Election Season or Innovation Season?

I'm reminded recently of Daffy Duck fighting with Bugs Bunny, the duck demanding that it's Rabbit-Hunting Season and Bugs refuting that it's Duck Season. In this cartoonish analogy, President Obama is both Bugs and Daffy, in a shouting match with himself. It's either Investment Season or Election Season. It apparently can't be both.

There's a reason Energetics' subline is "A blog on climate, energy and politics." As frustrating as it sometimes is, the pursuit and achievement of goals on the path towards decarbonization and a clean energy future depend heavily on the institutional intricacies set up by our political landscape. The political infrastructure in place establishes the ability of our nation to invest in our future. President Obama's speech at George Washington University yesterday illustrated this notion, and his stump speech that ostensibly kicked off his 2012 campaign was often inspiring in its liberalism and rhetorical embrace of innovation economics.

The America I know is generous and compassionate. It’s a land of opportunity and optimism. Yes, we take responsibility for ourselves, but we also take responsibility for each other; for the country we want and the future we share.
...
I will not sacrifice the core investments we need to grow and create jobs.

In place of "jobs," the President could have easily said "a national infrastructure renovation" or "a clean energy economy." All three are true, but the politics of the game will probably guarantee that jobs are the key focus of his speeches from now until at least November 2012.

Like Bugs vs. Daffy though, there is some trickery at play. The President is calling this moment Investment Season when it's shaping out to be anything but. The sweeping and not entirely insincere verbiage dedicated by the President to investing in a "future we want" is undercut by the recent budget debacle, where we see funds for innovation, science and research cut across the board. The Breakthrough Institute crunches the thoroughly uninspiring numbers, and while investments levels for FY2012 aren't quite as low as they would be if Congressional Republicans had their way, more often not the President and his allies came away on the losing end of the draw.

I believe the President would be better served by a more ambitious agenda, one that aims to significantly increase investments in our nation's transportation grid, energy infrastructure, education and technological robustness. Indeed, I wish Obama would act exactly like he said he would in his 2011 State of the Union address. Instead, we have conflicting messaging coming from his podium. "Invest in our future" is sidelined by "live within our means" and calls for the government to tighten its belt like millions of families across the country. Economists agree this is a red herring -- now is not the time to worry about the deficit, but instead a time to rebuild a nation whose citizens, infrastructure and resources will guide it out of debt in the future.

The President is going to win next year. But a victory without a bold agenda will ill-serve the needs of an American economy desperately crying for the investments it's been robbed of for decades. Obama need not fret whether it's Investment Season or Election Season. It's both. Investing in America's future is good politics, and Obama's characteristically hopeful and progressive political rhetoric needs a policy backbone that seriously invests in the future we want.

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President Obama's Budget Would Invest in Energy Innovation

President Obama released his fiscal year 2012 budget proposal this morning, a solid endorsement of the necessity to increase public investment in energy innovation amidst proposals to indiscriminately cut discretionary spending across all federal programs. The President's budget proposal builds off of the innovation-centered economic growth strategy presented in the State of the Union Address last month and the White House Innovation Report released two weeks ago.

On the energy investment front, the budget proposal aims to increase the DOE's budget by 11.8 percent over FY2010's current appropriation levels, or $3.1 billion dollars, a comparatively small increase in an overall budget proposal of $3.7 trillion that proposes reducing the projected deficit by roughly $110 billion per year for the next ten years.

This budget increase is a vital step towards meeting the scale of the energy innovation challenge long-underlined by the Breakthrough Institute and by a general consensus of leading energy innovation experts, think tanks, and policymakers.

However, not all of these increases lie with funding for energy innovation. Using the Energy Innovation Tracker, a tool that compiles federal energy-innovation funding across nine federal agencies for the years 2009-2011, inclusive of ARRA, we've broken out investments in energy innovation (defined in the tracker as Basic Science, RD&D, and Education investments) from general energy investments in measures such as deployment, facility construction, and program management.

To do so, we've calculated the share of total budgets for each of these programs in FY2010 dedicated to energy innovation spending, and have assumed, for discussion's sake, that an equal proportion of each proposed FY2012 program budget is intended for energy innovation spending. The FY2010 budget is used rather than FY2011 budget request, as federal agencies are currently operating with a continuing resolution under FY2010 budget levels. The summary table for a selection of these energy innovation measures is presented below. Please note that these are ballpark figures. For a more extensive discussion of the methodology behind these assumptions, see the bullets at the end of this post.

Selected DOE Program Energy Innovation Budgets, FY2010 and Estimated Proposed FY2012 ($ millions)

(click to enlarge)

In addition to these budgetary increases:

• The Administration is proposing an additional $5 billion investment for the Section 48C Advanced Energy Manufacturing Tax Credit program, which provides a 30% tax credit for energy manufacturing facilities to encourage advanced manufacturing processes.

• The budget also proposes increasing funding for several of the DOE's loan guarantee programs, aiming to scale-up loan guarantees for the development and deployment of innovative renewable energy and energy efficiency technologies, nuclear power projects, and advanced technology vehicle manufacturing.

• Budget increases will be funded through the proposed reform of fossil fuel energy spending, through the elimination of tax subsidies for the oil and gas industry and a 45% cut to DOE fossil energy research programs. Hydrogen research and a few other programs also receive targeted reductions in the budget request.

These elements of President Obama's proposed budget are key moves towards the larger energy innovation system reform advocated for by several leading innovation scholars in "Post-Partisan Power", and in "Jumpstarting a Clean Energy Revolution with a National Institutes of Energy" a 2009 report published by the Breakthrough Institute and Third Way.

With these proposed investments across the energy innovation cycle, from research in breakthrough technologies to investments in advanced manufacturing and demonstration of later-stage technologies, the proposal recognizes that public investments in energy innovation are not just critical to the nation's energy future, but also to securing the country's economic prosperity. The proposal adds to a growing chorus of voices on both sides of the political spectrum that recognize that smart, targeted investments, rather than sweeping spending cuts, can be used to spark innovation and overcome the fiscal deficit.

The President's proposed budget is an important first step towards meeting this country's energy innovation imperative. Now, it remains to be seen if the budget proposal is largely symbolic, or if the President is fully committed to making this case to the American public and to winning over conservative policymakers and fiscal hawks who have been reluctant to embrace an innovation-focused strategy for fiscal responsibility and economic renewal.

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*Calculations for share of proposed FY12 budget devoted to energy innovation for the Office of Fossil Energy differed from calculations used for other offices, as the Administration stated throughout the proposed budget its goal of phasing out inefficient fossil fuel subsidies. Thus, it was assumed that the proportion of budget devoted to energy innovation would have increased in the FY12 proposed budget, and this share was calculated by summing: the changes listed in the FY12 proposed budget for the Carbon Capture & Power Systems Programs, the Advanced Energy Systems Programs, and a portion of the FY10 energy innovation budget that was assumed to be unchanged from lack of indication otherwise.

• The DOE's Office of Science (OS)'s budget is proposed to increase by 9.2 percent from FY2010 appropriation levels to $5.4 billion, mostly to continue funding basic energy research and to fund workforce development programs. However, not all of the Office of Science's funding goes towards energy science research, as the office also is a major funder of the nation's fundamental physical science research. With approximately $1 billion, or 20%, of the Office of Science's FY2010 budget devoted to basic energy science research, $1.1 billion, an increase of $100 million over FY10, of the OS' budget will be devoted to basic energy science through this proposed budget.

• The Administration is requesting a $550 million for the Advanced Research Projects Agency-Energy (ARPA-E) to continue funding early-stage transformational energy research projects, an increase of $350 million from ARPA-E's original funding of $400 million over two years through the ARRA stimulus package. 88% of ARPA-E's funding through ARRA was apportioned to energy-innovation RD&D, thus about $487 million of this $550 million can be expected to be spent on energy-innovation RD&D through the FY12 proposed budget.

• The budget proposes an increase in funding for the DOE's Office of Energy Efficiency and Renewable Energy (EERE)'s budget, from $2.2 billion in FY10 to $3.2 billion, to continue funding research, development, demonstration and deployment on renewable energy and energy efficiency technologies. Of EERE's FY10 budget, 48% was spent on energy innovation-related RD&D and training programs, thus we can assume roughly $1.5 billion will be spent to energy-innovation related programs through the FY12 proposed budget.

o In the vehicle technology realm, the Administration proposes an 93% increase in the DOE EERE's Vehicle Technologies budget to $588 million to advance R&D for innovative transportation technologies. With an 80% dedicated to energy innovation funding in FY2010, we can assume that almost $486 million will be spent on energy innovation related projects in the Vehicle Technologies program through the proposed budget.

