U.S. Technology and Innovation Policies: Lessons for Climate Change
Prepared for the Pew Center on Global Climate Change
John A. Alic, Consultant
David C. Mowery, University of California, Berkeley
Edward S. Rubin, Carnegie Mellon University
Press Release 
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:
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.
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)
Direct or Indirect Support for Commercialization and Production; Indirect Support for Development
Support for Learning and Diffusion of Knowledge and Technology
* 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:
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:
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.
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:
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.
JOHN A. ALIC, Consultant
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 Act; Paths 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. Economy; The 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.