wish, that developing countries should face emission limits at the same time and on a similar scale as we do is folly. 

We have now touched on three main excuses for doing nothing: the science is uncertain; the economic costs of addressing this issue are too high; and developed nations should not be asked bear this burden first.  All of these excuses are used to delay action on this issue.  In pushing for such a delay, people often resort to a fourth excuse that underlies all of the others: we can solve this problem if and when we really have to.  But until then, leave us alone.  This is what I call the “silver-bullet defense.” 

Americans, by nature, are an optimistic people who have a deeply held faith in their ability to apply their down-home ingenuity to solve every problem that comes along.  We live in a world of wrinkle-erasing botox injections, iron-free shirts and cellular phones with cameras built-in.  We’ve got to be able to come up with an equally wondrous technology to solve this problem of global warming.  Just give us time. 

There are two problems with this argument.  First, we don’t have time.  You cannot launch an industrial revolution overnight—and that is exactly what we need: another industrial revolution.  Second, climate change is too big a challenge for any one solution.  It is going to take a wide-ranging portfolio of technologies, from energy-efficiency technologies and hydrogen to carbon sequestration, renewable fuels, coalbed methane, biofuels, nanotechnology and biotechnology.  Developing these technologies and getting them to market is going to take a lot of hard work.  We cannot just snap our fingers and make it happen.

We need to replace our existing energy system.  Businesses, however, continue to receive mixed signals from policy-makers about whether or not we are serious about getting on with the challenge of weaning ourselves from fossil fuels.  What’s more, the federal government spends even less than the private sector on energy-related RD&D, which is particularly disappointing when you consider the importance of energy to our economy, our security and our  environment. 

We can do better than this.  We need to encourage, perhaps even require, the development of the full complement of technologies—some of which we may not even know about yet—that will begin to deliver real reductions in greenhouse gas emissions. 

In the same way that we need a broad portfolio of technologies, we will need an array of policy solutions as well. 

Among the most important of these is an economy-wide cap-and-trade system.  This is a policy that sets targets for greenhouse gas emissions and then allows companies the flexibility to trade emission credits in order to achieve their targets in the most economic manner.  This is the approach taken in the Climate Stewardship Act introduced last year by Senators Joseph Lieberman and John McCain.  Their bill garnered the support of 43 U.S. senators and prompted the first serious debate in Congress about exactly what we need to be doing to respond to the problem of climate change.  (A companion measure was introduced in the House of Representatives just last month.) 

But a cap-and-trade policy alone is not enough.  We also need an aggressive R&D program, government standards and codes, public infrastructure investments, public/private partnerships, and government procurement programs—and I am sure there are policies we haven’t even thought of yet.  However, despite needing all these policies, we still seem to be waiting for an easy, catch-all answer that will get us out of this mess, just as we are waiting for a technology silver bullet to make the problem go away overnight.  And waiting itself becomes yet another excuse for doing nothing. 

But in doing nothing, we are making a choice.  We are choosing to ignore what we know to be true—namely, that the earth is warming, that this warming is getting worse, and that human activity is largely to blame.  We are choosing to leave as our bequest to future generations a world that will, in all likelihood, be very different from the world we live in today.  We are choosing to saddle our children and our children’s children with an array of problems that may well be beyond their ability to solve.

This is not a case, in other words, where inaction can be explained in terms of benign neglect—“we just didn’t know.”  Atmospheric levels of carbon dioxide, the major greenhouse gas, have reached an all-time high, according to a report last month from the National Oceanic and Atmospheric Administration.  By putting off serious action, we are essentially making a conscious decision to make the problem worse.  And for that, there is really no excuse. 

Of course, it doesn’t have to be this way.  There are indeed many smart and inexpensive steps we can take beginning right now to reduce our greenhouse gas emissions and start developing the low-carbon energy technologies of the future. 

How can we start?  Here are a few ideas—things we can do to lay the groundwork for reduced emissions, increased energy efficiency and improved energy security in the years ahead:

· Number One: We can require companies to track and disclose their greenhouse gas emissions.  If it is true that what is measured is managed, then this is an essential step if we ever want to move forward with any kind of program for reducing emissions. 

· Number Two: We can use a standard-setting process to set practical but progressive goals to improve the efficiency of our vehicles and our appliances.

· Number Three: We can make strategic public investments in promising technologies.
· Number Four: We can provide incentives for farmers and foresters to adopt practices that take carbon from the atmosphere and store it in soil, crops and trees.

· Number Five: We can step up efforts to determine whether we can safely and permanently sequester carbon in geologic formations deep underground at a reasonable cost.

· And Number Six: As I mentioned already, we can build an economy-wide system that sets modest but mandatory targets for reducing emissions and uses market approaches like emissions trading to meet them at the lowest possible cost.

That’s just a random assortment of things we can do right now.  And none of these activities—not one—would pose any kind of serious threat to U.S. economic performance.  Indeed, by creating the conditions for a new industrial revolution that encourages the development and deployment of low-carbon energy technologies, we can create new opportunities, new jobs, and new wealth. 

The key as we move forward is to set a clear, long-term goal of where we want to be on this issue, and then to figure out the short- and medium-term steps that will get us there.  At the Pew Center, we call it the “10-50 Solution.”  By 10-50, we mean that we believe this is a 50 year issue and we should be thinking ahead and envisioning what our society and our economy will need to look like if we are to significantly reduce our emissions. 

That’s the “50” part.  Then, in order to make it manageable, we break it down into 10 year increments.  And we identify the policies and strategies we can start pursuing in the next ten years and the decades to come so we can achieve our long-range goal.

That’s the “10” part.

The 10-50 approach takes a long-term view because we know it will take time to achieve the result that we need -- a low carbon economy.
 
At the same time, the 10-50 approach enables us to identify the practical steps we can take in the short-term and in the decades to come so we can achieve steady progress. 

If we do this right, one step at a time with a long term goal -  it will be like Calvin from Calvin & Hobbes who said,  'Know what's weird?  Day by day, nothing seems to change, but pretty soon…everything's different'.

In closing, let me say again that I greatly appreciate the opportunity to be here today.  And I ask all of you to join with me and the Pew Center in saying that the time is past for making excuses about why we should not or cannot take serious action to address the problem of global climate change.  With an approach based on sound science, straight talk, and a commitment to working together to protect the climate while sustaining economic growth, we can achieve real progress on this issue.  And we must. 

Columbia University is 250 years old this year.  Let’s work together to ensure that, 250 years from now, there will be a symposium at this great university on what happened at the dawn of the 21st century to finally get a handle on this enormous problem. 

Thank you very much.  

The 10-50 Solution: A Decade-by-Decade Approach to Climate Change

The 10-50 Solution: A Decade-by-Decade Approach to Climate Change

Remarks by Eileen Claussen
President, Pew Center on Global Climate Change

EnvironDesign8 Conference

April 22, 2004


Thank you very much.  It is a pleasure to be in Minneapolis.  I know this may date me, but as I was on my way here to the home of the old Mary Tyler Moore show, I was reminded of an exchange between Mary and her boss, Lou Grant. 

Lou Grant says, “You know, Mary, you’ve got spunk.”
“Well, thank you, Mr. Grant,” says Mary.
“And you know what?” says Lou. “I HATE spunk.”

In all seriousness, I honestly believe that everyone at this conference has spunk.  And, unlike Lou Grant, I am a big fan of it.  The reason you have spunk is that you are the leaders of the sustainability movement in America.  And I am honored to be with such a distinguished group of environmental problem-solvers to celebrate Earth Day—or, as the Bush administration calls it, Thursday, April 22nd.

On the occasion of the 34th anniversary of Earth Day, I believe it is important to acknowledge how far we’ve come in that time.  In 1970, after all, we had a lot of people driving around in monster vehicles powered by gas-guzzling V-8 engines.  Today, by contrast, we have, well, a lot of people driving around in monster vehicles powered by gas-guzzling V-8 engines.   The more things change, the more they stay the same. 

Seriously, we have made significant progress on these issues since the 1970s—but, obviously, not nearly enough.  And today we have a choice.

We can fall over ourselves seeking short-term gains for our businesses and society—potentially at great expense to our future.  Or, we can think ahead—there’s a novel idea—and invest in strategies, processes and ideas that will help to ensure that our businesses—and, indeed, our life as we know it—are still around 10, 20, or 50 years down the line.

In attending this conference, I know that all of you have made the second choice.  And I congratulate you for your commitment to environmental problem-solving—which I hope will be the number-one growth industry of the 21st century.

Today, I would like to talk with you about the issue of climate change.  No surprise there.  And, understanding that this group is looking at a wide range of environmental and sustainability topics, I want to start with a brief overview of what we know about climate change and what we are (and are not) doing in response.  I will conclude my remarks by suggesting to you a new approach for addressing this enormous problem—an approach that couples a long-term vision of progress with a solid understanding of the interim steps that will help us achieve that vision. 

But first a description of the problem itself.  Global temperatures increased approximately 1ºF over the twentieth century, and additional warming of 2.5º to 10º F is projected over the century to come.  What is causing this warming?  The driving force, although not the only force, is human emissions of greenhouse gases, which grew globally by approximately 10 percent during the 1990s. 