• The Administration is proposing a decrease of 0.6% in the Office of Nuclear Energy's (NE) budget, from $858 million to $853 million. 40% of NE's FY10's budget went towards energy-innovation spending, and resultantly we would expect about $349 million of Obama's proposed Office of Nuclear Energy budget to go towards nuclear energy innovation projects.

o Amidst growing interest in the Small Modular Reactor (SMR) technology, the FY 2011 DOE budget request was the first to propose a project specifically geared towards supporting RD&D of SMR technologies, a $39 million project through the Reactor Concepts RD&D program. Obama's budget proposes a $125 million budget for the Reactor Concepts R&D program, which will reportedly include R&D on advanced SMR designs.

• The proposal includes funding to launch three additional Energy Innovation Hubs, to bring the total number of DOE Energy Innovation Hubs to six, two shy of the eight hubs advocated for by the Breakthrough Institute and a coalition of think tanks in a policy report on the reauthorization of the America COMPETES Act. These three new hubs would focus on batteries and energy storage, smart grid technologies and systems, and critical advanced materials. The three original Energy Innovation Hubs received funding of approximately $22 million each in FY2010, and are conducting research in the areas of Energy Efficient Buildings, Fuels from Sunlight, and Modeling and Simulation for Nuclear Reactors.

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Nuclear Power in a Post-Partisan Approach to Energy

Originally published by Alex Trembath at Americans for Energy Leadership.

In the wake of cap-and-trade’s defeat, and as we begin a new session of Congress, common ground must be found on policy to renovate America’s energy infrastructure. Now may be the time to explore the possible benefits of renewing America’s once vigorous nuclear power production. Notably absent in recent advances in America’s energy portfolio has been nuclear power. Public safety fears stemming from Chernobyl and Three Mile Island have left nuclear policy in stasis for decades, but as our President aims to launch a new industrial policy and our nation trends towards a new national energy policy, it may be time to revive our commitment to this method of zero-emissions baseload power generation.

Nuclear power is unique among clean energy technologies in that Democrats tend to be more hesitant towards its production than Republicans. Indeed, it has a reputation for its appeal to conservatives -Senators Kerry, Graham and Lieberman included provisions for nuclear technology in their ultimately unsuccessful American Power Act (APA) with the ostensible goal of courting Republican support. The urgency with which Democrats feel we must spark an energy revolution may find a perfect partner with Republicans who support nuclear power. But is there anything more than speculative political evidence towards its bipartisan viability?

If there is one field of the energy sector for which certainty of political will and government policy is essential, it is nuclear power. High up front costs for the private industry, extreme regulatory oversight and public wariness necessitate a committed government partner for private firms investing in nuclear technology. In a new report on the potential for a “nuclear renaissance,” Third Way references the failed cap-and-trade bill, delaying tactics in the House vis-a-vis EPA regulations on CO₂, and the recent election results to emphasize the difficult current political environment for advancing new nuclear policy. The report, “The Future of Nuclear Energy,” makes the case for political certainty:

“It is difficult for energy producers and users to estimate the relative price for nuclear-generated energy compared to fossil fuel alternatives (e.g. natural gas)–an essential consideration in making the major capital investment decision necessary for new energy production that will be in place for decades.”

Are our politicians willing to match the level of certainty that the nuclear industry demands? Lacking a suitable price on carbon that may have been achieved by a cap-and-trade bill removes one primary policy instrument for making nuclear power more cost-competitive with fossil fuels. The impetus on Congress, therefore, will be to shift from demand-side “pull” energy policies (that increase demand for clean tech by raising the price of dirty energy) to supply-side “push” policies, or industrial and innovation policies. Fortunately, there are signals from political and thought leaders that a package of policies may emerge to incentivize alternative energy sources that include nuclear power.

One place to start is the recently deceased American Power Act, addressed above, authored originally by Senators Kerry, Graham and Lieberman. Before its final and disappointing incarnation, the bill included provisions to increase loan guarantees for nuclear power plant construction in addition to other tax incentives. Loan guarantees are probably the most important method of government involvement in new plant construction, given the high capital costs of development. One wonders what the fate of the bill, or a less ambitious set of its provisions, would have been had Republican Senator Graham not abdicated and removed any hope of Republican co-sponsorship.

But that was last year. The changing of the guard in Congress makes this a whole different game, and the once feasible support for nuclear technology on either side of the aisle must be reevaluated. A New York Times piece in the aftermath of the elections forecast a difficult road ahead for nuclear energy policy, but did note Republican support for programs like a waste disposal site and loan guarantees.

Republican support for nuclear energy has roots in the most significant recent energy legislation, the Energy Policy Act of 2005, which passed provisions for nuclear power with wide bipartisan support. Reaching out to Republicans on policies they have supported in the past should be a goal of Democrats who wish to form a foundational debate on moving the policy forward. There are also signals that key Republicans, notably Lindsey Graham and Richard Lugar, would throw their support behind a clean energy standard that includes nuclear and CCS.

Republicans in Congress will find intellectual support from a group that AEL’s Teryn Norris coined “innovation hawks,” among them Steven Hayward, David Brooks and George Will. Will has been particularly outspoken in support of nuclear energy, writing in 2010 that “it is a travesty that the nation that first harnessed nuclear energy has neglected it so long because fads about supposed ‘green energy’ and superstitions about nuclear power’s dangers.”

The extreme reluctance of Republicans to cooperate with Democrats over the last two years is only the first step, as any legislation will have to overcome Democrats’ traditional opposition to nuclear energy. However, here again there is reason for optimism. Barbara Boxer and John Kerry bucked their party’s long-time aversion to nuclear in a precursor bill to APA, and Kerry continued working on the issue during 2010. Jeff Bingaman, in a speech earlier this week, reversed his position on the issue by calling for the inclusion of nuclear energy provisions in a clean energy standard. The Huffington Post reports that “the White House reached out to his committee [Senate Energy] to help develop the clean energy plan through legislation.” This development in itself potentially mitigates two of the largest obstacle standing in the way of progress on comprehensive energy legislation: lack of a bill, and lack of high profile sponsors. Democrats can also direct Section 48C of the American Recovery and Reinvestment Act of 2009 towards nuclear technology, which provides a tax credit for companies that engage in clean tech manufacturing.

Democrats should not give up on their policy goals simply because they no longer enjoy broad majorities in both Houses, and Republicans should not spend all their time holding symbolic repeal votes on the Obama Administration’s accomplishments. The lame-duck votes in December on “Don’t Ask, Don’t Tell,” the tax cut deal and START indicate that at least a few Republicans are willing to work together with Democrats in a divided Congress, and that is precisely what nuclear energy needs moving forward. It will require an agressive push from the White House, and a concerted effort from both parties’ leadership, but the road for forging bipartisan legislation is not an impassable one.

The politician with perhaps the single greatest leverage over the future of nuclear energy is President Obama, and his rhetoric matches the challenge posed by our aging and poisonous energy infrastructure. “This is our generation’s Sputnik moment,” announced Obama recently. Echoing the calls of presidents past, the President used his State of the Union podium to signal a newly invigorated industrialism in the United States. He advocated broadly for renewed investment in infrastructure, education, and technological innovation. And he did so in a room with many more members of the opposition party than at any point during the first half of his term. The eagerness of the President to combine left and right agendas can hopefully match the hyper-partisan bitterness that dominates our political culture, and nuclear power maybe one sector of our economy to benefit from his political leadership.

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White House Report: Stimulus Driving Clean Energy Innovation, Manufacturing, Markets – But What Comes Next?

With global competition mounting and Recovery Act momentum poised to fade, can the Obama Administration secure a lasting clean energy legacy?

By Jesse Jenkins and Devon Swezey

The American Recovery and Reinvestment Act has funded breakthrough innovation and new growth industries that are driving down the cost of clean energy and building the foundation for competitive 21st century U.S. industries, according to a new White House report released today on the impacts of the U.S. stimulus bill.

The report, “The Recovery Act: Transforming the American Economy Through Innovation,” is notable for highlighting the multifaceted and relatively comprehensive clean economy strategy now underway with stimulus investments, and for the Administration’s welcome focus on making clean energy cheap.

Yet while the White House report highlights the considerable clean energy momentum established by the Recovery Act, it also inadvertently raises the specter of an impending clean tech funding cliff which risks sending U.S. clean energy industries into deep freeze as stimulus funds begin to expire over the coming months.

