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Tuesday, October 06, 2009

EU Set To Enter Clean Energy Race with $73 billion for R&D

By Yael Borofsky and Jesse Jenkins, originally at the Breakthrough Institute

Europe is planning to stage a grand entrance into the clean energy race by investing approximately $73 billion in clean energy research, according to Reuters, which has obtained an early draft of the European Commission's Strategic Energy Technology Plan (SET Plan) scheduled for release Wednesday.

Until now, the race to lead the world in clean energy technology has largely involved competition between the United States, East Asia's "clean tech tigers"- China, Japan, and South Korea - and up-and-coming challenger, India. With the U.S. wavering for the better part of a year on how best to enact climate and energy legislation, the Breakthrough Institute and others have called on the U.S. to include large-scale investments in clean energy technology if it wants to remain a world leader in innovation and corner what could be a market worth trillions.

But it seems that Europe has beaten the U.S. to the punch. If the draft is any indication, the EU will triple funding in energy research in order to bring suite of clean energy technologies to market and achieve its 80% reduction in greenhouse gas target by 2050. Europe at least, has realized the urgency of the clean energy race and that investment in clean energy innovation is the only way to compete. As an EU official told Reuters:

"We know that low-carbon technology will one day become cost-competitive with fossil fuels, and the question then is whether the EU will be an importer or an exporter of that technology...We have to be in pole position."

Although it is not possible to verify the exact details of the plan until the report is released on Wednesday (stay tuned for future coverage), the draft is a reliable indication of the types of investments Europe has in store, including EU16 billion (US$23.5 billion) for solar power, EU6 billion (US$8.8 billion) for wind power, EU7 billion (US$10.3 billion) for nuclear, and EU13 billion (US$19 billion)for carbon capture and storage technology, all over the next ten years.

Despite the fact that Joseph Romm of ClimateProgress insists that pending climate legislation is equivalent to Europe's massive planned outlay of government spending and is "the only way for the U.S. to win the clean energy race," analysis of the House-passed ACES demonstrates that the bill is not up to the task.

While Europe is poised to triple clean energy research spending to EU8 billion, or US$11.7 billion, ACES would invest just $1.1 billion annually (at $15/ton of CO2) in clean energy research and development, boosting U.S. energy research budgets by just 20% to just over $6 billion annually. With economies roughly the same size, the EU would outspend the U.S. nearly 2 to 1 in clean energy R&D if both the proposed SET Plan and the House-passed ACES bill become law. Judging by the graphic below, that doesn't exactly look like a great way to win the clean energy race, Mr. Romm.


Of course, to keep the proper context for these two plans, we must not forget the East Asian clean tech tigers. Japan has proposed $30 billion in low-carbon energy research spending over the next five years. South Korea intends to spend $46 billion over the same time period--a full one percent of national GDP each year -- to expand the nation's market share in a suite of clean technologies. And China, probably the greatest challenger to U.S. or EU clean energy leadership, is expected to invest $44-$66 billion annually over the next decade to modernize its energy system and become a world leader in clean energy.

As the U.S. Senate works out the specifics of the Kerry-Boxer bill released last week, we cannot afford to quickly dismiss the forthcoming EU Strategic Energy Technology Plan as yet another reason to simply pass the House's ACES bill. With both Asia and Europe committing the resources necessary to surge ahead of the U.S. in the clean energy race, the Senate cannot afford to let the opportunity to adequately fund clean energy innovation and reinstate the U.S as world leaders in innovation pass by. If the Senate fails - as the House unfortunately did - the U.S. will quickly find itself outspent and out-innovated by China, Japan, South Korea, and now, the European Union.

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