Steven Chu appears before the House Energy and Commerce Committee today.

Step right up to see the latest chapter in the ongoing political circus surrounding the bankruptcy of solar manufacturer and federal loan guarantee recipient Solyndra. Today’s main attraction: Secretary of Energy Steven Chu’s long-awaited appearance before the eager Republican members of the House Energy and Commerce Committee.

Key questions remain about the ill-fated solar manufacturer’s dramatic demise earlier this year. Unfortunately, investigations on the Hill long ago veered into the realm of political point-scoring, rather than a serious inquiry designed to improve federal support for nascent and nationally critical clean energy technologies.

Taking a step back from the circus on the Hill, let’s make two things very clear.

First, the global energy system is modernizing and diversifying. For an array of motivations, from public health and climate change to security and economic growth, today’s economies demand a 21st-century suite of clean and reliable energy technologies to supply the $5 trillion-and-growing global energy market.

Second, the Department of Energy (DOE) Loan Programs Office was never particularly well-equipped to effectively address the “commercialization valley of death” — the persistent lack of risk-tolerant capital that plagues American innovators and entrepreneurs working valiantly to improve the nation’s energy, economic, and environmental security.

Parallel mandates of job creation and long-term technology innovation were bound from the start to come into conflict, as they did in the case of Solyndra. A risk-seeking loan office cannot operate simultaneously as a government employment program without provoking the political dustup we’ve witnessed in recent months.

While the Loans Program Office falls short in some areas, we must not forget the reason it was originally established, with strong support from both parties, by the Energy Policy Act of 2005: American entrepreneurs face a persistent challenge in securing adequate financing to demonstrate and commercialize promising advanced energy technologies, a market barrier that must be addressed by smart and effective public policy.

As we explain in a new policy report out today, the commercialization valley of death plagues promising energy technologies that require large capital infusions to prove they can work as a full-scale power plant or manufacturing facility.

Venture capital, which has for decades fueled the vibrant IT economy, lacks adequate funding to shepherd innovative technologies through the pipeline, and the high-risk, high-reward nature of innovative energy technologies makes them unattractive to conventional investment banks.

This dearth of risk-tolerant capital means that many potentially game-changing advanced energy technologies fail to ever make it into the marketplace. As a result, conventional fossil energy technologies are effectively insulated from new competitors, impeding the development of clean, affordable, and reliable domestic energy sources.

Congressional investigators should prioritize clean-energy commercialization solutions over political grandstanding and focus on identifying key lessons from the experience of the Loan Programs Office. Congress should put these lessons to immediate use to reform federal involvement in clean energy commercialization.

In particular, we recommend replacing the troubled DOE Loan Programs Office with a new Clean Energy Deployment Administration (CEDA) [PDF], a flexible, independent government investment agency — effectively a bank — charged with unlocking the capital necessary to move innovative energy technologies across the commercialization valley of death.

Unlike one-time government payments such as grants or tax credits, CEDA would have the flexibility to reuse returns on investments to back new private investments, highly leveraging limited taxpayer resources for maximum impact.

CEDA staff and fund managers would also face strong, market-based incentives to responsibly manage the agency’s overall portfolio to shepherd this initial taxpayer investment for the long-term. Indeed, CEDA could return a profit each year, similar to both the Export-Import Bank and Overseas Private Investment Corporation.

Under the leadership of Sens. Jeff Bingaman (D-N.M.) and Lisa Murkowski (R-Alaska), the proposed investment agency has already been well-vetted. The program has the support of leading venture capitalists, American energy companies, and the U.S. Chamber of Congress. And it received bipartisan votes of confidence from the Senate Energy and Natural Resources Committee in both the 111th and 112th Congresses.

The time to act is now. American entrepreneurs and businesses need congressional policymakers to stop playing politics and focus on the key reforms needed to ensure clean and affordable advanced energy technologies can be readily brought to market.

I’ve said it before and I’ll say it again: When it comes to the global climate challenge, as goes China, so goes the world.