To achieve the White House’s long-term objectives – driving down the costs of emerging clean energy technologies such as solar power and advanced batteries and building globally competitive American clean energy industries – will require a long-term, comprehensive clean economy strategy and sustained investments in innovation, advanced manufacturing, and competitive market deployment.

The White House report correctly frames the overriding goal of clean energy investment around making clean energy cheap in real, unsubsidized terms. For solar energy, according to the report, the near-term goal is for solar electricity to be competitive with retail electricity rates, with a long-term goal to compete with central fossil fuel power plants. As the Breakthrough Institute has consistently argued, taking clean energy alternatives to scale and building globally competitive clean energy industries will ultimately depend on such improvements in cost and performance.

Cost reductions and performance improvements in solar technology, advanced batteries, and electric-drive vehicles will be driven by a confluence of factors, according to the report, including direct public support for energy innovation, manufacturing and deployment, and by strengthening the linkages across all three areas.

The White House report notes that the Recovery Act is accelerating solar energy innovation by providing funding for greater solar energy deployment, manufacturing and scale-up, and catalyzing needed technological breakthroughs to create novel and more efficient technologies. All told, these measures may help reduce to cost of solar power by 50% in coming years, according to White House estimates, while building domestic manufacturing capacity and investing in next-generation solar breakthroughs that could form the basis of entire new U.S. industries.

Similarly, stimulus investments have helped transform the United States from a bit player in international advanced battery markets to a global competitor with an estimated 20 percent of worldwide manufacturing capacity online by 2012, all while potentially driving down the cost of electric vehicle batteries by up to 70%. The key to success, the White House says, has been “investments across the innovation chain – from retooling current auto factories to new manufacturing and commercial deployment to research and development of electric drives and batteries.”

This multifaceted focus on innovation, manufacturing, and markets, bears a striking resemblance to the comprehensive clean economy strategy the Breakthrough Institute has spent much of the past two years advocating through an ongoing series of reports, policy recommendations, Congressional testimony, and writings.

It is notable, however, how distinct such a strategy is from the dominant cap and trade debate that has consumed essentially the entire Congressional calendar since passage of the Recovery Act in February 2009. The nearly complete focus of the subsequent Congressional energy and climate debate on the primacy of carbon pricing may have ultimately prevented meaningful debate on how to optimize and extend the critical, comprehensive clean energy investments begun under to stimulus and enact a long-term investment strategy to strengthen clean energy competitiveness.

Indeed, while the stimulus was supposed to be a “down payment” on a new clean energy economy, the Congressional cap and trade bills—which would have invested little in clean energy technology—left the country likely to default on long-term clean energy promises.

Meanwhile, our economic competitors are not making the same mistakes we are, and are continuing to publicly invest in their domestic energy innovation systems in a bid to capture the increasing economic rewards inherent to the burgeoning clean energy industry.

China is set to unveil a massive $740 billion, 10-year package of direct investments to secure their economic leadership in emerging clean energy industries. China already dominates global market share for electric batters, wind turbines, and solar panels, and is rapidly boosting its capacity to innovate and produce next-generation clean energy technologies. Japan, South Korea, Germany, Spain, Denmark and a host of other international competitors are also fast at work building domestic clean energy industries with a multifaceted focus on innovation, manufacturing, and markets.

Facing such intense global competition, and with Recovery Act funds poised to expire soon, sending U.S. clean energy markets off a clean tech funding cliff, the U.S. is in dire need of a long-term clean energy investment strategy to regain economic and technological leadership in this new growth sector.

The substantial and successful impact of the public investments in the U.S. stimulus bill point to a way forward, but unless rapidly followed by a long-term, sustained investment strategy, the Obama Administration’s clean energy legacy may wind up tarnished by the continued erosion of U.S. clean energy competitiveness.


Jesse Jenkins is Director of Energy and Climate Policy and Devon Swezey is Project Director at the Breakthrough Institute. Both are co-authors of “Rising Tigers, Sleeping Giant” a comprehensive report on global clean tech competitiveness, and “Strengthening Clean Energy Competitiveness,” a set of Congressional policy recommendations.

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Unfulfilled Promises on Clean Energy Technology?

By Jesse Jenkins, originally at the Breakthrough Institute

Updated, 8/19/10

There's been some change over at WhiteHouse.gov's energy and environment page, but probably not the kind we had in mind when we heard President Obama's oft-repeated campaign slogan, "Change You Can Believe In."

A number of (as yet unfulfilled) energy and environmental policy pledges have been removed from the WhiteHouse.gov page in recent weeks.

Chief among them: President Obama's pledge to "invest $150 billion over ten years in energy research and development to transition to a clean energy economy," once a central plank in Obama's energy and environment platform, and a feature of his first national budget proposal (in FY2009).

You can see a screen-shot of the old WhiteHouse.gov energy and environment page below, taken in May 2009, and a full archive of the June 2010 site text (sans CSS formatting) via the Versionista internet archives here. The old page was live with this pledge featured prominently as recently as June 10th, when the WhiteHouse.gov site underwent wholesale changes, according to Versionista.


The new page features a short (rhetorical) introduction, followed by a list of White House accomplishments in the realm of energy and environment, and no longer features any forward-looking pledges.

That includes any clear pledge to reduce U.S. greenhouse gas emissions by any particular amount by any particular date, or to establish a cap and trade program to achieve those objectives, other signatures of Obama's earlier policy pledges in the area. Cap and trade legislation is now widely considered dead in the U.S. Senate, after failing to secure anything close to the sixty-vote super-majority needed to clear the chamber.

One could read the changes at WhiteHouse.gov as a simple reflection of where Obama now is in his presidency, with almost two years under his belt and a list of accomplishments to his name to replace a set of campaign-style promises. Equally notable, however, is the list of what has indeed been accomplished, and what, for now, remains an entirely unfulfilled promise.

As of yet, despite strong expert consensus, a clear economic imperative, and the fervent appeals of 34 Nobel laureate scientists, a national ten-year mission to catalyze both public and private sector innovators by investing $150 billion in clean energy R&D remains solidly in that latter category...

Update, 8/19/10: Andrew Revkin at the NYTimes DotEarth blog notes the disappearance of the White House clean energy R&D pledge as well, noting:

Here's the back story. During his election campaign, Obama pledged to invest $150 billion over 10 years in research and development to advance non-polluting energy technologies. That level of federal investment on energy frontiers, after decades of bipartisan disinterest in energy sciences, has been widely seen as a critical component of any meaningful effort to expand the world's energy menu without overloading the atmosphere with heat-trapping gases.

But nearly all of the research money under the Obama plan was slated to come from the revenues generated by auctioning permits for greenhouse gas emissions. So the fate of the new American post-fossil energy revolution was tied to the fate of a cap-and-trade system that was always going to be a tough sell in a polarized Congress and now is on the legislative scrap heap.

Darren Sameulsohn of Politico also notes the disappearance of the climate and clean energy pledges. Samueolsohn writes:

The Web site changes came with little fanfare at the same time environmental groups were pleading with Obama to take a more proactive role in finding the votes for a sweeping climate bill. The president's primetime address from the Oval Office on June 15 drew criticism from activists when he didn't mention the words "carbon," "greenhouse gases," "global warming" or "cap and trade."

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With Seconds on the Clock, Democrats May Waste Last Chance for Clean Energy Win

With the final seconds ticking down on the Congressional clock, President Obama and Senate Democrats emerged from a White House summit with Republican moderates Tuesday still lacking any plan to score a last minute win for clean energy.

Wasted opportunity

Establishing a price (any price) on carbon pollution through a(n increasingly weak) cap and trade system continues to be the the preferred climate and energy approach of environmental advocacy groups and Democratic leadership. This preference holds despite the fact that for at least three years, that plan has consistently failed to uncover any route to securing the sixty votes necessary for passage in the Senate (a similar bill narrowly passed the House last June).

Heading into the Tuesday morning White House summit, Republicans eyed as key swing votes for any clean energy or climate bill telegraphed clear intentions: cap and trade would be a practical non-starter, but they were ready to act with the President on measures to promote zero-carbon electricity, electric and plug-in hybrid vehicles, and greater energy technology innovation, clean up dirty coal plants, and improve energy efficiency.

The summit offered President Obama a prime opportunity to reset the Senate energy debate by calling a new play: take up the energy provisions Republicans have offered, counter with a more aggressive proposal on similar fronts, and begin earnest negotiations with GOP swing votes to ensure passage of a final bill that could move America towards a clean energy economy before the Congressional clock expires.