In the same vein as the standard line, “It’s not just the heat, it’s the humidity,” climate change is about much more than rising temperatures.  It is also about increases in sea level, changes in precipitation, including more frequent floods and droughts, an increase in extreme weather events, as well as other effects.  As if that’s not enough, substantial increases in global mean temperature could set off large-scale changes to the earth’s systems such as a shutdown of the Gulf Stream or a melting of the West Antarctic ice sheet.  The thresholds are uncertain and it may take centuries for these things to happen, but it is possible that warming in the 21st century could trigger these types of events—events that, once started, will be extremely difficult, if not impossible, to reverse.

What are we doing to address this problem?   At the global level, 121 countries have now ratified an agreement that would for the first time establish binding limits on worldwide emissions of greenhouse gases. I am talking, of course, about the Kyoto Protocol.

Over the last several years, there has been a lot of discussion of this treaty in political circles—much of it of a harshly critical nature—and I think it is important to remember what Kyoto is and what it is not. Most importantly, we must remember that Kyoto was never intended as the be-all and end-all solution to the problem of climate change.  Rather, it was intended as a first step, a way to commit the nations of the world to real action to reduce their emissions of greenhouse gases.  Right now, Kyoto’s targets take us only to 2012—just eight years away—when, in fact, we are going to have to work at this issue for decades to come.

The other thing to remember about Kyoto is that it is not only Russia’s fault that the treaty is right now in diplomatic limbo.  As you may know, Kyoto cannot enter into force until it is ratified by countries responsible for 55 percent of global greenhouse gas emissions.  And, right now, Russia’s signature is needed to reach the 55-percent level.
 
In all the talk about whether or not Russia will ratify and all the outrage that will surely surface should they decide not to, it is useful to remember that, among other big emitters, the United States and Australia have already opted out.   So there is plenty of blame to go around.

Even though it remains in limbo, and even though it may never enter into force as it currently stands, the Kyoto Protocol was and remains an historic achievement—as well as a powerful instrument for bringing the countries of the world together around a common understanding of the problem and of our shared role in addressing it.  It is because of Kyoto, after all, that we are finally seeing some nations get serious about reducing their emissions.  The European Union, for example, has adopted a carbon dioxide emission trading program.  And Prime Minister Tony Blair has committed Great Britain to a 60-percent cut in greenhouse gas emissions by 2050--the first instance of a world leader taking a long-term view on how to address this problem.

So that’s the global story.  Here in the United States, we have a different story.  At the federal level, we have seen no real action on this issue from either the Bush or the Clinton administrations (although Congress did engage in a serious debate about the climate issue last year).  At the same time, state governments and large corporations in this country are, in many instances, taking it upon themselves to shape solutions.

Let’s start in Washington.  A lot has been made of the Bush administration’s ill-mannered rejection of the Kyoto Protocol way back in 2001.  But the rejection itself wasn’t really all that shocking.  This was a new administration with its own ideas about how to tackle the problems of the world.  Rather, what was truly shocking was that the White House offered nothing in the way of an alternative global solution—and, equally important, no real plan for reducing the United States’ contribution to the problem.

Indeed, the White House and its congressional allies were none too friendly toward a plan put forward last year by Senators John McCain and Joe Lieberman that would for the first time establish modest but binding targets for reducing U.S. greenhouse gas emissions.  However, despite the opposition of the Bush administration and congressional leaders, the McCain-Lieberman Climate Stewardship Act attracted a very respectable 43 votes in the Senate, showing strong and growing bipartisan support for mandatory action against climate change in the United States.  (A companion measure was introduced in the House of Representatives just last month.) 

Still, for real action on this issue in the United States, we need to look to the state capitals and corporate boardrooms.

First the states.  In 2002, the Pew Center released a report entitled Greenhouse and Statehouse: The Evolving State Government Role in Climate Change.  In it, we surveyed state activity on this topic and found that a variety of measures that have proven controversial at the federal level--such as renewable portfolio standards, emission targets, and mandatory reporting of emissions--have indeed been implemented at the state level, often with little dissent.

The state initiatives are an important development not only because they can help pave the way for federal action but also because of the simple fact that U.S. states are large emitters of greenhouse gases.  Texas, for example, emits more greenhouse gases than France, the United Kingdom, or Canada.  Ohio’s emissions exceed those of Turkey and Taiwan, and emissions in Illinois exceed those from The Netherlands.  Clearly, if we are intent on scrutinizing—and, hopefully, celebrating—what is happening in these and other nations to address the problem of climate change, we also must take account of the actions of individual U.S. states with comparable levels of emissions.

The Pew Center’s report makes clear that states across America have initiated programs that are achieving real reductions in their emissions.

· For example, 13 states, including Texas, now require utilities to generate a specified share of their power from renewable sources. 

· Two states, Wisconsin and New Jersey, have created mandatory reporting programs for large emitters of greenhouse gases.
 
· Massachusetts has established a multi-pollutant cap that requires six older power plants to reduce their CO2 emissions.

· And, in California, state lawmakers have gone beyond target-setting and reporting and are working to establish direct controls on carbon emissions from cars and SUVs.

What’s more, we now are seeing groups of states begin to discuss climate solutions on a regional basis. Thus you have the agreement among New York and nine other mid-Atlantic and northeastern states to discuss a regional “cap-and-trade” initiative aimed at reducing carbon dioxide emissions from power plants.  And, last September, the governors of three Pacific states—California, Oregon, and Washington—announced that they will be working together to develop policies to reduce emissions from all sources.

The second place in America, in addition to the state capitals, where real action is happening on the climate issue is in corporate boardrooms.  At the Pew Center, we work with a group of leading companies that are committed to economically viable climate solutions.  The 38 members of our Business Environmental Leadership Council together employ nearly 2.5 million people and have combined revenues of $855 billion.  And here’s just a sampling of some of the things they are doing to reduce their emissions:

· Alcoa, for example, is developing a new technology for smelting aluminum that, if successful, will allow the company to reduce its greenhouse gas emissions to half their 1990 levels over the next nine years.
 
· United Technologies, or UTC, has reduced overall greenhouse gas emissions by 15 percent since 1997. In addition, the company has exceeded its goal of reducing energy consumption as a percentage of sales by 25 percent from 1997 levels.

· And, of course, I want to mention DuPont, which made a voluntary pledge to reduce its global emissions of greenhouse gases by 65 percent by the year 2010.  In 2002, DuPont announced that it had achieved this target eight years ahead of schedule.

· Another company that has met its target ahead of schedule is BP, which in 2002 announced that it had reduced its global greenhouse emissions by 9 million metric tons in just four years.

All of these are important developments, and they show how increasing numbers of leading companies see a clear business interest both in reducing their emissions and in helping to shape a climate-friendly future.

But the truth of the matter is that these companies are basically freelancing—as are the states that I have mentioned.  In the absence of a broader national strategy to address this problem, corporate executives and state officials are taking it upon themselves to act.  We should all applaud that and encourage them to do even more.  However, the global nature of the climate issue demands much broader action and a much broader strategy to bring about revolutionary change in the way we power our economy. 

Consider this: in order to stabilize the global climate, global emissions must eventually fall to well below their 1990 levels.  Depending upon whom you talk to, the figure ranges from 50 to 95 percent!  And this would have to be achieved by the end of the century.  And as I mentioned earlier, the UK already has a plan in place to reduce its emissions by 60 percent below 1990 levels by 2050.   Where is the U.S.?  As of 2000, we were 13.6 percent above 1990 levels, and we have no plan to reduce our emissions at all.

Clearly, individual states and a handful of companies cannot do this alone. 

So how do we move forward?  How do we create the impetus for broad, across-the-board reductions in emissions of greenhouse gases?  At the Pew Center, we recently developed something we are calling the “10-50 Solution.”  And, in case you were wondering, it is not a miracle household cleaner.  Rather, it is a new way of thinking about the problem of climate change—and how to solve it. 

By 10-50, we mean that we should be thinking ahead about where we want to be on this issue in 50 years (that’s the “50” part), and then identify the policies and strategies we can start pursuing in the next ten years and the decades to come so we can achieve our long-range goal. (That’s the “10” part.).  In this, I am reminded of Antoine de Saint-Exupery’s advice that, “As for the future, your task is not to foresee, but to enable it.”

Here is what we know.  First, we know that we need a low-carbon economy by mid-century.   Second, we know that it will take a new industrial revolution to get there, and that low-carbon energy technologies will play a critical role in that revolution.  And, third, we know that all signs indicate that we cannot and will not achieve a low-carbon economy if we continue on a “business-as-usual” path. 

I am not here to say exactly what the alternative, low-carbon path will look like or exactly where it will take us.  No one can say that.  Rather, I want to point out some of the issues or guidelines we need to be thinking about as we begin to chart that path and get going. 

I believe we need to be thinking about four major issues as we map our path to a low-carbon future.  The first of these is technology development—in other words, how to spark an energy technology revolution.

The 1990s saw the peak of an unprecedented technology boom in computer, information, and telecommunication technologies.  But we did not see this unprecedented technological change spread into the energy sector.  Despite more than a few optimistic predictions to the contrary, the energy sector continues on a conventional-technology trajectory – without many signs of substantial change. 