Soaring CO2 emissions from energy use in China drive global greenhouse-gas trends. (Click for a larger version).Graph: CO2 ScorecardDriving that aphorism home, CO2 Scorecard, a not-for-profit project that closely tracks global greenhouse-gas emissions, now reports that China’s CO2 emissions increased by 906 million tons in 2009 — the second largest annual increase for any country in recorded history. China’s soaring emissions were enough to completely offset the drop in emissions wrought by the economic havoc plaguing much of the Western world (see graphic to the right).

China’s unprecedented surge in CO2

Over the last decade, China’s annual emissions of climate destabilizing CO2 jumped by 5 billion tons per year. According to Shakeb Afsah, president and CEO of CO2 Scorecard, that’s “the highest [increase in annual CO2 output] for a single country in recorded history, representing an average annual emissions increase of almost 12 percent — more than four times the rate observed [for China] the previous decade.”

To put this unprecedented 5 billion ton increase in annual CO2 emissions in context, Afsah and colleague Kendyl Salcito note that during the 14-year-long post-war boom period of 1959-1973, during which U.S. CO2 emissions rose each year, America’s annual output of CO2 jumped by only 2 billion tons.

This new analysis comes on the heels of the latest International Energy Agency’s World Energy Outlook, which projects China’s soaring demand will single-handedly account for 36 percent of all global energy demand growth over the next 25 years. According to the global energy watchdog group, China’s energy use will rise 75 percent between 2008 and 2035, raising the nation’s share of global energy use to 22 percent, up from 17 percent today.

Sliding backwards?

Despite a much-publicized national climate policy centrally focused on driving down the CO2 intensity of the Chinese economy through greater industrial and power plant efficiency, the amount of carbon emitted per unit of economic output in China slid backwards during four of the last 10 years. In 2009, after four years of steady progress, the carbon intensity of China’s economy took a big step backwards, regressing to 1999 levels, according to CO2 Scorecard:

Click for a larger version. Graph: CO2 Scorecard

That factoid means there’s more going on here than just simple economic growth driving emissions growth. China’s macroeconomic policies are actually driving the carbon intensity of the nation’s economy backwards, working at cross-purposes with the central government’s avowed climate strategy.

The analysts at CO2 Scorecard point the finger at China’s promotion of an export-oriented manufacturing economy, including the nation’s increasingly controversial currency policies.

Since joining the World Trade Organization in 2001, China has built up a manufacturing juggernaut that has taken over global supply chains for some of the world’s most energy intensive industrial processes, including cement, steel, glass, and chemicals production, turning predominately to carbon-intensive coal to fuel this economic engine. That was a recipe for both soaring economic output and carbon emissions alike.

The recent impact of the global recession has only exacerbated China’s outsized role in global emissions. According to CO2 Scorecard:

Through the global recession, China’s depressed exchange rate protected its energy intensive industries, serving as a subsidy for export-oriented manufacturing industries (Wolf 2009). Other countries that would have grown their industrial sectors couldn’t compete against China’s deflated prices. So China has ended up with a lion’s share of industrial production within its economic pie, subjecting itself to a sub-optimally large share of CO2 emissions and other industrial pollution.

China’s carbon commitments: ambitious or lackadaisical?

To meet a targeted 40-45 percent reduction in carbon intensity by 2020, announced in November 2009 as China’s pledge at global climate negotiations in Copenhagen, China’s central government has recently forced the closure of inefficient factories and power plants, enforced planned blackouts, and launched other seemingly heavy-handed steps to reduce the energy intensity of the national economy.

Despite these high-profile measures, analysts, including Breakthrough Senior Fellow Roger Pielke Jr., have repeatedly warned that China’s seemingly ambitious climate target really just amounts to continuing on a course of business-as-usual — which would mean another decade of unprecedented emissions growth.

Afsah and Salcito note that this latest evidence adds credence to such concerns. “Though impressive on paper,” China’s carbon intensity pledge “represents the status quo,” the duo writes.