Unfortunately, President Obama let this chance to break from the failed and increasingly desperate cap and trade agenda slip by, using the meeting, instead, to reiterate to the assembled Senators - and greens watching from the sidelines - that "he still believes the best way for us to transition to a clean energy economy is ... by putting a price on [carbon] pollution."

In what seemed to be an effort to convince outside audiences that Obama had not given up on cap and trade, rather than a real display of leadership, the President failed to present any clear plan of action or convince new supporters to back the much-diminished ambitions of a utility-only cap and trade bill. Instead, the White House team emerged from the meeting simply noting that, "Not all of the Senators agreed with this [carbon pricing] approach, and the President welcomed other approaches and ideas..."

Senator John Kerry (D-MA), the dogged architect (with Sen. Joseph Lieberman of Connecticut) of the increasingly embattled Senate cap and trade strategy, boldly declared that Democrats were willing to make even more concessions in the quest for permanently elusive GOP cap and trade supporters.

"We believe we have compromised significantly, but we're prepared to compromise further," Sen. Kerry told reporters.

This after Democrats had already stacked their "comprehensive" climate and energy bill full of enough offsets and cost containment mechanisms to render the emissions "cap" non-binding on covered sectors--and after recent offers to scale back the cap to cover only electric utilities, a sector responsible for just about one-third of U.S. carbon emissions...

Running out the clock

Thus, it seems that Democrats are now poised to waste what little time remains this year on what could be described either as an increasingly desperate effort to appease Republicans firmly opposed to what they've dubbed "a nationwide energy tax," or as an increasingly transparent attempt to assure green supporters they are 'fighting hard' for cap and trade in preparation for pinning their inevitable failure on 'those dastardly Republican obstructionists.'

Regardless, this strategy is all but certain to leave America empty handed on clean energy reform.

As oil gushes into the Gulf and global temperatures continue to rise, coming away from this Congressional year with nothing would be the greatest tragedy of all. But if Democrats can put aside their insistence on a wholly-compromised, "comprehensive" cap and trade bill, there may yet be hope for a political and substantive victory.

Republicans signal opening

Last week, Republicans invited to the White House summit emerged from a quick planning huddle to tell reporters that they would press Obama to drop cap and trade and work with the GOP to promote several provisions to advance clean electricity, electrification of cars and trucks, and research and development of low-carbon energy technologies.

The GOP has several "clean energy proposals which we are for and he's for too," said Senator Lamar Alexander (R-TN), who as Republican Conference Chair is at the center of GOP leadership.

After Tuesday's inconclusive meeting, key swing Republicans reiterated that there was still an opening to move forward on clean energy--if Democrats would drop cap and trade.

Senator Olympia Snowe (R-ME) stated:

"As I have long advocated, working toward energy independence is an imperative for our economic and national security. Which is why today I urged the President to seize control of our own energy destiny and, for the first time, establish clearly defined national timetables for clean energy production, benchmarks for oil consumption reduction, and goals for game-changing research - which no other president has ever done, to ensure we actually attain that independence.

The Maine moderate pointed to bi-partisan measures she had sponsored to promote energy efficiency, renewable electricity generation, and research, meanwhile stating that while she supported a limited carbon-pricing program in principle, "today we are in different and perilous economic times," stating that economy-wide cap and trade was something America "simply cannot afford."

Likewise, Senator George Voinovich (R-OH) characterized the White House meeting as "a clear signal to the president, Senator Kerry and Senator Lieberman that the chances of passing their cap and trade legislation are quite slim."

The senator went on to note:

"On the other hand, there seemed to be consensus that Senator Bingaman's energy bill may be a viable path forward in the Senate. While in need of improvement, it has bipartisan support and presents a variety of policy tools to expand domestic clean energy resources and reduce emissions.

Republicans have thus put a clean energy offer on the table constituting a clear path to bipartisan energy progress - focus on measures to boost clean electricity generation, oil reduction, energy innovation, and efficiency.

Scoring the last minute clean energy win

Herein lies the last opportunity for Democrats to score a win for energy reform. To date, Republicans have backed a number of key Senate proposals that collectively offer the foundations for a bipartisan clean energy bill that could achieve actual progress, despite the limited time to act in the crowded Congressional calendar [1 - see notes at end for more detail]:

Clean electricity generation: Republicans have backed both a (modest but first-ever) requirement that utilities nationwide purchase a portion of their electricity from renewable energy sources [2], as well as a more aggressive clean electricity requirement that would make nuclear power and carbon capture and storage at fossil fuels plants eligible alongside renewables [3]. Democrats have an opportunity to counter-offer with a slightly more expansive proposal, calling, say, for 25% of all U.S. electricity to come from new, zero-carbon electricity sources by 2020 and 35% by 2030, then negotiate from there. The end result would be a mandate to transform the U.S. electricity sector, putting American utilities on a path to a low-carbon future.

Similarly, Republicans have consistently championed financial incentives to deploy zero-carbon electricity sources. They, of course prefer nuclear power, but this offer still provides an opportunity for Democrats to counter. Instead of $10 billion to back loan guarantees for just nuclear power plants [4], Democrats could propose a similar (or even greater) amount of funding to capitalize a Clean Energy Deployment Administration capable of using a variety of flexible credit enhancement and financing mechanisms to spur the deployment of numerous innovative zero-carbon energy sources, including nuclear power, but also a suite of other cutting edge clean technologies [5].

Vehicle electrification and advanced biofuels: Senator Alexander has joined with Democrats Byron Dorgan (ND) and Jeff Merkley (OR) to propose a bill aiming to put the U.S. on track to electrify half of all vehicles on the road by 2030 [6]. A perfect bipartisan response to the unfolding Gulf oil crisis, the proposal represents a major multi-billion-dollar push to roll out charging infrastructure, incentivize the purchase of electric and plug-in hybrid vehicles and trucks, and invent and manufacture advanced batteries here in the United States that would do more to reduce U.S. oil consumption than any 10 or 20 cent increase in gasoline prices imposed by a cap and trade bill.

This electrification push could be coupled with financial incentives to spur advanced non-grain biofuels and escalating requirements to produce flexible-fuel vehicles that can run on gasoline biofuels (another Republican-backed proposal [7]). Combine these two measures to promote flexible-fuel, plug-in hybrids that can run on electricity as well and you've got essentially the very same plan proposed by the cogent David Sandalow (now an Assistant Secretary of Energy in the Obama Administration) to win America's "Freedom from Oil."

Clean energy research and innovation: Investment in energy technology innovation has consistently enjoyed bipartisan support, both from policymakers and the public, which routinely rank greater clean technology investment as their top policy response to energy and climate concerns. A doubling of DOE energy research [8], the scale-up of the newly established Advanced Research Projects Agency for Energy (ARPA-E), and the creation of a new nationwide network of clean energy innovation centers [9] or clusters [10] would each be critical components of a robust U.S. energy innovation system capable of driving both the incremental and transformational innovation needed to make clean energy cheap and ensure the next generation of clean technologies are invented and commercialized in America.

Cleaning up the dirtiest coal plants: Financial incentives to accelerate the shut down of the oldest, dirtiest coal plants in America and new air pollution regulations to clean up remaining plants could deliver huge public health gains and probably even greater emissions reductions than any weakened, utility-only cap and trade bill. Both provisions have enjoyed bipartisan support [11].

A "cash for coal clunkers" program could provide such financial incentives to close the old high-polluting coal plants (many of them pre-dating, and thus exempt from, Clean Air Act regulations) and replace them with cleaner power plants (with one level of incentive to replace the coal plant with a state-of-the-art natural gas plant, and progressively larger incentives for zero-carbon alternatives like renewables and nuclear power). Old, dirty coal plants provide just a small share of U.S. electricity but make up a disproportionately large share of U.S. power-sector greenhouse gas emissions and pollutants (with associated health impacts and economic costs).

Similarly, updated requirements to clean up conventional air pollutants - including toxic mercury as well as the smog and acid rain-forming sulfur dioxide and nitrogen oxide pollution - would both incentivize the worst culprits to shut down rather than install expensive new pollution controls, while requiring the remainder of the coal fleet to clean up its air pollution resulting in widespread public health benefits for everyone.

Enhanced efficiency: New efforts to boost the efficiency of American vehicles, buildings, appliances, lighting, and manufacturing have routinely enjoyed bipartisan support. Greater energy efficiency will help the U.S. economy get more economic bang out of our energy usage. Increasing economic productivity is a goal Republicans and Democrats can clearly come together to secure, and they have; wide-ranging efficiency measures have featured prominently in several bills currently backed by key Republicans [12].