One reason for this is that there are fundamental market and policy forces that keep an energy technology revolution from happening.  Developing the technology to replace the existing and entrenched energy system will require massive investment.  But businesses continue to receive mixed signals from policy-makers about whether or not we are serious about getting on with the challenge.  So there is not sufficient incentive to place big bets on the development and diffusion of low-carbon energy technologies.

What’s more, the federal government spends even less than the private sector on energy-related RD&D, which is particularly disappointing when you consider the importance of energy to our economy and our national security—not to mention the implications of our energy use for the environment.   While there is some support for some breakthrough technology, most of the investment remains attached to carbon-intensive energy technologies.

The second issue we need to be thinking about as we look ahead to a low-carbon future has to do with what happens after we develop the technologies we need.  In other words, how do we ensure that new, climate-friendly technologies can enter the marketplace and compete?

Many people who concede that government has a role in fostering energy R&D simply stop there.  Once the technology is developed, they say, consumers will simply go out and buy it.  In fact, experience tells us differently. 

The fact that R&D alone will not get technologies into the market became clear to us through some of our work over the last few years.  This past year, we finished a report that looked at historical U.S. technology and innovation policies to see what lessons could be learned for addressing climate change.  One of the key insights from this report is that past government policies that go beyond R&D -- to promote downstream adoption of technologies and learning by doing -- have greatly influenced technological change.   This was true in the past, and is likely to be true in the future.  The bottom line is that we must have specific policies both to push and to pull these technologies into the market. 

You’ll notice that I said these technologies, which brings me to the third issue we need to pay attention to: There is no technological silver bullet solution to climate change. 

This problem is just too big for any single solution.  At a workshop we sponsored with the National Commission on Energy Policy last month on the 10-50 solution, we convened a group of experts and business leaders to look specifically at five technologies that are sure to play a prominent role in reducing the carbon intensity of our economy.  These are: energy efficiency technologies; hydrogen; carbon sequestration/coal gasification; advanced nuclear technologies; and renewables.  These five technologies are obviously very important, but I want to be clear today, as I was during our March workshop, that any future portfolio of low-carbon fuels and energy technologies will surely be broader than them.  For example, important fuels and groups of technologies—from coalbed methane to biofuels, ocean wave power, geothermal energy, nanotechnology, and biotechnology—may all have important roles to play in a future low-carbon energy mix.

So we have all of these technologies, and the fact remains that not one of them is likely to be deployed in the marketplace on the scale and in the time frame needed to address climate change without an explicit and unprecedented set of policies from government.  Our shared challenge will be to develop policies that are broad enough and neutral enough to provide incentives for a high level of innovation across the relevant energy, materials, and information technology industries.  At the same time, we need these policies to be targeted and specific enough to give promising technologies a start down the road toward significant deployment--and to do so without dampening the competitive ingenuity that is a driver of the most innovative economy in the world: ours. 

This brings me to the fourth and final issue we need to be thinking about as we try to respond in a decisive and effective way to the challenge of climate change.  Just as there is no technology silver bullet, there is no policy silver bullet for transitioning to a low-carbon future.  According to some people, all we need is a strong technology R&D policy; in other words, forget about adopting a mitigation policy.  Still others say a mitigation policy is all we need – and that even a small price signal will do the trick now and forever, amen. 

At the Pew Center, we think we need both a strong R&D and a strong mitigation policy, as well as some policies that we may not even know about yet.

The Pew Center has always been a strong advocate of an economy-wide cap-and-trade policy—in other words, a policy that sets targets for greenhouse gas emissions and allows companies the flexibility to trade emission credits in order to achieve their targets.  We still believe that a cap-and-trade system is an essential step in the “10-50” strategy. 

But we also believe that cap-and-trade by itself will not bring about the technological revolution that is necessary.  An aggressive RD&D program, government standards and codes, public infrastructure investments, public/private partnerships and government procurement all probably have some role to play.   What we need to do is refine what this portfolio of options should look like, and what the timing of each of the components should be.

So those are the four things we need to be thinking about: how to develop climate-friendly technologies; how to market them; how to ensure that we are looking broadly at the many technologies that can help while paying close attention to the most promising technologies; and how to arrive at a broad set of policies that will put this country on a track to real reductions in emissions.

In closing, let me say that it is clear from all of the work that the Pew Center is doing on this issue that we need vision.  We need spunk.  We need people like those of you at this conference to help us move the discussion of climate change away from the divisive debate over environmental vs. economic tradeoffs.  Instead, we need to focus on the concrete steps we can take—both in this decade and in the decades to come—to get a handle on this enormous problem.  Each of us has a role we can play:

· If you are a manufacturer, do you have a goal and a plan for reducing your emissions and energy use and, ultimately, adopting low-carbon sources of energy?

· If you are a real estate developer or architect, what are you doing to develop the prototype homes and office buildings of 2015 or 2025—structures that achieve new levels of energy efficiency and embrace climate-friendly technologies?

· If you are an engineer, to what extent are you engineering new processes and products that will deliver significant energy savings in the decades to come?  Are you engineering the systems that will help us deliver on the promise of new low-carbon energy technologies?

· And, last but not least, if you are a government official, what policies can you put forward that will help your community or your state couple a long-term vision with short-term action to address this issue?

And don’t let me forget one other important category of people: citizens.  In this year of presidential and congressional elections, as well as elections at the state and local levels, all of us, as citizens, need to be engaged on this issue. 

Recent history shows us that our government, whether it is in Democratic or Republican hands, has a very hard time dealing with the issue of climate change in an effective way.  There are a lot of interests lined up on the side of doing nothing.  But the number of people at this conference, and all the great work that you are doing to solve environmental problems, suggests to me that our side can be just as strong—and stronger.

Thank you very much.

Summary of Gilchrest-Olver Climate Stewardship Act

The Climate Stewardship Act (H.R.4067), as proposed by Reps. Wayne T. Gilchrest (R-MD) and John W. Olver (D-MA), would require the Administrator of the Environmental Protection Act (EPA) to promulgate regulations to limit greenhouse gas (GHG) emissions from the electricity generation, transportation, industrial, and commercial economic sectors. The covered sectors accounted for approximately 85% of the overall US emissions in the year 2000. The bill also would provide for the trading of emissions allowances and reductions through a National Greenhouse Gas Database that would contain an inventory of emissions and registry of reductions.

Target: Starting in 2010, the bill would cap U.S. aggregate emissions for the covered sectors at the 2000 level. The bill's emissions limits would not apply to the agricultural and the residential sectors. Certain subsectors would be exempt if the Administrator determined that it was not feasible to measure their GHG emissions.

Allowances: An entity that is in a covered sector, or that produces or imports synthetic GHGs (HFCs, PFCs, and SF6), would be subject to the requirements of this bill if it:

(a) owns at least one facility that annually emits more than 10,000 metric tons of GHGs, measured in units of carbon dioxide equivalents (MTCO2E);
(b) produces or imports petroleum products that, when combusted, would emit more than 10,000 MTCO2E; or
(c) produces or imports synthetic GHGs that, when used, would emit more than 10,000 MTCO2E.

Each covered entity would be required to submit to the EPA one tradeable allowance for each MTCO2E emitted directly, emitted through the combustion of petroleum products, and emitted through the use of synthetic GHGs.

Allocation of Allowances: The Secretary of Commerce would determine the amount of allowances to be given away or "grandfathered" to covered entities and the amount to be auctioned. The Secretary's determination would be subject to a number of allocation factors identified in the bill. Proceeds from the auction would be used to reduce energy costs of consumers and assist disproportionately affected workers and industries.

Flexibility Mechanisms: Covered entities would have flexibility in acquiring their allowances. In addition to the allowances grandfathered to them, covered entities could trade with other covered entities to acquire additional allowances, if necessary. Also, any entity would be allowed to satisfy up to 15% of its total allowance requirements by submitting:

(a) tradeable allowances from another nation's market in GHGs;
(b) a registered net increase in sequestration;
(c) a GHG emission reduction registered by a non-covered entity; and
(d) allowances borrowed against future reductions.

A covered entity that agreed to emit no more than its 1990 levels by 2010 would be allowed to meet up to 20% of its requirement through (a) international credits, (b) sequestration, and (c) registered reductions, but not (d) borrowed credits.

National Greenhouse Gas Database: The EPA Administrator would be required to implement a comprehensive system for reporting and inventorying GHG emissions and for registering GHG reductions and sequestration. Covered entities would be required to report their GHG emissions and non-covered entities (including those in the agricultural sector) would be allowed to register GHG emission reductions achieved since 1990 and sequestration.

Penalty: Any covered entity not meeting its emissions limits would be fined for each ton of GHGs over the limit at the rate of three times the market value of a ton of GHG.

Climate Change Effects on Coastal and Oceanic Resources: The bill would amend the Coastal Zone Management Act to require the National Oceanic and Atmospheric Administration to report periodically on the possible and projected impacts of climate change on coastal communities and oceanic and coastal ecosystems. The bill would also require the Department of Commerce to identify adaptation measures that might be used to protect these resources and to estimate the costs of the measures.

Research: The bill would establish an abrupt climate change research program at the Commerce Department and a program at the National Institute of Standards and Technology in climate change-relevant standards and measurement technologies.

