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Monday, December 14, 2009

Senators Introduce Bill to Boost Clean Tech Manufacturing

Originally Posted at the Breakthrough Institute

Last Thursday, U.S. Senators Jeff Bingaman (D-NM), Orrin Hatch (R-UT), Debbie Stabenow (D-MI), and Richard Lugar (R-IN) introduced bipartisan legislation aimed at accelerating the growth of clean technology manufacturing industries in the United States.

The American Clean Technology Manufacturing Leadership Act would extend a tax credit first introduced in the short-term American Recovery and Reinvestment Act (ARRA) to allow companies to write-off 30 percent of the cost of creating, expanding or re-tooling domestic clean tech manufacturing facilities.

The ARRA program--called the Advanced Energy Manufacturing Tax Credit--provides $2.3 billion in tax credits and has spurred new investments in U.S. clean tech manufacturing facilities. Funding for the popular program is expected to dry up in mid-January but the new legislation would provide an additional $2.5 billion to extend the life of the program.

In a statement on the release of the bill, Senator Stabenow proclaimed that the legislation is critical to boost economic growth, job creation, and U.S. competitiveness in the global clean energy race:

"In order to turn our economy around and create jobs, we need to build the clean energy technology of the future here in America. Otherwise, we will lose the race with other countries and see those jobs go overseas."

Senator Bingaman added some perspective about the current challenge facing the United States:

"Currently, the United States runs an annual 'green trade deficit' of almost $9 billion. But the United States should be the world's No. 1 manufacturer of clean energy technology. This tax incentive will help us move toward that goal."

Indeed, as the Breakthrough Institute and ITIF note in "Rising Tigers, Sleeping Giant," a recent survey of clean energy competitiveness in the U.S. and Asia, the U.S has fallen behind its international competitors in the capability to manufacture and produce clean energy technologies on a large scale:

"With no domestic manufacturers of high-speed rail technology, the United States will rely on companies in Japan or other foreign countries to provide rolling stock for any planned high-speed rail lines. And all three Asian nations lead the United States in the deployment of new nuclear power plants. The United States relies on foreign-owned companies to manufacture the majority of its wind turbines, produces less than 10 percent of the world's solar cells, and is losing ground on hybrid and electric vehicle technology and manufacturing."

The three Asian nations examined in the report--China, Japan, and South Korea--are also investing aggressively in clean tech sectors and will out-invest the United States three-to-one in these sectors in a bid to gain a first-mover advantage in rapidly growing clean energy markets.

If the United States does not strengthen its competitive position vis-a-vis its Asian competitors, the jobs, tax revenues, and other benefits of clean tech growth will overwhelmingly accrue to our competitors. The report also notes that the climate and energy legislation working its way through Congress, as currently formulated, will not be sufficient to close the clean tech investment gap and put the United States back in contention in the race to dominate future clean tech industries.

Toward a Clean Energy Economy Strategy

Simply attempting to limit emissions and put a low price on carbon--the primary mechanism of both the American Clean Energy and Security Act (ACESA) and the Clean Energy Jobs and American Power Act (CEJAPA)--will not forestall America's decline in the global clean tech industry. These are both pollution reduction bills, not clean energy economy bills, and should not be confused.

An effective clean energy economy strategy would have at its center large, direct and long-term public investments in domestic clean tech industries. Not all clean technologies are created equal and these investments should be optimized to address the hurdles of individual clean technologies in order to improve their performance and drive down their costs. In short, a clean energy economy strategy would invest in American clean energy to make clean energy cheap, driving U.S. clean tech exports and creating U.S. clean tech jobs.

The bi-partisan American Clean Technology Manufacturing Leadership Act announced by Senators Bingaman, Hatch, Stabenow, and Lugar is laudable because it recognizes that simply pricing carbon is not a clean energy economy strategy, and thus will not keep the United States competitive in the clean energy race.

This legislation is one step in what must be a comprehensive and robust clean energy economy strategy that prioritizes large public investments in clean energy innovation, manufacturing, deployment, and infrastructure. In the absence of such a strategy, the U.S. will continue to cede economic leadership in the global clean tech industry to its international competitors and sit passively by as the new clean tech industries of the future take root beyond our shores.

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