Advancing the production of zero-carbon electricity, electrifying the American transportation fleet, catalyzing clean energy research and innovation, cleaning up the coal fleet, and boosting the efficiency and productivity of the U.S. energy system: these measures represent a nearly full list of the key levers needed to drive down emissions and U.S. dependence on coal and oil, all while building stronger domestic clean energy industries. What's more, these five areas are now ripe for bipartisanship and with Republican support, these clean energy measures presents a key opportunity for Democrats to drive America forward this year towards a clean energy economy.

What will the last play call be?

Obama and Senate Democrats now face a clear choice between two options...

They can waste precious time assuring green supporters they haven't abandoned cap and trade and meanwhile, come up empty handed by squandering the political opportunity presented by the oil catastrophe in the Gulf, appearing weak and inept before a public demanding energy reform, and handing another political victory to a GOP all too eager to enter the midterms having denied Obama and the Democrats one of their key policy priorities. More to the point, Americans will wind up without any substantive energy progress this year.

OR

Democrats can come out of the huddle prepared to build off of Republican proposals already on the table by offering more substantial counter-offers on each front: clean electricity, electrifying transportation, clean energy innovation, energy efficiency and even accelerated coal plant retirement. These energy-focused measures attached to a bill responding to the oil disaster in the Gulf would command strong public support, putting Democrats in a position to finally bargain from the high ground, secure stronger provisions, and score a real win on clean energy before the end of year.

Will it be a "comprehensive energy and climate bill?" No. And that's fine!

The inexorably-weakening "cap" and trade bills Senate Democrats seem willing to swallow are far from comprehensive already--and still unlikely to secure any passage this year.

Faced with ending up empty-handed and beaten, it is time for Democrats to bank these real wins now while making it abundantly clear to the public that this bill does not "check the box" on energy and climate for good.

If Democrats do that, they will have led America on the path to energy reform, and can tell the public that they will continue to lead a bipartisan effort to end America's dependence on dirty fossil fuels next year, if voters will back them in the November midterms.

If instead, Democrats insist on wasting these last few seconds on the obviously failing and increasingly desperate cap and trade agenda, Americans are likely to wind up without any substantive energy progress this year, and Democrats are likely to fare even worse at the polls. The ball is in their court.

Originally posted at the Breakthrough Institute

Notes:

[1] With just weeks remaining for floor votes in the Senate before the midterms hit, there's still a Supreme Court justice and a new Afghanistan commander to confirm, Financial Reform bills to conference, a budget to perhaps pass (prospects there don't look great), and on top of that, the White House just announced President Obama would give a big speech on Immigration Reform later this week, touching off yet another hot button domestic policy issue.

[2] The "American Clean Energy Leadership Act" (S.1462, or ACELA) passed the Senate Energy and Natural Resources Committee last June with bipartisan support from four Republican committee-members: Sens. Lisa Murkowski (AK), Sam Brownback (KS), Jeff Sessions (AL), and Bob Corker (TN). That bill would establish a (modest but first-of-its-kind) requirement that utilities nationwide purchase a portion of their electricity from renewable energy sources (15% by 2020). In addition to this requirement, known as a "Renewable Electricity Standard" (RES) or "Renewable Portfolio Standard (RPS), the ENR Committee bill would: establish a new federal agency to provide low-cost financing to spur the deployment of new clean technologies (the Clean Energy Deployment Administration); ramp up funding for Department of Energy R&D; establish new efficiency standards for buildings, lighting, appliances, industry and manufacturing.

[3] This is consistent with the "Diverse Energy Standard" included in the "Practical Energy and Climate Plan" (S.3464). Introduced by Senator Richard "Dick" Lugar (R-IN) and co-sponsored by Sens. Lisa Murkowski (R-AK and Ranking Member of the Energy Committee), and Lindsay Graham (R-SC, who backed the bill after walking away from the climate plan he drafted with Sens. Kerry and Lieberman in April), the bill has arguably surfaced as the GOP's preferred energy platform. In addition to the "diverse" clean energy standard that includes stronger requirements than the Energy Committee bill above (15% by 2015, 20% by 2020, 25% by 2025 ... 50% by 2050) but allows nuclear power and carbon capture and storage at coal plants to qualify for the utility requirement, the GOP-backed bill would: ramp up vehicle fuel efficiency standards and set the first ever standards for medium- and heavy-duty trucks; establish financial incentives for advanced biofuel production (from non-grain sources) and require new vehicles to be flexible fuel (capable of running on biofuels and gasoline); establish stronger building, appliance, and industrial efficiency standards; ; expand loan guarantees for zero-carbon nuclear power plants; and provide incentives for the retirement of the oldest and dirtiest coal plants in the country.

[4] The "Clean Energy Act" (S.2776) sponsored by Republicans Lamar Alexander (TN) and Mike Crapo (ID) and Democrats Jim Webb (VA) and Mark Warner (VA), would encourage the build-out of new nuclear plants with a major expansion of loan guarantees, providing $10 billion in appropriations to be leveraged into roughly $100 billion in loan guarantees. In addition, the bill would provide $750 million in funding to establish new "mini-Manhattan projects" to advance clean energy research.

[5] The Clean Energy Deployment Administration is included in the bipartisan ACELA bill, see note [2] above. A similar provision passed the House in the Waxman-Markey American Clean Energy and Security Act.

[6] The Electric Vehicle Deployment Act (S.3442), sponsored by Democrats Byron Dorgon (ND) and Jeff Merkley (OR) and Republican Lamar Alexander (TN), aims to put the US on track to electrify half of all vehicles on the road by 2030. The $7-10 billion bill would: launch pilot communities across country to spur adoption of electric and plug in hybrid vehicles (funded at $2 billion per year); subsidize the nationwide build-out of charging infrastructure and purchase of electric and plug-in vehicles, including new credits for medium- and heavy-duty hybrid purchases; provide $1.5 billion for advanced battery research and $250 million for related workforce development and education efforts.

[7] Incentives for advanced biofuels production and flexible fuel vehicles are included in the Lugar energy bill, see note [3] above.

[8] The Energy Committee bill, see note [2] above, would authorizing a doubling of applied research programs at DOE, and basic research programs at DOE and elsewhere are on track to double under the America COMPETES Act originally passed with bipartisan support and signed into law by President Bush in 2007.

[9] These innovation centers would be consistent to the "mini-Manhattan projects" proposed by the Webb-Alexander-Warner-Crapo bill, see note [5] above.

[10] Clean energy cluster programs would extend multi-sector, collaborative research efforts to enhance the strength of regional economic clusters and could be a natural and effective extension of the research programs supported by Republicans. See "Strengthening Clean Energy Competitiveness: Opportunities for America COMPETES Reauthorization"

[11] A "cash for coal clunkers" style program offering $11 billion in financial incentives to accelerate the closure of the oldest, dirtiest coal plants comprising 16% (49 GW) of the coal fleet but representing a disproportionate amount of U.S. pollution of both the carbon and conventional varieties appeared in draft legislation sponsored by Senator Dick Lugar (R-IN). The final version introduced as S.3464 (see note [3] above) included a narrower incentive program for coal plant retirement. Republicans Lamar Alexander (TN) and Susan Collins (ME) and Democrats Tom Carper (DE) and Amy Klobuchar (MT) have sponsored the "Clean Air Act Amendments of 2010" (S.2995) which would impose new 'three-pollutant' air pollution requirements on mercury, SO2 and NOx emissions at power plants.

[12] A wide range of efficiency programs are included in both the bipartisan Energy Committee bill, see note [2], and the Lugar bill, see note [3], as well as numerous other bills co-sponsored or introduced by Republican Senators.

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After "Drill, Baby, Drill," Obama Should Embrace Another GOP Energy Plan

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

With President Obama's announcement Wednesday that the Administration would support expanded offshore oil and gas extraction, it's now apparent that price pressures on oil make political pressures on politicians impossible to ignore and that some expansion of offshore drilling is inevitable.

But despite Green backlash against the Obama administration's apparent embrace of "drill, baby, drill," it's actually another Republican energy plan Obama should turn to if he wants to make a real dent in America's dependence on oil. Embracing a GOP plan to put the hundreds of billions in potential federal revenues from new oil and gas royalties into a fund to accelerate clean technology innovation could offer Obama a bona fide opportunity to "reach across the aisle," strengthen America's energy security, and help make clean energy cheap.

Don't believe it? Here's the breakdown...