Between 2005 and 2008, China’s average annual CO2 intensity reduction rate was 4.35 percent, according to CO2 Scorecard’s analysis. Simply continuing that business-as-usual rate would see China’s emissions shrink 45 percent in around 13 years — by 2018, or two years ahead of their pledged goal.

“Maintaining the 4.35% reduction rate would not require any additional effort on China’s part,” Afsah and Salcito write. But hitting their goal in 2020 instead of 2018 would mean China could even slack off a bit, requiring just a 3.9 percent annual reduction.

“China is not just setting itself up for a business-as-usual carbon intensity reduction plan; it has committed to a lazier plan, allowing its emissions to continue increasing for an extended period of time,” write Afsah and Salcito (see graphic above).

A recipe for rebound?

Worse yet, China’s primary focus on improving industrial energy efficiency as the key to meeting carbon intensity goals is almost perfectly designed to trigger rebounds in energy demand that erode or even negate climate gains from such measures.

As noted in Breakthrough Institute’s February report, “Energy Emergence: Rebound and Backfire as Emergent Phenomena,” energy efficiency measures lower the effective price of the services derived from fuel consumption — heating, cooling, transportation, industrial processes, etc. — thus triggering a rebound in demand for those services (see a FAQ on rebound effects here).

These “quite limited. Cleaner energy alternatives must continue to improve in price, performance, or both, to meet a “China-sized” appetite for energy.

China, America, Europe, and the rest of the world must rapidly accelerate the pace of improvement in a whole suite of clean energy technologies, from nuclear and solar alike to plug-in hybrid vehicles, energy storage, and advanced biofuels. And a whole set of next-generation energy technologies must cross the valley of death from laboratory to commercialization in the coming decades.

On this point, a cadre of energy experts including analysts at the International Energy Agency, U.S. Energy Secretary Steven Chu, dozens of Nobel laureates, high-profile American business leaders, and leading think tanks, are all united: We must make clean energy cheap, and fast.

China is already on a roaring path towards single-handedly swamping any hopes of climate stability, and success is far from assured.

The only thing that is certain is that the clock is ticking, and there’s no time to waste in developing clean, cheap, scalable energy technologies to fuel both China and the world. The entire climate challenge hinges on our ability to do just that.

As the writer and environmental activist Bill McKibben is fond of saying, “You can’t negotiate with the planet.”

Bill’s right of course. But as TIME magazine environmental correspondent Bryan Walsh observes, “it turns out you can’t negotiate with the human desire for growth and development either — not in any political system on this planet. We need policies that provide us with the energy for both — or we may end up with neither.”

The expansion of the Grand Ridge Energy Center in Illinois is one of many projects that has benefitted from the federal stimulus package. Photo: GE

A slew of critical news articles about a clean energy stimulus program have suggested both that the program is a government boondoggle and that the Obama administration has inflated the number of jobs supported by the program. Both contentions are misleading.

One article published by MSNBC, titled “Hot air? White House takes credit for Bush-era wind farm jobs,” begins this way:

The Obama administration is crediting its anti-recession stimulus plan with creating up to 50,000 jobs on dozens of wind farms, even though many of those wind farms were built before the stimulus money began to flow or even before President Barack Obama was inaugurated.

It is true that some of the projects that received funding under the stimulus-funded Section 1603 cash grant program went to projects that had completed construction prior to the stimulus bill. The MSNBC article, written by journalist Russ Choma, notes that 11 of the 70 major wind farms that received grants had erected their wind towers during the Bush administration.

The problem is that this fact fundamentally misses the point.

As we noted yesterday, the stimulus-funded grant program did not waste taxpayer money.

Projects that received cash grants under the Treasury’s section 1603 stimulus program (the subject of recent criticisms) received the grants instead of tax credits that would have cost the government an equivalent amount.

