Thursday, August 19, 2010

Getting it Wrong on Carbon Caps and Clean Tech Investment

By Devon Swezey, originally published at the Breakthrough Institute

In a new article at the Washington Independent, Andrew Restuccia falls into the trap of equating the failed cap and trade bill with a proactive clean economy strategy that would drive considerable private investment in clean energy.

We warned about this last Friday, when we argued that cap and trade advocates would use recent news that Deutsche Bank is moving clean energy investment overseas as evidence that cap and trade would have kept investment in the United States.

According to Restuccia:

"It turns out that an economy-wide cap on carbon emissions really is necessary to spur investment in what President Obama likes to call the "clean energy economy." At least for Deutsche Bank."

Actually, according to Deutsche Bank's own reports, a carbon cap would have done little:

"While emissions targets express an intention and carbon markets might deliver a price signal in the long-term, governments must strengthen underlying mandates and incentives immediately if capital is to be deployed to cover the gap, creating more investment and jobs."

Those underlying incentives are public investments, in the form of feed-in tariffs and procurement policies in countries like Germany and China that have "demonstrated their ability to deliver renewable energy at scale" and earned those countries a "low-risk" investment rating, according to the Bank.

Indeed, in his comments to Reuters, Deutsche Bank Head of Global Asset Management, Kevin Parker, is careful not to mention cap and trade directly. And if he is referring to cap and trade, then he's being disingenuous, as his own reports criticize the "volatile market incentive approach" of the United States.

China planning public investment, not cap and trade

Restuccia also writes that China, which has attracted the bulk of private investment in clean energy, will "begin capping carbon emissions" in the near future. Yet China is not considering absolute emissions reductions targets or an economy-wide cap and trade system, but is considering localized trading systems, similar to the voluntary exchanges we have in the United States. A recent Reuters article on the subject states that China "won't be rushing to launch a national emissions trading scheme or to commit to absolute emissions reduction targets."

The real story that Restuccia and many others miss is the country's planned $740 billion, 10-year investment package expected to be announced soon. Indeed, the reason China has become a hub of clean tech investment is that it's government is very actively promoting the sector through major public investments in R&D, manufacturing, and deployment incentives like procurement and feed-in tariffs.

It's time for clean energy advocates to recognize no congressional cap and trade bill will drive substantial private investment without a targeted, proactive clean economy strategy that prioritizes major public investment in clean energy technology.

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