While much of the rhetoric used to advocate for offshore drilling deals with the threat of rising prices at the pump and our nation's energy security, EIA projections show that "access to the Pacific, Atlantic, and eastern Gulf [offshore] regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030." At that point, access to the new portions of outer continental shelf (OCS) previously off-limits would cut gasoline prices at the pump by just three cents, a clearly insignificant step towards "energy independence."

What could have a significant impact on our energy security, however, would be to invest the hundreds of billions in potential federal revenues from oil and gas royalties to accelerate clean tech innovation and deployment, helping America develop the clean and affordable energy sources needed to truly diversify our energy mix and secure our freedom from oil.

How much money are we talking about?

According to EIA estimates, there are about 8 billion barrels of crude oil and 58 trillion cubic feet of natural gas (about 59.6 billion mmBTUs) potentially available in Eastern/Central Gulf of Mexico and Atlantic OCS areas previously off-limits to exploration and extraction (another 10 billion barrels of crude and 18 trillion cubic feet of gas may lie off Pacific coastal areas). That estimate does not include potentially recoverable oil and gas in the Arctic Alaska coastal areas also opened up in the President's new proposal.

At today's oil prices of roughly $85 per barrel, that works out to about $680 billion worth of new oil production and another $238.5 billion worth of gas at today's relatively low natural gas prices (about $4/mmBTU). Add in the recoverable reserves off Alaska's North Slope and let's call it an even trillion dollars worth of new oil and gas production (more if prices climb in the future).

The federal Minerals Management Service (MMS) controls oil and gas leases in the OCS and collects 1/6 of the value of oil and gas produced from OCS areas. That means, the MMS has the potential to collect over $165 billion in royalties from new offshore drilling. That's far from a trivial sum of money.

Of course, those royalties will be collected over the course of a couple decades and likely won't start flowing until 2014 or later, but even after individual states close to drilling sites claim their share of the revenue there will still be a sizable chunk of change available that could be invested in the development of clean energy technology.

(And there could be ways to front-load the royalty payments to get money flowing to cleantech sooner, such as a requiring a portion of the royalty value paid in advance upon signing the leases; this would have the additional benefit of helping discourage speculative efforts to lock up sites but not produce oil, accelerating production of new oil and gas).

After all, we simply cannot drill our way to energy security. The New York Times reports that at current rates of consumption, estimates show that there could be as much as a three-year supply of oil and around a two-year supply of natural gas in the OCS areas. That's not exactly a long-term 'fix' for an oil-addicted nation, which is why Obama noted Wednesday in his speech at Andrews Air Force Base that offshore drilling is meant merely to aid in the "transition to cleaner energy sources;" drilling is no alternative.

We can, however, invest and invent our way to freedom from oil. That's where (somewhat ironically!) the Republicans 'all of the above' energy plan, AKA the "American Energy Act," has a leg up on the President -- at least for now.

Under the GOP proposal, put forth by House Republicans in June 2009, 90% of the federal share "of the revenues created by OCS exploration would go to a renewable energy trust fund to pay for a variety of renewable, alternative and advanced energy programs." This "American Renewable and Alternative Energy Trust Fund" would be dedicated to efforts accelerating the development of clean energy technologies that can truly help end America's oil addiction. If the federal government retained 75% of the royalty revenues from new OCS and Alaskan Coastal Plain production, this formula could represent an infusion of over $110 billion for critical clean energy investments over the next twenty years.

So while the expansion of offshore drilling may seem like we're taking a step back from a future free from oil, investing the royalty revenues in clean tech RD&D could amount to a big leap forward in the transition to a clean energy economy by securing a revenue source for clean tech that is not tied to embattled efforts to establish a carbon price -- all while beginning the urgent work of securing America's clean tech competitiveness and ensuring our energy security.

Nearly the entire Republican caucus, not to mention a handful of Democrats, are already on record voting for this concept in the August 2008 vote on the New Energy Reform Act, introduced by the so-called Gang of 10 during the height of the oil price spikes in 2008.

If offshore drilling is to move forward over the next few years, the Obama Administration and Congressional Democrats should waste no time in embracing this clean energy investment plan.

Alternatively, Obama could look to pacify the deficit hawks by dedicating the royalty revenues to lower projected deficits -- ignoring for a moment that it will be new industries and a growing economy that will have the largest impact on rebalancing the federal budget. Obama could also heed the advice he's likely to get from Beltway Green Groups who will no doubt urge the President to use the lion's share of the funds for state revenue sharing in a (likely futile) attempt to entice votes from Southeast and Gulf Coast Senators for the troubled Kerry/Graham/Lieberman 'comprehensive energy and climate' bill. Either would represent another wasted opportunity to make a critical large-scale investment in our clean tech competitiveness and a future free from oil.

With offshore drilling seemingly unavoidable, wouldn't it be ironic if Republican plans for the resulting royalties wound up more supportive of clean-tech investment than President Obama and the Democrats?

Update: Michael Lynch, an energy consultant and MIT faculty, writes as an op-ed contributor to the New York Times that total oil and gas tax revenues from new offshore production could reach at least $10 billion per year and likely no more than $25 billion. His estimates are quite a bit higher than ours because he counts both royalty payments and other taxes paid by oil and gas exploration and production companies. Lynch also notes that there would be about $20 billion a year in additional taxes if we open up California and other Pacific coastal areas, which he advocates.

Jesse Jenkins is the Director of Energy and Climate Policy at the Breakthrough Institute. Yael Borofsky is the Institute's Staff Writer and Researcher and her writing can be found daily at the Breakthrough Blog

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Penny Wise and Pound Foolish: Why Obama's Symbolic Spending Freeze May Grow the Deficit

With rising anxiety about mounting federal deficits, President Obama declared a freeze on all non-defense discretionary spending in his latest budget proposal. Heavy on symbolism and light on impact, the Administration's proposal attacks all of the areas of the government least responsible for the inexorable increase in federal deficits, while potentially starving key parts of the discretionary budget critical to America's economic prosperity.

Let's be clear: ballooning deficits do pose a real long-term threat to the United States' economic security. Under current forecasts, the accumulated deficit could total $20 trillion by 2020. That could hobble Uncle Sam with interest payments on the federal debt nearly as large as the projected total for all domestic discretionary spending. Efforts clearly must be taken to avoid such an unsustainable - and risky - financial future.

That said, curbing domestic spending is the wrong route to trim the deficit. The President's spending freeze applies to only a small fraction of the federal budget, while exempting both the mounting costs of two wars and the ever-rising bill for the nation's entitlement programs - Social Security, Medicare and Medicaid.

Together, defense spending and the three big entitlement programs account for roughly 60 percent of President Obama's $3.7 trillion FY2011 budget. Defense spending has soared 70 percent since 2001, in inflation-adjusted terms, reaching the highest level in post-World War II history. The Pentagon's $708 billion 2011 budget is now 23 percent higher than the peak of Regan-era Cold War military spending. At the same time, the steady rising costs of an aging population are projected to drive the price tag for entitlement programs alone to nearly half (46%) of the U.S. budget by 2020.

There is simply no route to a balanced budget without the hard work of serious entitlement reform, including efforts to control the rising costs of health care in America. Likewise, slashing domestic spending will do little to control the deficit without efforts to rein in defense spending, beginning with the responsible disengagement from the wars in Iraq and Afghanistan.

Without a growing economy, taming the deficit will prove impossible

Despite long-term deficit concerns, slashing federal spending or raising taxes in the short-term - e.g. while economic recovery is tenuous and unemployment still hovers near ten percent - would be tantamount to economic suicide. As long as the economy remains on shaky ground, real deficit-cutting efforts will effectively stay shackled; tax revenues will remain stagnant while efforts to trim spending or raise tax rates could send the economy tumbling back into recession. Thus, without a growing economy, taming the deficit will ultimately prove impossible.

As such, getting the budget back in the black has more to do with smart investments to ignite America's engines of economic growth than symbolic spending freezes. While Clinton-era deficit reduction efforts are often credited with taming the federal deficit in the 1990's, it was robust economic growth, largely driven by the long IT boom of the mid and late '90's, that did the lion's share of the work to turn deficits into the surpluses.

Along with real entitlement reform and winding down the wars, smart government investments in broad-based economic growth must therefore be the keystone of a three-part strategy to truly balance the federal budget.

Domestic spending freeze undermines critical investments in America's prosperity

That's where the pernicious potential of the new spending freeze becomes clear: the embrace of symbolic "restraint" on domestic spending could have a real impact on the Obama Administration's efforts to make critical investments in areas like infrastructure, education, and innovation, undermining precisely the efforts necessary to get America on the path to prosperity.

