Breaking the Ice on U.S. Clean Energy Opportunities

On Friday, March 12, we held a briefing on jobs and opportunities in clean energy markets.

Today, the President signed an Executive Order creating an Export Promotion Cabinet of top officials and an Export Promotion Council, a private-sector advisory body. This Executive Order serves to highlight once again how important American exports and competitiveness are to economic recovery and continued US economic strength.  While much hand-wringing has occurred over the potential for climate and energy policy to hurt the ability of U.S. firms to compete in international markets, the opportunity of such policy to enhance the competitiveness of U.S. businesses has received less notice. The irony is that even as the planet warms, the United States may be left standing out in the cold if it doesn’t choose to lead in the development of next-generation energy technologies.

Initially, it may be difficult to see how addressing our environmental and energy security problems can also yield economic benefits. Yet as laid out in our new policy brief, the logic is simple: clean energy technology markets are growing rapidly, and climate and clean energy policy will help position U.S. firms to be key market players by driving innovation in 21st century technologies. In partnership with the office of Senator Arlen Specter (D-PA), we will host a briefing on Friday, March 12 to present its analysis and to hear from business and labor representatives as they discuss the link between clean energy policy and new market opportunities.

Not to give it all away, but the bottom line is that failure to adopt climate and clean energy policy will ultimately hurt … the bottom line. If we fail to act, we risk blunting American companies’ competitive edge in lucrative markets for products related to renewable energy, carbon capture and storage (CCS), nuclear power, advanced fuels and vehicles, and industrial, transportation, and building efficiency technologies. Global markets for these and other cleantech products are expanding as a function of several factors, including efforts to reduce greenhouse gas (GHG) emissions in light of mounting concern over climate change, an increased desire on the part of many countries to achieve greater energy security, and higher fossil fuel prices. Business-as-usual policy is not going to cut it if the U.S. wants to be a major player in these new markets.

The numbers speak for themselves. Between 2004 and 2008, global investment in a wide range of clean energy technologies grew at an average compound annual growth rate of 45 percent, reaching $155 billion in 2008. Even assuming no changes to existing policies by any major-emitting countries, the International Energy Agency (IEA) estimates that between 2010 and 2020, cumulative global investment in renewables, CCS, and nuclear power will total about $3.4 trillion between 2010 and 2030; under a strong international climate agreement, this cumulative total could reach $6.6 trillion. And these numbers don’t include investment in building and transportation efficiency, alternative fuels, and other technologies. Of course, real market sizes are likely to fall somewhere between these base-case and strong-action totals, but growth will be substantial.

Unfortunately, the United States risks letting the opportunity to compete in these clean energy markets slip away. In 2009, North America trailed Europe and China in aggregate cleantech asset financing, venture capital, and private equity investments. Globally, only one of the top five wind turbine manufacturers and one of the top 10 solar panel manufacturers are American. The growing success of other nations is not accidental. Rather, it’s the result of deliberate action motivated by a desire to tap new market opportunities combined with the realization that history demonstrates it matters where industries are first established. Thanks to its policies, China is now the world’s largest solar panel manufacturer, exporting about 95 percent of its production. Denmark produces 40 percent of annual global installed wind capacity. And by 2020, investment in German-made renewable energy systems could be in the range of $18 billion to over $27 billion a year. As the list goes on, it is clear that countries poised for success in cleantech markets have two things in common:

  • Strong climate policy, clean energy policies, or both; and
  • A keen awareness of the benefits that will come from cleantech market dominance.

These nations also understand that many clean energy industries create and sustain jobs in a variety of fields. China’s renewable energy industries are adding 100,000 jobs a year, and the German government estimates that its renewable energy industries will employ 400,000 workers by 2020, with its policies generating an estimated net positive employment effect of over 70,000 jobs relative to a reference case projecting very slight renewable energy expansion. Strong domestic markets are crucial to maximizing this job creation potential because some jobs in clean energy industries must be located where demand exists: if a company sells cleantech products in the United States, it is very likely to hire American workers for installation, maintenance, the manufacturing of certain components, and other work.

America can and should do better – it has the innovative edge, the manufacturing infrastructure, and the human and physical capital to position itself as a leader in cleantech markets, but only if it acts now. The single most important step it can take is the adoption of comprehensive climate and energy policy that puts a price on GHG emissions using market-based mechanisms. Such action will deliver the certainty businesses need to mobilize significant long-term capital investment. Internationally, the United States should provide global leadership in the development of an international agreement that addresses climate change, which in turn will foster a vibrant global cleantech market. America stands to benefit from the continued expansion of these markets, but only if it chooses to come in from the cold.