Here’s the deal: Since most clean energy project developers are too small to have a large tax appetite, they partner with larger financial institutions to fund the project, which then claim the benefit on the project’s behalf. However, when the bottom fell out of tax equity markets amidst the financial crisis of 2008 and the resulting recession, many tax equity investors withdrew from projects on the drawing boards and walked away from some projects already underway. In such cases, the cash grant program was essential to keeping the project financially viable, under construction, and putting Americans to work.

Furthermore, the cash grant program did support more than 50,000 short-term jobs during the height of the recession and nearly 4,000 long-term, permanent jobs, according to conservative estimates.

The MSNBC article suggests that the Obama administration is counting jobs resulting from Bush-era projects in its estimates of job creation resulting from the Section 1603 program. According to the article, administration officials have claimed that the stimulus program has supported 50,000 jobs. But that estimate, often invoked by the American Wind Energy Association, is corroborated by a recent study by the Lawrence Berkeley National Laboratory (LBNL) on the job creation impacts of the grant program that explicitly excludes jobs associated with the Bush-era projects.

Indeed, of the nearly 6.2 GW of newly installed wind energy projects that elected the cash grant incentive, the LBNL analysts discount nearly 60 percent of them as projects for which the grant may not have been essential for completion (e.g., projects were already completed or would have otherwise been able to utilize the production tax credit to help finance the projects).

According to LBNL’s model, construction and operation of the remaining 2.4 GW of new wind projects — which would not have been completed without the cash grant program — “supported 51,600 gross short-term job-years during the construction phase, and 3,860 gross long-term jobs during the operational phase.”

Administration claims that the program supported “50,000 jobs” are thus supported by this independent analysis. Further, some additional jobs were also likely supported at construction projects that had already begun but would have otherwise halted amidst the tumult of the financial crisis and the recession. These jobs, which may have been saved by the cash grant program, are not included in the LBNL estimate, which is thus likely on the conservative side.

One of the other main criticisms leveled by the MSNBC article appears to be that most of the jobs supported are short term. Well, what else would be expected from a short-term stimulus measure supporting construction projects?

The goal of stimulus programs, after all, are to get Americans to work during an era of economic crisis and soaring unemployment, and in that vein, the cash grant program helped support at least 50,000 American jobs, all while stimulating significant private-sector investment activity — for every dollar of federal grants, $2.33 in private investments flowed to clean energy projects.

As we argued previously, while the stimulus was hastily constructed and not particularly well optimized, the program ultimately helped forestall the collapse of the domestic clean energy industry. Total deployed wind capacity would have certainly been lower, and bankruptcies, shuttered projects, and laid-off employees far higher without the program. This would have been a major setback and killed any momentum toward efforts to create a robust clean energy economy in the United States.

The cash grant program could certainly be improved in a number of ways, which we detailed in our previous post. But notwithstanding the controversy that the media — and multiple Congressional campaign offices — have manufactured around the program, it is yet one more example of how public investment in clean energy technologies can support job creation and leverage private funding for a cleaner, more secure energy future.

Imagine a program that turns a relatively small initial investment into billions of dollars of U.S. economic growth, thousands of new Americans jobs, and groundbreaking technologies that change the way we use energy in this country and around the world. It would be a darling of innovators, the private sector, and policymakers. Sounds impossible for such a little program to generate such big results? Just like the little engine in the children’s story that pulled the train over the mountain, the U.S. has a small venture that could generate big results. It’s called the Advanced Research Projects Agency – Energy, or simply ARPA-E.

But instead of being hailed, ARPA-E is about to be given the bureaucratic equivalent of a death sentence, and all because Congress has failed to pass a budget for 2011. Instead of a real budget, Congress will direct agencies to continue with the same amount of money they received last year. That means ARPA-E’s funding effectively dries up.