The IT boom that paved the way to America's return to fiscal health in the 1990's was in fact the result of precisely the kinds of federal investments that today's budgets threaten. For four decades after World War II, the federal government made enormous investments in research universities, national laboratories, communications and micro-processing technologies, and the necessary infrastructure to support the development and commercialization of information technologies that have transformed the American workplace, created entire new industries, and made the American economy the most productive in the world.

Yet even as these government investments were paying dividends and new technologies were in the process of remaking the American economy, the U.S. government was already in the process of weakening its commitment to the very innovation system that had made the IT revolution possible. In the 1980's, federal funding for education, infrastructure, and technology R&D was already on the decline, an overall trend that only continued through the Clinton and Bush years.

Thus, even as the economic boom associated with the IT revolution was eliminating deficits that at the beginning of the decade had appeared intractable, the U.S. government became complacent about precisely the kinds of public investments that catalyzed American innovation and prosperity. With the exception of bio-medical research, which saw big increases in the late 1990's and early 2000's, federal investment in America's innovation economy has stagnated over the last three decades. And without accelerated technological innovation and progress, America's prospects for real sustained economic growth are limited.

President Obama's first budget, and the stimulus passed by Congress last winter, offered some hope for a change in course. Spending on R&D, education, technology, and infrastructure was up. And to the President's credit, the proposed 2011 budget has preserved funding increases for many of these programs despite the proposed discretionary spending freeze. But if America hopes to catch the next technological wave and ride it to fiscal stability, it will have to invest much more in its innovation economy, returning to levels not seen since before 1980.

Case in point: investment needed to secure clean energy competitiveness

Energy is a case in point, although by no means an isolated one. While investing in clean energy, or any other particular sector of the economy, will not single-handedly cure America's economic ailments, new growth sectors with multi-trillion dollar potential don't grow on trees. Making investments now to catalyze competitive clean energy technologies and industries will pay big economic dividends down the line.

American policymakers would thus be foolish to ignore the economic potential of soaring global demand for clean energy in any serious strategy to get both the U.S. economy and the federal budget back on track.

Unfortunately for a cash-strapped America, in today's increasingly competitive global environment, securing market share and leading industries in the clean tech sector won't be possible on the cheap.

In his State of the Union, President Obama lamented, "There's no reason Europe or China should have the fastest trains, or the new factories that manufacture clean energy products."

On the one hand, President Obama is right; neither China nor the EU has some inherent competitive advantage in the clean tech field.

But the President is missing the very clear reason our Asian and European competitors are out-pacing the United States in clean tech: governments in Beijing, Tokyo, Seoul, and across the eurozone are all launching (or redoubling) comprehensive national clean energy strategies backed by big, long-term public investments to support each stage of the clean tech value chain.

Take China as an example, where both the Chinese central government and numerous provincial governments are together committing tens, if not hundreds of billions of dollars annually to secure competitive clean energy industries - and the jobs, tax revenues and export opportunities that go with them.

Carving out America's market share in the growing sector will similarly require both a focused national strategy and sustained public investment to support the key components of a competitive clean energy economy: robust clean energy innovation, manufacturing leadership, and strong and consistent market demand.

"I do not accept second place for the United States of America," President Obama boldly declared in his State of the Union. Yet when it comes to the race to harness clean energy growth, the United States will continue to languish in second place - or worse - as long as clean energy investment remains restrained by the Administration's spending freeze.

Real strategy to control the deficit requires long-term focus

In the end, there are no short-term, easy fixes to a problem as intractable as the soaring federal deficit. Nor will critical public investments in education, infrastructure, innovation, and competitive American industries pay huge dividends in the next budget cycle.

Rather, a real effort to put both the federal budget and the U.S. economy back on track will require an honest commitment to take up several hard tasks over the long-haul: bringing solvency to the nation's critical entitlement programs; reining in historically-high defense spending without imperiling the nation's security; and making a series of robust, sustained public investments that can put America back on the path to long-term, shared prosperity.


Jesse Jenkins is Director of Energy and Climate Policy at the Breakthrough Institute, and co-author of "Rising Tigers, Sleeping Giant," a major report on international clean tech competitiveness. Follow him on twitter @JesseJenkins

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A Critical Moment for Energy Leadership

Originally published by The Stanford Daily

One of the most powerful moments during last week’s State of the Union came when President Obama warned that while Washington stalls, other nations are moving quickly to dominate the global clean-energy industry.

“China is not waiting to revamp its economy,” Obama declared. “These nations aren’t playing for second place… They’re making serious investments in clean energy because they want those jobs. Well, I do not accept second place for the United States of America… The nation that leads the clean-energy economy will be the nation that leads the global economy. And America must be that nation.”

Obama is right, and as always, his words were eloquent. Now his administration must get to work and advance a real strategy for global energy leadership.

The current proposals under consideration in Congress are far too weak. China, Japan and South Korea are launching massive, comprehensive clean-energy projects, investing a combined total of around $500 billion over the next five years. In contrast, the House-passed American Clean Energy & Security Act (ACESA), combined with the 2009 economic recovery package, poises the U.S. government to invest only $172 billion in this industry over the next five years, according to a recent report I co-authored with the Breakthrough Institute and Information Technology & Innovation Foundation.

That is hardly an effective strategy for energy leadership, and advocates should be careful about labeling the House and Senate climate bills as comprehensive solutions for U.S. clean-tech competitiveness.

In July 2009, a group of 34 Nobel Laureates wrote a letter to President Obama decrying this lack of investment and urging his support for $15 billion per year in clean energy R&D. “We are concerned that [ACESA] provides less than one fifteenth of the amount you proposed for federal energy research, development, and demonstration programs,” they wrote. “This stable R&D spending is not a luxury. It is in fact necessary because rapid scientific and technical progress is crucial to achieving these goals, and to making the cost affordable.”

A large and growing body of technology experts agree. In recent congressional testimony, Secretary of Energy Steven Chu stated, “I am concerned that we have not adequately focused on the importance of research and development of new energy technologies.”

Senator Jeff Bingaman (D-N.M.), Chairman of the Senate Energy & Commerce Committee, recently said, “It is troubling that current legislative proposals before Congress to address climate change give relatively low emphasis to providing funding for the needed science and technology.”

And in a recent public broadcast on energy and climate policy, Bill Gates wrote, “I looked at Waxman Markey [cap and trade climate legislation] and the research thing was miniscule.”

Indeed, these proposals contain dangerously low levels of support for technology development. ACESA would only invest $1 to $1.5 billion per year in clean energy R&D, on top of the current federal energy R&D budget of around $4 billion per year (only a portion is for renewable energy). Meanwhile, the National Institutes of Health receives $30 billion in federal R&D, while the Department of Defense receives a whopping $85 billion.

Now is a critical moment. Copenhagen came and went with few results. The national climate agenda is on the verge of collapse. The tide is rapidly rising against greater federal investment. And Asia is moving at break-neck speeds to dominate this industry and seize the mantle of global economic leadership.

Fifty years ago, in the wake of the launch of Sputnik, the United States rose to the moment and launched a massive national effort to lead the space race and win the Cold War. Today, the clean energy race represents one of the greatest opportunities and challenges for American leadership in a generation, and it demands a similar national mobilization.

If the administration and Congress do not take swift action to invest $15 to 30 billion annually in federal clean energy R&D – along with a broader set of investments in clean energy deployment, infrastructure and education – the United States will miss a historic opportunity to strengthen our economy, create new jobs, improve our energy security and lead the world in confronting climate change. A decade from now, we may still find the prosperous clean-energy economy promised by our national leadership. It will simply be headquartered in China.

Teryn Norris is a weekly columnist for The Stanford Daily and recently launched a student initiative called Americans for Energy Leadership. Feedback is welcome at terynnorris@stanford.edu.

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Will Copenhagen Mark the End of "Magical" Climate Thinking?

That's the question explored by the Breakthrough Institute's Michael Shellenberger and Ted Nordhaus in a new column in Foreign Policy that chronicles the climate odyssey of the past year - from President Obama's campaign and election through Congressional climate debates and the chaos in Copenhagen.

Take a gander at the in-depth column here.

Here's a few excerpts:

There was good reason to be hopeful in January 2009 that the election of Barack Obama would bring about America's long-awaited clean energy revolution. As president-elect, Obama had started to talk about energy policy in a way that no leader of either U.S. party had before. Promising to save the country from both severe recession and industrial decline, Obama described the transformation of the United States' energy economy as a defining challenge of his presidency -- an economic and national security imperative that Congress would fail to address at the country's peril.