10-50 Solution Workshop

Promoted in Energy Efficiency section: 
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The Pew Center on Global Climate Change and the National Commission on Energy Policy (NCEP) sponsored a workshop entitled “The 10-50 Solution: Technologies and Policies for a Low-Carbon Future.” The goal of this workshop was to articulate a long-term vision for a low-carbon economy within 50 years and to discuss the technologies, industrial processes and policies needed in the short and medium term to achieve it.

The 10-50 Solution: Technologies and Policies for a Low-Carbon Future

A workshop sponsored by the Pew Center on Global Climate Change and the National Commission on Energy Policy

March 25-26, 2004
The St. Regis Hotel, Washington, DC

On March 25-26th, the Pew Center on Global Climate Change and the National Commission on Energy Policy (NCEP) sponsored a workshop entitled “The 10-50 Solution: Technologies and Policies for a Low-Carbon Future.” The goal of this workshop was to articulate a long-term vision for a low-carbon economy within 50 years and to discuss the technologies, industrial processes and policies needed in the short and medium term to achieve it. Over 100 policy-makers, business leaders, NGO representatives, and leading experts participated in the event. 

In preparation for the workshop, the Pew Center and NCEP commissioned background papers on technological advances in five key areas (efficiency, hydrogen, carbon sequestration/coal gasification, advanced nuclear technologies, and renewables) and on policies designed to promote these and other low-carbon  technologies in the marketplace.  Workshop presentations and final proceedings, including a summary of common themes and policies identified during the workshop, and workshop background papers are now available. 

U.S. Technology and Innovation Policies

In Brief, Number 7
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Technological innovation on a global scale will be needed to mitigate global climate change. To significantly reduce emissions of carbon dioxide (CO2) and other greenhouse gases (GHGs), three types of technological innovations are needed: (1) more efficient technologies that use less energy to deliver valuable services such as electricity and transportation; (2) technologies to expand the use of alternate energy sources with lower or zero GHG emissions, such as renewable energy (e.g., wind and solar); and (3) technologies to capture and sequester the CO2 from fossil fuels before (or after) it enters the atmosphere, such as disposal in geologic formations. Technological change will be instrumental in reducing costs, widening applicability, and improving reliability in these three categories, and will be required to reduce emissions of the non-CO2 GHGs as well.

The most effective way to bring about these innovations is through a combination of technology policy incentives that encourage climate-friendly technologies, and environmental policies such as a cap-and-trade program that limits GHG emissions. Lessons learned from the United States’ rich experience with technology and innovation policies can be applied to GHG-reduction efforts, and include the following:

  • A balanced policy portfolio must support not only research and development (R&D), but also promote diffusion of knowledge and deployment of new technologies: R&D, by itself, is not enough.
  • Support for education and training should supplement research funding.
  • Policies that do not directly promote technological innovation (i.e., “non-technology policies”) still provide critical signposts for prospective innovators by indicating technological directions likely to be favored by future markets.
  • Policy-makers should channel funds for technology development and diffusion through multiple agencies and programs, because competition contributes to policy success.
  • Public-private partnerships can foster helpful, ongoing collaborations.
  • Effective programs require insulation from short-term political pressures.
  • Regulatory and marketplace certainty help create favorable conditions for firms to invest in new climate-friendly technologies.
  • Policy-makers must be prepared to tolerate some “failures” (i.e., investments that do not pay off), and learn from them as private sector entrepreneurs do.
  • In light of the inherent uncertainty in innovation, government policies should generally support a suite of options rather than a specific technology or design.

Introduction

Government policies will be critical to the development and adoption of a portfolio of new technologies needed to abate global climate change. Widespread adoption of these new technologies—for electric power generation, transportation, industry, and consumer products—is required in any major effort to reduce the greenhouse gas (GHG) emissions that contribute to climate change. However, technological change on an economy-wide scale cannot happen overnight. Well-crafted government policies in both the short and long term will be instrumental in encouraging more rapid development, deployment, and diffusion of climate change mitigation technologies,1 and will be essential complements to environmental policies that set limits on GHG emissions—such as a GHG cap-and-trade program. Implementing these policies in the near term is essential for creating an environment in which technological innovation can thrive and contribute to GHG reductions. The United States—a global leader in innovation—is well placed to lead such technological change and hence enjoy benefits in terms of global competitiveness in new energy and other GHG mitigation technologies.

Private firms tend to under-invest in technology development, making government policy for technological innovation necessary. This under-investment occurs because environmental externalities (such as climate change) are undervalued. In addition, firms that invest in technology innovation cannot retain all of the benefits of their expenditures because the knowledge that they gain “spills over” to competing firms. As a result, although most innovations come from private firms, government policies of many types influence the rate and direction of technological change.

Global research and development (R&D) funding trends indicate that both governments and private firms are under-investing in energy technology R&D. In the United States, federal government energy technology R&D budgets declined 74 percent between 1980 and 1996 (from $5 billion to $1.3 billion), and were accompanied by declines in private sector investments.2 Similar funding declines have occurred throughout the industrialized world.3  Because the United States is a global leader in R&D, the nation’s under-investment in energy technology R&D has particularly disturbing implications for global efforts to address climate change. The research, development, and diffusion of new technologies necessary to address climate change will require coordination between the public and private sectors, and across nations.

This brief summarizes the role of technological change in GHG mitigation strategies, provides a taxonomy of technology policies, and gleans lessons learned from U.S. technology and innovation policies. It concludes with policy insights for spurring technological innovation in the effort to address climate change.

The Role of Technological Change in GHG Control Strategies

Climate change is one of the most far-reaching and formidable environmental challenges facing the world. The earth is undoubtedly warming, largely as a result of GHG emissions from human activities including industrial processes, fossil fuel combustion, and changes in land use, such as deforestation. Continuation of historical emission trends will result in additional warming over the 21st century, with current projections of a global increase of 2.5°F (1.4°C) to 10.4°F (5.8°C) by 2100, and warming in the United States expected to be even higher. Potential consequences of this warming include sea-level rise and increases in the severity or frequency (or both) of extreme weather events, including heat waves, floods, and droughts. The risks of these and other consequences are sufficient to justify action to significantly reduce GHG emissions.

In the United States, energy consumption is the dominant source of GHG emissions. Carbon dioxide (CO2) accounts for approximately 84 percent of total GHG emissions. Although other GHGs4 have a more powerful effect on global warming per molecule, CO2 enters the atmosphere in far greater quantities because it is produced whenever fossil fuels are burned.5 To significantly reduce these emissions, three types of technological innovations are needed: (1) increased energy efficiency for technologies that deliver valuable services like electricity and transportation; (2) technologies to expand the use of alternate energy sources with lower or zero GHG emissions; and (3) technologies to capture and sequester CO2 from fossil fuel combustion before (or after) it enters the atmosphere. Technological change will be instrumental in reducing costs, widening applicability, and improving reliability in efforts to reduce emissions of CO2 and non-CO2 gases alike.

Stabilizing atmospheric concentrations of CO2 and other GHGs at a “safe” level, the international goal under the United Nations Framework Convention on Climate Change,6 would have profound implications for industrial and industrializing economies alike. Human activity now adds around 8 billion metric tons of GHGs to the earth’s atmosphere each year, a total that is growing approximately 4 percent annually.7 A widely discussed goal of stabilizing atmospheric CO2 at twice the pre-industrial level by 2100 (i.e., at 550 parts per million, 65 percent higher than today’s concentration) implies worldwide CO2 reductions on the order of 60 to 80 percent below projected “business as usual” levels for the remainder of the 21st century. Substantial reductions in U.S. CO2 emissions would require that the United States replace or retrofit hundreds of electric power plants and substantially improve the efficiency of tens of millions of vehicles. In addition, appliances, furnaces, building systems, and factory equipment numbering in the hundreds of millions might also need to be modified or replaced.

Technological change on this scale cannot happen immediately. Many of the technologies needed do not yet exist commercially or require further development to reduce costs or improve reliability. Technology policies, such as those outlined in the next section, can help spur technological change.

A Taxonomy of Technology Policies

Technological change is a complex process with multiple stages and feedbacks. These stages include “invention” and “innovation,” which are distinct activities. Invention refers to the process of discovery that leads to scientific or technological advance, perhaps in the form of a demonstration or prototype. Innovation refers to the translation of the invention into a commercial product or process. “Adoption,” or “diffusion,” occurs when these products and processes are actually used.

Although many types of policies affect invention and innovation, no universally accepted nomenclature or taxonomy summarizes or describes them. Economists often use the term “technology policy” to describe the diverse collection of measures that somehow affect technological development, and these are the focus of this brief. Taxonomies of technology policies seldom include regulatory policies, such as environmental regulations and antitrust enforcement, which have in the past catalyzed innovation and adoption and are discussed in a subsequent section of this brief.

Different policies influence outcomes at different stages of technology development. Table 1 on pages 4–5 lists fifteen common technology policy tools grouped into three broad categories, with comments on the strengths and weaknesses of each. The first category is direct government funding for R&D. The second category is a collection of policies that directly or indirectly support commercialization and adoption, or indirectly support development. The final group includes policies that foster technology diffusion through information and learning.