But the reality fell far short of expectations. The Obama administration succumbed, like many others, to a sort of magical climate thinking that promised a painless and even prosperous transition to a low-carbon future with the tools already at hand. The only official within his administration to accurately grasp the technology challenges faced, Energy Secretary Steven Chu, was sidelined at crucial moments.

[...]

One year ago, in his first State of the Union address, Obama proposed a previously unprecedented $15 billion annual investment in clean energy research and development. Further, he appointed a technologist, the Nobel Prize-winning physicist Chu, as energy secretary to oversee that investment. The $800 billion stimulus, passed shortly thereafter, gave further credence to the notion that after 30 years of false starts, overblown rhetoric, and outright neglect, Congress and the president might finally get serious about remaking the United States' energy economy.

The stimulus included billions for energy R&D, infrastructure, and efficiency, and overturned the conventional wisdom that the United States would never again make big federal investments in technology as it had during the Cold War. But no sooner had the president's stimulus program demonstrated that a new way forward on climate change and energy might be possible, then the new administration relinquished its climate change and energy policy to the partisans of the past.

[...]

Putting Browner, a former Al Gore aide, in charge of climate-change policy was payback to environmental groups and the green donors who had supported Obama's campaign. But it also signaled that, inside the White House, the clean energy investment message that the president had used to such great effect in winning battleground states like Ohio and Colorado was seen as just that: a powerful message to use in the campaign, not a policy priority.

In this, Obama was following two decades of magical thinking among both greens and liberal Democrats about energy technology. In this view, energy efficiency pays for itself, solar and wind power are already nearly cost competitive with fossil fuels, and both can quickly and cheaply reduce emissions. This Pollyanna view of fossil fuel alternatives and efficiency, which makes going green seem cheap and easy -- little more than the cost of "a postage stamp a day" -- has provided the justification for green-policy advocacy that has overwhelmingly focused on pollution regulations and carbon pricing while ignoring serious investment in energy research and development.

The price of Obama's failure to break with green climate orthodoxy is only now becoming apparent. The collapse of international climate negotiations in Copenhagen last month was just the latest evidence that efforts to regulate global pollution output cannot succeed. The Kyoto framework, which imagined that carbon pollution limits could be the primary driver of the complete transformation of the global energy economy, has irretrievably failed.

The real technological obstacles to decarbonizing the global economy today represent an insurmountable obstacle to political efforts to limit carbon emissions. Until policymakers get serious about addressing the central technological challenge, all efforts to control carbon emissions are doomed.

[...]

Steven Chu came to Washington expecting to manage a massive expansion of energy R&D. Chu had cut his teeth as a research scientist at the justly famed U.S. government-funded Bell Labs, which he saw as a model because they were responsible for inventing or developing a range of devices now part of the fabric of American life, from fax machines to TV transmission, radio astronomy, solar panel cells, the transistor, calculators, cell phones, Wi-Fi, and hundreds of other technological miracles.

Chu had never bought the idea that, in Al Gore's words, "we have all the technology we need" to solve the climate problem. Instead, he told the New York Times that Nobel-caliber breakthroughs are required in chemistry, physics, and biology to make more efficient batteries, solar panels, and biofuels that can compete with fossil fuels in price, and that nuclear power is needed to displace coal.

Unfortunately, his view hasn't shaped the actions of the administration or Democrats in Congress. By early spring it was clear that Democratic leaders on the House and Senate budget committees were not inclined to honor the president's request for a dramatic scale-up of federal clean energy R&D and that the White House was not inclined to fight for it. And with greens and establishment Democrats fully lost in the magical idea that we can achieve massive emissions reductions through conservation, efficiency, and existing renewable technologies, there was scarcely any constituency inside the Beltway for the kind of big energy-technology program that Chu had hoped to launch.

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The Waxman-Markey legislation passed the House of Representatives last summer by a scant few votes, even as it became glaringly obvious to everyone who dared look that it would not require emissions reductions below business-as-usual levels.

Green groups insisted that the bill would reduce emissions and pointed reporters and green donors to allegedly independent analyses by the World Resources Institute (WRI). But the WRI, a major party to the cap-and-trade agreement negotiated by the EDF and NRDC with energy companies, simply used a magic accounting trick that was visible in plain sight: counting carbon offsets as real reductions of U.S. emissions.

Offsets typically fund activities such as tree planting and methane capture from landfills, and have proven over the last decade to be extremely unreliable, when they have not been outright fraudulent. The extensive offsets in Waxman-Markey would have allowed U.S. emissions to rise at business-as-usual rates over the next decade rather than declining to 17 percent below 2005 levels, as proponents of the bill claimed. Nevertheless, the WRI created graphs showing U.S. emissions magically going down 17 percent by 2020 and nearly 80 percent by 2050; the New York Times duly reprinted them; and partisans on both sides of the debate tacitly agreed to pretend as if proponents' farcical claims about the bill's mandated emissions reductions were true.

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Incumbent energy interests had, in short, hijacked magical climate thinking for their own uses. They took cap-and-trade legislation and turned it into an opportunity for them to raise energy prices on consumers, invest a fraction of the higher revenues in clean energy, remove existing regulatory obstacles to the construction of coal plants, and lock in their competitive advantage while crowding out energy newcomers, including clean energy firms, for decades to come.

The legislation's prominent defenders, like CAP's Joseph Romm, labeled green critics of the bill "global warming deniers" and told anyone who would listen that Waxman and Markey had pulled a fast one on the coal lobby. Duke Energy's James Rogers played along, offering to gladly repay the American public in emissions reductions after 2030 for billions in free allowance allocations today.

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The collapse of the Copenhagen talks marks not just the end of the United Nations as the primary venue for global climate negotiations but also the abandonment of binding emissions-reduction targets and timetables as the primary vehicle for achieving emissions reductions. Targets will continue to be tossed around, either as aspirational goals or as loophole-riddled sops to appease greens. But the real international action on climate change and energy will involve bilateral and multilateral negotiations to develop and deploy clean energy technologies.

Those negotiations will sometimes look like trade negotiations, sometimes like IMF negotiations, and sometimes like global agriculture or public health efforts. What they won't look like is the impossible global pollution-output negotiations that have defined international efforts to address climate change since the Rio climate convention 18 years ago.

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In the end, whether or not the Senate passes a cap-in-name-only climate bill, the long-term failure of Kyoto and all other efforts to establish binding emissions caps is virtually assured and is a function of a basic technological problem. We simply do not have low-carbon technologies today that can at large scale replace fossil fuels at a cost that any political economy in the world is willing to impose upon itself. There will be no political solution to climate change, no binding international agreement to substantially reduce emissions, and no effective domestic carbon cap until low-carbon technologies are much cheaper than they are today.

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However, the technologies we need will not materialize in response to carbon prices or emissions caps. Nor will they arrive, as many conservatives would have it, by getting the government out of the way and simply allowing a new generation of Steve Jobs and Bill Gates to tinker away in their garages.

Rather, we need to create a new clean energy economy in the same way we created our information economy: by identifying a set of well-defined technical problems and mobilizing the human resources of our technologically advanced civilization -- our scientists, laboratories, universities, and engineers -- to solve them.

These technical questions are not difficult to grasp and in fact have already largely been laid out by Chu in his remarks to the New York Times. How do we convert sunlight into energy much more efficiently than solar panels do today? What combination of chemicals can store more energy in batteries that are smaller and lighter? How can we manufacture a next generation of self-contained nuclear reactors that are safer, smaller, and cheaper than the large ones of the 1950s and 1960s? And how can we engineer new biological organisms to serve as a cheap fuel alternative to oil?

Solving global warming's technology challenges will require not a single Apollo program or Manhattan Project, but many. We need to solve technical problems across a range of technologies and at a variety of stages along the road from technological development to demonstration to commercialization to mass deployment.

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Transforming the global energy economy from fossil fuels to low-carbon alternatives over the next 50 to 100 years is such a monumental technological undertaking that it is quite understandable that many would either declare it impossible or retreat into magical thinking. We must resist these temptations.

Solving the technology challenge will not be easy, but in terms of our collective wealth and knowledge we are in a better position today than at any other point in our history. In the end, global efforts to address the climate challenge, if they are to succeed, must centrally focus upon the creation of a new and extraordinarily important global public good: the development of low-carbon energy technologies that are cheap, clean, and abundant. After two decades of domestic and international failure to take real action on climate change, it is time for the purveyors of magical thinking to take their exit so that the main act can begin.”

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