Lessons Learned from U.S. Technology and Innovation Policies

Although the United States has never had a coherent set of technology policies, government actions have profoundly influenced the rate and direction of technological change. Federal policies affecting technological change began with the codification of the patent system in the U.S. Constitution. Federal land grants supported the U.S. system of publicly financed colleges and universities, which became major players in R&D and innovation. In addition, government procurement during World War I transformed an infant aircraft industry that had produced only a few hundred planes; by the war’s end, U.S. firms had manufactured some 14,000 planes, learning a great deal in the process. Government-spurred innovation accelerated in the post-World War II period. Despite the heterogeneity in federal policies—or perhaps because of it, given the high levels of uncertainty that characterize innovation—government actions have been remarkably effective. Lessons learned from this rich experience are supported by a large body of literature in economics and other fields concerning innovation, and include the following:

  • Technological change is a complex process involving invention, innovation, adoption, learning, and diffusion of technology into the marketplace. The process is highly iterative, and different policies influence outcomes at different stages. For example, the U.S. government spurred diffusion of know-how in microelectronics through policies including antitrust and defense procurement. In response to a federal government antitrust suit, AT&T released technical information about the transistor (which it invented), licensed the relevant patents at nominal rates to all comers, and refrained from producing transistors for outside sale. Texas Instruments then introduced the first commercially successful transistor, and the Department of Defense (DoD) and its contractors began to design the new devices into radar, sonar, missile guidance, and communications systems, stimulating further learning and cost reductions. In addition, DoD procurement contracts stipulating that the chips be available from at least two suppliers led to the sharing of design and process know-how, which encouraged new market entrants and accelerated inter-firm technology flows.
  • Gains from new technologies are realized only with widespread adoption, a process that takes considerable time and resources and typically depends on a lengthy sequence of incremental improvements that enhance performance and reduce costs. For example, several decades of significant government and private sector R&D investments occurred before gas turbines derived from military jet engines improved in efficiency and reliability to the point that they were cost-effective for electric power generation. Today, gas turbines are the leading technology for new, high-efficiency power plants with low GHG emissions.
  • Technological learning is the essential step that paces adoption and diffusion. “Learning-by-doing” contributes to reductions in production costs, and adopters of new technology contribute to ongoing innovation through “learning-by-using.” Widespread adoption, in turn, accelerates the incremental improvements from learning by users and producers, further fueling adoption and diffusion. For example, an entirely new class of products emerged as Intel (and soon, other firms) designed successive families of microprocessors, based in large part on feedback from users. When Intel began work on its 386 processor family, the lead technical and marketing specialist spent six months simply visiting customers to understand the features they valued most highly.
  • Technological innovation is a highly uncertain process. Because pathways of development cannot be predicted, government policies should support a portfolio of options, rather than a particular technology or design. The unforeseen explosive diffusion of the Internet during the 1990s is illustrative. Both the Internet’s technologies and many of the formal and informal governance mechanisms that evolved to coordinate its standards and infrastructure sprang from DoD-sponsored networking research and trials.

In addition to these insights gained regarding the innovation process, lessons learned from U.S. experience with technology policies over the past several decades include the following:

  • Federal investments contribute to innovation not only through R&D but also through “downstream” adoption and learning. For example, in the early years of computing, defense agencies made indispensable contributions to a technological infrastructure that propelled the industry’s rise to global dominance.
  • Public-private R&D partnerships have become politically popular because they leverage government funds and promote inter-firm collaboration. Partnerships may have particular advantages in fostering vertical collaborations, such as those between suppliers and consumers of energy.
  • Adoption of innovations that originate outside a firm or industry often requires substantial internal investments in R&D and human resources. Smaller firms may be less able to absorb innovations without government assistance.
  • Just as competition in markets helps resolve uncertainties and improves economic performance, competition within government can improve performance in fostering innovation. The messy and often duplicative structure of U.S. R&D support and related policies creates diversity and pluralism, fostering innovation by encouraging the exploration of many technological alternatives.
  • Because processes of innovation and adoption are lengthy and convoluted, effective policies and programs require sustained political support. Reliable political constituencies have been essential for the development of new technologies in defense and for research in the biomedical sciences. By contrast, technology policies for addressing climate change face a discordant political environment.

Regulatory Policies and Technological Innovation

In addition to the technology policies discussed above, environmental and other regulatory policies can strongly influence the process of technological change. Regulatory policies create an overall incentive and framework for innovation by mandating pollution reductions. Such policies have influenced the development and deployment of many technologies over the past 30-plus years. For example, environmental regulations drove innovations in automobile engines and electric power plants that have contributed to widespread improvements in air quality. Regulatory policies will likewise be required to stabilize atmospheric GHG concentrations because technology policies, while important, cannot by themselves achieve the GHG reductions necessary to mitigate climate change. Rather, technology policies should be part of a comprehensive approach that includes “non-technology policies,” such as a GHG emissions cap-and-trade program.

Environmental policies respond to market failures that leave economic actors with little incentive to reduce activities that have adverse effects on society as a whole, such as releasing harmful substances into the atmosphere or water. The design of these regulations plays an important role in the extent and quality of innovation. Poorly designed environmental regulations can significantly inhibit innovation, and the overall timing and stringency of regulations can determine the extent to which innovation occurs or is used. Moreover, environmental policies must provide regulatory certainty—that is, they must reassure investors that additional future regulations will not impair the value of near-term investments made to comply with the original environmental policy. To foster the greatest innovation, environmental regulations should be designed to provide incentives to firms to both prevent and reduce pollution, such as by:

  • Reducing use of polluting technologies;
  • Selecting cleaner processes when installing new technologies or capital equipment;
  • Continually striving to improve the environmental performance of existing processes or technologies; and
  • Placing control technologies on existing plants to reduce emissions.

Regulations can be designed to assist innovation by promoting the greatest breadth of pollution reduction alternatives at the lowest possible cost. Many past environmental policies have relied heavily on “command-and-control” regulations that compel polluters to reduce their emissions to specified levels. Greenhouse gas emissions, however, are more suitably controlled through market-based approaches—such as emissions fees, pollution charges, or emissions cap-and-trade programs—because GHGs are emitted across all economic sectors around the world, and mix uniformly in the atmosphere. Thus it matters little precisely where the emission reductions take place, so long as they are real and verifiable. Traditional rate-based or technology-based standards, for example, would create little incentive for ongoing improvements in operational techniques to address climate change. The more recent turn toward “market-based” approaches for addressing climate change has created better incentives for continuous pollution reduction and technological innovation by giving firms greater flexibility and permitting compliance with regulations at lower cost.

Patterns of capital investment by businesses also can have a major impact on the success and cost-effectiveness of climate change policies.8 Capital stock, such as electricity generation plants, factories, and transportation infrastructure, is expensive and firms are often reluctant to retire old facilities and equipment. Certain policies can stimulate more rapid turnover of existing capital stock. These include putting in place early and consistent incentives that would assist in the retirement of old, inefficient capital stock; making certain that policies do not discourage capital retirement; and pursuing policies that shape long-term patterns of capital investment. In addition, even a modest carbon price could stimulate investment in new capital equipment. Likewise, uncertainty is likely to impede investment in new capital stock until the rules with respect to climate policy and other future environmental regulations are clarified.

U.S. energy and transportation policies also have influenced technology innovation and adoption. U.S. energy policy has often incorporated familiar tools of technology policy, such as tax credits for adoption of renewable energy technologies. Although the United States has long avoided energy pricing policies and fuel taxes to encourage energy efficiency, a substantial boost in gasoline taxes would likely be a powerful stimulus for innovation in automotive technologies.9 Fuel economy for cars and trucks could be increased by 25 to 33 percent over the next 10 to 15 years using market-ready technology at a net savings, if fuel savings are taken into account. However, since fuel economy is undervalued in the marketplace, policies such as mandatory GHG standards and public information are needed to pull technological improvements into the market.10 Because the goals of U.S. energy policy and the most effective methods to achieve them remain politically controversial, future choices—e.g., to encourage conservation or encourage fossil fuel production—could either support or undermine the goal of achieving GHG reductions.11

Policy Guidance for Climate-Related Technology and Innovation Policies

Greenhouse gas emission reductions will require a broad portfolio of policies to foster technology innovation and adoption by stakeholders ranging from multinational corporations to households. The policy portfolio should combine technology policies as discussed in this brief with other policies to induce innovation and deployment.12

A climate change policy response must account for uncertainties in the pace and cost of innovation. Technological evolution is always accompanied by unknowns concerning the levels of performance that can ultimately be achieved, the technological attributes that will prove most attractive to adopters, and the costs of these technologies. Technical design and development are fluid, open-ended activities with multiple choices and tradeoffs and often-ambiguous selection criteria. Uncertainties can be resolved only through learning processes. These processes are often slow and piecemeal, studded with lessons from both successes and failures. Technology-oriented policies and non-technology policies alike must function in such settings. Additional lessons for climate change policy include the following:

  • Because the benefits of technological innovation come only with widespread adoption, and because adoption and learning are mutually reinforcing processes, the policy portfolio should support diffusion of knowledge and deployment of new technologies as well as research and discovery. In short, R&D alone is not enough.
  • Because private investments respond primarily to near-term market incentives, public investments are necessary to build a technological infrastructure able to support innovation over the long term. A key ingredient of such infrastructure is a vibrant community of technologists and entrepreneurs working in settings in which knowledge and information flow freely. Government financial support for education and training, as well as for research, enhances such infrastructure. Intellectual property rights are important, but excessively strong intellectual property regulations may weaken such infrastructure.
  • Competition among firms contributes to effective selection of innovations, and competition among academic research groups contributes to discovery. Similarly, competition among government agencies and government laboratories contributes to policy success. Competition exposes ineffectual bureaucracies, out-of-touch government laboratories, poor policy choices, and project-level mistakes. It encourages diversity by opening alternatives for exploration by technology creators and technology users alike. For these reasons, policy-makers should channel new funds for R&D through multiple agencies and allocate funds to industry and other researchers on a competitive basis.
  • Because there can be no learning without some failures, policy-makers cannot expect every government investment to pay off. They must be prepared to tolerate mistakes, and to learn from them, just as entrepreneurs in the private sector do. In addition, policy-makers must be willing to accept a balanced portfolio that provides sufficient and sustained funding for both short- and long-term R&D. This means avoiding the temptation to pick “winners and losers” too early in the development phase of new technologies. Nonetheless, tolerance for error is no excuse for sloppy management or ill-conceived policies and programs.

Conclusions

Much technological innovation will be needed to mitigate global climate change. The most effective way to bring about these innovations is through a combination of technology policy incentives that accelerate the deployment of climate-friendly technologies and help create new markets for these products and processes, and environmental policies such as a GHG cap-and-trade program that sets limits on GHG emissions. Implementing these policies in the near term is imperative. A well-balanced portfolio of government policies that stimulates innovation, incentivizes adoption, and avoids picking winners is the best path forward to meet the challenges of global climate change.

 


1 Alic, John A., David C. Mowery, and Edward S. Rubin. U.S. Technology and Innovation Policies: Lessons for Climate Change. Pew Center on Global Climate Change. Arlington, VA. November 2003. This brief draws heavily from this report.

2 As calculated using constant U.S. 1996 dollars in Margolis, Robert M. and Daniel M. Kammen. “Evidence of under-investment in energy R&D in the United States and the impact of federal policy.” Energy Policy 27: 575-584. 1999.

3 Ibid.

4 The principal GHGs are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and a range of industrial gases including hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6).

5 From an environmental and economic standpoint, effective climate strategies should address CO2 as well as non-CO2 GHGs, and control of non-CO2 gases could be especially important and cost-effective in the near term. See Reilly, John M., Henry D. Jacoby, and Ronald G. Prinn. Multi-gas Contributors to Global Climate Change: Climate Impacts and Mitigation Costs of Non-CO2 Gases. Pew Center on Global Climate Change. Arlington, VA. February 2003.

6 United Nations Framework Convention on Climate Change (1992), to which the United States is a signatory.

7 Intergovernmental Panel on Climate Change. Climate Change 2001: Synthesis Report. Cambridge, UK: Cambridge University Press. 2001. This report includes a range of energy and emissions scenarios for the next century.

8 For a more complete discussion of capital cycles and their implications for climate change policy, see Lempert, Robert J., Steven W. Popper, and Susan A. Resetar. Capital Cycles and the Timing of Climate Change Policy. Pew Center on Global Climate Change. Arlington, VA. October 2002.

9 For more information, see Greene, David L. and Andreas Shafer. Reducing Greenhouse Gas Emissions from U.S. Transportation. Pew Center on Global Climate Change. Arlington, VA. May 2003.

10 Ibid.

11 For a more complete discussion of the role of energy policy in addressing climate change, see Smith, Douglas W., Robert R. Nordhaus, and Thomas C. Roberts, et al. Designing a Climate-friendly Energy Policy: Options for the Near Term. Pew Center on Global Climate Change. Arlington, VA. July 2002.

12 See The U.S. Domestic Response to Climate Change: Key Elements of a Prospective Program. In Brief, Number 1. Pew Center on Global Climate Change. Arlington, VA.

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Press Release: Diverse Group of Leaders Outlines Framework for Mandatory Climate Change Action

For Immediate Release:
March 17, 2004    
                                                             
Contact:  Jack Riggs, Aspen Institute
(202)736-5820

Contact: Katie Mandes, Pew Center
(703)-516-4146

Diverse Group of Leaders Outlines Framework for Mandatory Climate Change Action

Washington, March 17 – A mandatory greenhouse gas reduction program for the U.S. could be both effective and politically feasible, according to a diverse group of business, government, and environmental leaders brought together by the Aspen Institute and the Pew Center on Global Climate Change. 

The group, which included representatives of the energy, mining and automobile industries, environmental and consumer organizations and Congressional staff, did not debate whether there should be a mandatory policy. Instead, they started with the premise that all parties want to ensure, if mandatory action is taken, that climate policies will be environmentally effective, economical and fair. 

“What is truly significant is that such a diverse group was able to reach consensus on several elements of what a mandatory national policy might look like,” said Eileen Claussen, President of the Pew Center on Global Climate Change.

Recommendations for a policy framework are detailed in a report released today on Capitol Hill by the dialogue’s co-chairs, Eileen Claussen, President of the Pew Center on Global Climate Change, and Robert W. Fri, Visiting Scholar and former President of Resources for the Future.

The group agreed upon a set of criteria to evaluate program design options, including environmental effectiveness, cost effectiveness and competitiveness, administrative feasibility, distributional equity, political feasibility, and encouragement of technology development.

Two principles guided the choice of recommendations.   First, the desire for broad rather than sector-specific coverage, and coverage of multiple gases, not just CO2, guided the participants.  This ensured long-term environmental effectiveness and distributional equity.   Second, there was consensus that phasing of actual reduction targets would be important and that a modest start would be preferable.  This would send a signal that reducing greenhouse gases was national policy.  Deeper cuts could occur later, as technology evolves and capital stock turns over in response to early market signals generated by the policy.

After considering several possible designs, participants reached consensus on a hybrid program that combines elements of a cap-and-trade program with tradable efficiency standards. An initially modest but declining absolute national cap on greenhouse gas emissions would be placed on large sources such as electric utilities and manufacturers. Deeper cuts could occur later, as technology evolves and the economy responds to the policy. The group did not attempt to specify the level of the absolute cap on CO2 emissions, or the date it should go into effect.

A similar cap would apply to emissions from transportation fuel suppliers, coupled with tradable CO2-per-mile automobile standards. The group also recommended tradable efficiency standards for appliances and other manufactured products.

Manufacturers, utilities and other large emitting sources that fell short of or exceeded the new standard could buy, sell or trade emission credits in a nationwide emissions trading program, allowing emissions reductions to be achieved where it can be done most cost effectively.   Emission credits would be awarded for removing existing CO2 from the atmosphere by verifiable means, possibly through land-use related carbon sequestration projects such as afforestation and energy plantations.

Participants also stressed the importance of a policy that encourages development and diffusion of new technologies, both to reduce emissions and to provide new market opportunities for U.S. business. 

“The report represents a framework, not a fully developed policy – a starting point for further dialogue rather than a final product,” commented Fri. Nonetheless, he noted it should prove helpful to those seeking to balance policy and politics, environmental effectiveness and cost, and efficiency and equity in designing a mandatory greenhouse gas reduction program.

The Aspen Institute is a non-profit organization founded in 1950 to foster enlightened leadership and open-minded dialogue on contemporary issues in a non-partisan setting.   The Pew Center on Global Climate Change is an independent, non-profit and non-partisan organization dedicated to providing credible information and innovative solutions in the effort to address global climate change.

The report “A Climate Policy Framework: Balancing Policy and Politics” can be found on the Aspen Institute’s and the Pew Center on Global Climate Change’s websites, www.aspeninst.org/eee and www.c2es.org.

A Climate Policy Framework: Balancing Policy and Politics

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"A Climate Policy Framework: Balancing Policy and Politics"
Proceedings from the joint Aspen Institute/Pew Center Conference,
March 2004

A diverse group of business, government, and environmental leaders, brought together by the Aspen Institute and the Pew Center, recommends a framework for a mandatory greenhouse gas reduction program for the United States. The group started with the premise that, if mandatory action is taken, climate policies should be environmentally effective, economical and fair. After a three-day dialogue, the participants reached consensus on a policy framework that is both effective and politically feasible.

 

Press Release

Dowload the report (PDF format)

Attendee List (PDF format)

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U.S. Technology and Innovation Policies: Lessons for Climate Change

US Technology  Innovation Policies

U.S. Technology and Innovation Policies: Lessons for Climate Change

Prepared for the Pew Center on Global Climate Change
November 2003

By:
John A. Alic, Consultant
David C. Mowery, University of California, Berkeley
Edward S. Rubin, Carnegie Mellon University

Press Release

Download Entire Report (pdf)

Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

New technologies for electric power generation, transportation, industry, and consumer products are expected to play a major role in efforts to reduce the greenhouse gas (GHG) emissions that contribute to global climate change.   Yet technological change on this scale cannot happen overnight.  Government policies will be instrumental in encouraging more rapid development and adoption of technology.  In the United States—long a leader in innovation—well-crafted policies that encourage the development, deployment, and diffusion of new technologies will be essential complements to other GHG-reduction policies.                     

The Pew Center commissioned this report to examine U.S. experience with technology and innovation policies—both successes and failures—and to draw lessons for future applications, including efforts to address climate change.   The authors found that because innovation is a complex, iterative process, different policy tools can be employed as catalysts at various phases (e.g., invention, adoption, diffusion). They also discuss the roles that intellectual property protection and regulatory policies play in driving innovation, and examine programs such as the Defense Advanced Research Project Agency (an innovative force in information technology), as well as public-private collaborations such as the Partnership for a New Generation of Vehicles, to glean lessons for climate change policy.  The insights revealed are clear: 

  • A balanced policy portfolio must support not only R&D, but also promote diffusion of knowledge and deployment of new technologies: R&D, by itself, is not enough.
     
  • Support for education and training should supplement research funding.
     
  • “Non-technology policies” provide critical signposts for prospective innovators by indicating technological directions likely to be favored by future markets.
     
  • Policy-makers should channel funds for technology development and diffusion through multiple agencies and programs, because competition contributes to policy success.
     
  • Public-private partnerships can foster helpful, ongoing collaborations.
     
  • Effective programs require insulation from short-term political pressures.
     
  • Policy-makers must be prepared to tolerate some “failures” (i.e., investments that do not pay off), and learn from them as private sector entrepreneurs do.
     
  • In light of the inherent uncertainty in innovation processes, government policies should generally support a suite of options rather than a specific technology or design.

Technology policies, while important, cannot by themselves achieve the GHG reductions necessary to mitigate climate change.  Rather, they should be part of a comprehensive approach that includes “non-technology policies,” such as a GHG cap and-trade program.  The authors and the Pew Center thank Bob Friedman, Ken Flamm, David Hart, and Ev Ehrlich for commenting on previous report drafts.

Executive Summary

Large-scale reductions in the greenhouse gases (GHGs) that contribute to global climate change can only be achieved through widespread development and adoption of new technologies. In the United States, energy consumption is the dominant source of GHG emissions. Most of these emissions consist of carbon dioxide (CO2), which accounts for approximately 84 percent of total GHG emissions. Although other GHGs, such as methane (CH4), have a more powerful effect on global warming per unit of release, CO2 enters the atmosphere in far greater quantities because it is produced whenever fossil fuels are burned. Thus the technological innovations needed to reduce GHG emissions and eventually stabilize GHG concentrations in the atmosphere are those that can, at reasonable cost: (1) improve the efficiency of energy conversion and utilization so as to reduce the demand for energy; (2) replace high-carbon fossil fuels such as coal and petroleum with lower-carbon or zero-carbon alternatives, such as natural gas, nuclear, and renewable energy (e.g., wind and solar); (3) capture and sequester the CO2 from fossil fuels before (or after) it enters the atmosphere; and (4) reduce emissions of GHGs other than CO2 that have significant impacts on global warming.
 

Although innovation cannot be planned or programmed, and most innovations come from private firms, government policies of many types influence the rate and direction of technological change. This report identifies technology policy tools that have fostered innovation in the past (see summary table below) and draws lessons for GHG abatement. It also briefly discusses other measures such as environmental regulations that would serve to induce innovation.

A Summary of Technology Policy Tools

 

Direct Government Funding of Research and Development (R&D)

  • R&D contracts with private firms (fully-funded or cost-shared).
  • R&D contracts and grants with universities.
  • Intramural R&D conducted in government laboratories.
  • R&D contracts with industry-led consortia or collaborations among two or more of the actors above.

Direct or Indirect Support for Commercialization and Production; Indirect Support for Development

  • Patent protection.
  • R&D tax credits.
  • Tax credits or production subsidies for firms bringing new technologies to market.
  • Tax credits or rebates for purchasers of new technologies.
  • Government procurement.
  • Demonstration projects.

Support for Learning and Diffusion of Knowledge and Technology

  • Education and training (technicians, engineers, and scientists; business decision-makers; consumers).
  • Codification and diffusion of technical knowledge (screening, interpretation, and validation of R&D results; support for databases).
  • Technical standard-setting.*
  • Technology and/or industrial extension services.
  • Publicity, persuasion, and consumer information (including awards, media campaigns, etc.). 

* Refers only to standards intended to ensure commonality (e.g., driving cycles for comparing automobile fuel economy), or compatibility (e.g., connectors for charging electric vehicle batteries), not to regulatory standards.


The key lessons of this analysis are supported by a large body of literature in economics and other fields concerning the innovation process, and include the following:

  • Technological innovation is a complex process involving invention, development, adoption, learning, and diffusion of technology into the marketplace. The process is highly iterative, and different policies influence outcomes at different stages.
     
  • Gains from new technologies are realized only with widespread adoption, a process that takes considerable time and typically depends on a lengthy sequence of incremental improvements that enhance performance and reduce costs. For example, several decades passed before gas turbines derived from military jet engines improved in efficiency and reliability to the point that they were cost-effective for electric power generation. Today, gas turbines are the leading technology for new, high-efficiency power plants with low GHG emissions.
     
  • Technological learning is the essential step that paces adoption and diffusion. “Learning-by-doing” contributes to reductions in production costs. Adopters of new technology contribute to ongoing innovation through “learning-by-using.” Widespread adoption accelerates the incremental improvements from learning by both users and producers, further speeding adoption and diffusion.
     
  • Technological innovation is a highly uncertain process. Because pathways of development cannot be predicted, government policies should support a portfolio of options, rather than a particular technology or design.

Government policies influence technological change at all stages in the innovation process. Lessons learned from U.S. experience with technology policies over the past several decades include the following:

  • Federal investments contribute to innovation not only through R&D but also through “downstream” adoption and learning. Government procurement of jet engines, for example, accelerated the development of gas turbines by providing a (military) market that allowed users and producers to gain experience and learn by using. Likewise, in the early years of computing, defense agencies made indispensable contributions to a technological infrastructure that propelled the industry’s rise to global dominance.
     
  • Public-private R&D partnerships have become politically popular because they leverage government funds and promote inter-firm collaboration. Partnerships may have particular advantages in fostering vertical collaborations, such as those between suppliers and consumers of energy.
     
  • Adoption of innovations that originate outside a firm or industry often requires substantial internal investments in R&D and human resources. Smaller firms may be less able to absorb innovations without government assistance.
     
  • Just as competition in markets helps resolve uncertainties and improves economic performance, competition within government can improve performance in fostering innovation. The messy and often duplicative structure of U.S. R&D support and related policies creates diversity and pluralism, fostering innovation by encouraging the exploration of many technological alternatives.
     
  • Because processes of innovation and adoption are lengthy and convoluted, effective policies and programs require insulation from short-term political pressures.Reliable political constituencies have been essential for the development of new technologies in defense, for research in the biomedical sciences, and for agricultural and manufacturing extension. By contrast, technology policies for addressing climate change face a discordant political environment.

Technology policies alone cannot adequately respond to global climate change. They must be complemented by regulatory and/or energy pricing policies that create incentives for innovation and adoption of improved or alternative technologies. Such “non-technology policies” induce technological change, with powerful and pervasive effects. Environmental regulations and energy efficiency standards have fostered innovations that altered the design of many U.S. power plants and all passenger cars over the past several decades. The technological response to climate change will depend critically on environmental and energy policies as well as technology policies. Because climate change is an issue with time horizons of decades to centuries, learning-by-doing and learning-by-using have special salience. Both technology policies and regulatory policies should leave “space” for continuing technological improvements based on future learning. Climate change policy must accommodate uncertainties, not only regarding the course and impacts of climate change itself, but also in the outcomes of innovation.

Conclusions

Greenhouse gas emission reductions will require a broad portfolio of policies to foster technology development and adoption by actors ranging from households to multinational corporations. The policy portfolio should combine technology policies as discussed in this report with other policies to induce innovation and deployment.

A climate change policy package must account for uncertainties in the pace and cost of innovation. Technological evolution is always accompanied by unknowns concerning the levels of performance that can ultimately be achieved, the technological attributes that will prove most attractive to adopters, and the costs of these technologies. Technical design and development are fluid, open-ended activities with multiple choices and tradeoffs and often-ambiguous selection or evaluative criteria. Uncertainties, part and parcel of innovation, can be resolved only through learning processes. These processes are often slow and piecemeal, studded with lessons from both successes and failures. Technology-oriented policies and non-technology policies alike must function in such settings.

Further lessons for climate change policy include the following:

  • Because the benefits of technological innovation come only with widespread adoption, and because adoption and learning are mutually reinforcing processes, the policy portfolio should support diffusion of knowledge and deployment of new technologies as well as research and discovery. In short, R&D alone is not enough.
     
  • Because private investments respond primarily to near-term market incentives, public investments are necessary to build a technological infrastructure able to support innovation over the long term. A key ingredient of such infrastructures is a vibrant community of technologists and entrepreneurs working in settings in which knowledge and information flow freely. Government financial support for education and training, as well as for research, enhances such infrastructures. Excessively strong intellectual property rights may weaken such infrastructures.
     
  • Competition among firms contributes to effective selection of innovations, and competition among academic research groups contributes to discovery. Similarly, competition among government agencies and government laboratories contributes to policy success. Competition exposes ineffectual bureaucracies, out-of-touch government laboratories, poor policy choices, and project-level mistakes. It encourages diversity by opening alternatives for exploration by technology creators and technology users alike. For these reasons, policy-makers should channel new funds for R&D through multiple agencies and allocate funds to industry and other researchers on a competitive basis.
     
  • Because there can be no learning without some failures, policy-makers cannot expect every government investment to pay off. They must be prepared to tolerate mistakes, and to learn from them, just as entrepreneurs in the private sector do. Needless to say, tolerance for error is no excuse for sloppy management or ill-conceived policies and programs.

To encourage innovation in response to climate change, the federal government should support the development of an environment that nourishes creativity and learning in science, technology, and commercial applications. Well-designed technology policies support the free flow of information, which promotes the evaluation of new ideas and the acceptance and diffusion of the best new technologies. Much innovation will be needed if GHG emissions are to be reduced to the levels needed to stabilize atmospheric concentrations of heat-trapping gases. Government policies will set the underlying conditions for (and constraints on) innovation. The effectiveness of climate change policies will be judged by the innovation that follows. Well-crafted policies can help nourish an energy technology revolution over the next half century as astonishing as the information technology revolution of the last half century.

About the Authors

JOHN A. ALICConsultant

John Alic writes and consults on policy issues related to technology, science, and the economy. As a staff member at the congressional Office of Technology Assessment from 1979 to 1995, he directed projects that include U.S. Industrial Competitiveness: A Comparison of Steel, Electronics, and Automobiles (1981) and Commercializing High-Temperature Superconductivity (1988). His consulting has included work for government agencies, the National Academy of Engineering, and the H. John Heinz III Center for Science, Economics, and the Environment project on “Technology Policies for Reducing Greenhouse Gas Emissions.” Alic is co-author of Beyond Spinoff: Military and Commercial Technologies in a Changing World (1992) and New Rules for a New Economy: Employment and Opportunity in Postindustrial America, a Century Foundation book published in 1998. A graduate of Cornell, Stanford, and the University of Maryland, he has taught at several universities and is currently completing a book manuscript with the working title, Trillions for Technology: Innovation and the U.S. Military.


DAVID C. MOWERY, University of California, Berkeley

David Mowery is Milton W. Terrill Professor of Business at the Walter A. Haas School of Business at the University of California, Berkeley, a Research Associate of the National Bureau of Economic Research, and during the 2003-04 academic year, the Bower Fellow at the Harvard Business School.  He received his undergraduate and Ph.D. degrees in economics from Stanford University and was a postdoctoral fellow at the Harvard Business School.  Dr. Mowery taught at Carnegie Mellon University, served as the Study Director for the Panel on Technology and Employment of the National Academy of Sciences, and served in the Office of the United States Trade Representative as a Council on Foreign Relations International Affairs Fellow.  He has been a member of a number of National Research Council panels, including those on the Competitive Status of the U.S. Civil Aviation Industry, on the Causes and Consequences of the Internationalization of U.S. Manufacturing, on the Federal Role in Civilian Technology Development, on U.S. Strategies for the Children's Vaccine Initiative, on Applications of Biotechnology to Contraceptive Research and Development, on New Approaches to Breast Cancer Detection and Diagnosis.  His research deals with the economics of technological innovation and with the effects of public policies on innovation; he has testified before Congressional committees and served as an adviser for the Organization for Economic Cooperation and Development, various federal agencies and industrial firms.  Dr. Mowery has published numerous academic papers and has written or edited a number of books, including ‘Ivory Tower’ and Industrial Innovation:  University-Industry Technology Transfer Before and After the Bayh-Dole ActPaths of Innovation:  Technological Change in 20th-Century America; The International Computer Software Industry:  A Comparative Study of Industry Evolution and Structure; U.S. Industry in 2000; The Sources of Industrial Leadership; Science and Technology Policy in Interdependent Economies;  Technology and the Pursuit of Economic Growth; Technology and Employment:  Innovation and Growth in the U.S. EconomyThe Impact of Technological Change on Employment and Economic Growth;Technology and the Wealth of Nations; and International Collaborative Ventures in U.S. Manufacturing.  His academic awards include the Raymond Vernon Prize from the Association for Public Policy Analysis and Management, the Economic History Association's Fritz Redlich Prize, the Business History Review's Newcomen Prize, and the Cheit Outstanding Teaching Award.


EDWARD S. RUBIN, Carnegie Mellon University

Dr. Rubin is the Alumni Professor of Environmental Engineering and Science at Carnegie Mellon University.  He holds joint appointments in the departments of Engineering and Public Policy and Mechanical Engineering, and is also Director of CMU's Center for Energy and Environmental Studies.  He obtained his Bachelor's degree in mechanical engineering at the City College of New York, and his Masters and Ph.D. at Stanford University. Over the past 32 years, he has directed research on a wide range of technology-policy issues related to energy and the environment, especially focused on coal-based systems.  He has served on various technical and advisory boards to the U.S. Department of Energy, the U.S. Environmental Protection Agency, and the National Academies, and is currently a member of the National Research Council's Board on Energy and Environmental Systems (BEES), and its committee assessing DOE's Vision 21 program.  He is the author of over 200 technical papers and reports dealing with advanced energy technologies, environmental control systems and environmental policy, as well as a recent textbook on Engineering and the Environment. In addition, he has served as a consultant to a variety of public and private organizations in the U.S. and abroad concerned with energy use and environmental protection.

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Eileen Claussen Statement on McCain-Lieberman Vote

FOR IMMEDIATE RELEASE:
Thursday, October 30, 2003


Contact: Katie Mandes (703) 516-0606


Eileen Claussen Statement on McCain-Lieberman Vote

Washington, DC — Today's Senate vote on the Climate Stewardship Act demonstrates strong and growing bipartisan support for real action against climate change. John McCain and Joe Lieberman have crafted a piece of legislation that is ambitious yet achievable and affordable. The bill couples strong environmental goals with a flexible market-based approach that allows business to reduce emissions at the lowest possible cost. According to an analysis by MIT economists the cost to the average U.S. household would be just $15 a year in 2010, a modest price for insurance against the very real risks of global warming. It may be some time before a bill like this can be enacted. But thanks to this bill, Congress is for the first time engaged in a genuine debate over climate solutions. This debate is long overdue. This is a beginning.

###

The Pew Center was established in May 1998 by The Pew Charitable Trusts, one of the United States’ largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is an independent, non-profit, and non-partisan organization dedicated to providing credible information, straight answers, and innovative solutions in the effort to address global climate change. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.

Critique of the CRA Analysis of Lieberman-McCain Climate Stewardship Act (S.139)

Critique of the Charles River Associates Cost Projections of S.139 (as offered in 10/03)

On Wednesday morning, October 29, 2003, Tech Central Station released a Charles River Associates (CRA) analysis purported to analyze the version of the Lieberman-McCain Climate Stewardship Act (S. 139) to be voted on by the Senate on October 30.  The CRA analysis has neither gone through peer review nor been revised after comment and debate.  Among the most dubious aspects of the CRA analysis is that it projects a price per ton of greenhouse gas (GHG) emissions similar to that projected by the MIT model1 while projecting a much higher impact on GDP and household consumption. 


This is in part because CRA has not actually modeled the bill as it is being offered today.  In particular:

  • The CRA results are largely driven by an assumed hike in personal income taxes not included in the bill.
  • The CRA model does not include reductions of the five GHGs besides carbon dioxide covered by the bill2 which offer low-cost reduction opportunities.

In addition, the CRA analysis incorporates assumptions that further skew its cost estimates upwards.

  • The CRA analysis assumes, as the business-as-usual baseline, massive growth over the next 70 years in carbon-intensive fuels and activities.  This extrapolation exaggerates the reductions needed to meet the long-term targets imposed by their analysis.
  • The CRA analysis assumes that long-term technological change will be limited, ignoring U.S. industry’s long history of innovation in meeting major policy goals, whether related to defense, health, energy or environmental protection.

The CRA analysis assumes that the lower economic growth they project will lead to reduced tax revenue and result in other taxes being raised. But increasing personal income tax leads to greater distortions in the economy, resulting in a vicious cycle: the more the price of energy goes up, the less is consumed, so the personal tax burden is further increased, so less energy is consumed, etc. 

Without assumptions that are not reflective of the bill as written, CRA’s results become more comparable to MIT’s results3.  In CRA’s words, “When all three of these changes [foresight, future policy assumptions, and tax distortions] are combined, we are able to project consumption losses in the range of less than 0.06% or less than $70 per household per year.”


1 CRA projects carbon prices of $27/TC ($7/TCO2) in 2010 and $44/TC in 2020 ($12/TCO2), compared to $31/TC and $52/TC in the MIT study. 
http://web.mit.edu/globalchange/www/abstracts.html#a97
2 The six greenhouse gases addressed by S.139 are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6).
3 MIT projects a 0.02% effect on consumption at an annual cost of roughly $15 per household.

 

 

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