ARPA-E was created in 2007 to spur innovation in new groundbreaking technologies to set the United States apart from the rest of the world as a leader in the new clean energy economy. It is modeled after DARPA, the defense research agency responsible for the internet, Global Positioning Systems (GPS), and unmanned aerial vehicles. DARPA did all of this with a small, rotating staff of experts and minimal funding. ARPA-E is assembling a similarly nimble team of scientists, engineers, and innovators to make a big impact with a small budget.

We are competing against the rest of the world for a piece of the $2,000,000,000,000 (yes, that’s two trillion dollars) clean energy market. China is investing $738 billion over the next 10 years to beat us to the market with cheap, clean energy technologies. We cannot afford to stand still even in a wretched economy. It’s true federal funding is extremely tight but at its initial funding level of $388 million, ARPA-E has the potential to create wealth and prosperity. The next generation of battery technologies for electric vehicles, carbon capture technologies for coal-fired power plants, and new liquid transportation fuels that use microorganisms instead of petroleum and biomass to convert carbon dioxide back into liquid fuels. Any one of these technologies could change the way the world uses energy. Any one of these technologies could give birth to new companies and create thousands of jobs. Any one of these technologies could provide the necessary push for investment in the U.S. clean energy market that is just waiting to explode.

This little program that could create the energy world’s equivalent of GPS or the internet may not be around much longer. Congress has less than three months to fund ARPA-E. Eliminating funding for ARPA-E would be tantamount to the engines in the children’s story that refused to pull the broken down train, ceding billions of dollars in economic growth to China, South Korea, and Japan.

There should not even be a question as to whether the U.S. thinks we can continue to support this crucial venture in the coming years. ARPA-E is a vehicle that can and will unleash innovation in groundbreaking technologies and help push us over top of the clean energy market — we just need to believe in ourselves.

Co-authored by Devon Swezey, originally published at the Breakthrough Institute

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 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 percent 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 percent. 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.

Unfortunately, Doniger, NRDC (and EDF) wind up clinging onto a “cap” on carbon they have already given away while at the same time standing opposed to a new clean energy strategy that could still salvage a substantive win despite what little time remains on the Congressional clock.

A flawed case against “energy-only”

Doniger’s case for rejecting any legislation without a carbon “cap” rests on this central argument:

Unless the overall Senate bill includes a cap on stationary source emissions, some energy bill provisions would actually make carbon emissions worse.

Doniger cites four examples — policies promoting new power lines, electric vehicles, synthetic fuels, and biofuels — that he says could potentially result in an increase in emissions absent other regulations on carbon.

Some of his examples are just plain flawed; an NRDC-sponsored report on emissions from electric vehicles directly contradicts Doniger’s assertion that EVs powered by coal-fired electricity would raise emissions (in reality, even a coal-powered EV would be a marginal win from a GHG perspective). Others are more legitimate concerns; coal-to-liquids synthetic fuels should clearly be off the table from a GHG perspective, for example.

But the specter of an “energy-only” bill doing more harm than good could be addressed in several simple ways — GHG standards could be established for qualifying biofuels, and transmissions lines qualifying for incentives or expedited siting could be required to carry a certain percentage of zero-carbon electricity, for example. If NRDC is worried about bad outcomes, they could easily push for smart fixes to these policies, rather than categorically rejecting legislation that might include critical steps forward, including expanded transmission access to renewable energy zones, a vehicle electrification push, or the promotion of advanced, non-grain biofuels.

Furthermore, Doniger inexplicably ignores the fact that the EPA is already moving forward with efforts to limit carbon pollution from stationary-sources like power plants and is set to forge ahead in the absence of Congressional cap-and-trade legislation. Even in the face of likely litigation, the resulting regulatory uncertainty surrounding new EPA regulations will put the damper on any investments in new major emissions sources for the time being, including new coal-fired power plants.

Clinging to an illusory carbon “cap”

The real nugget though is that while NRDC et al. keep rejecting any substantive steps forward that lack a “binding cap” on emissions, they long ago ceded anything resembling a hard, binding emissions cap in their negotiations with industry stakeholders and Congress critters.

The Waxman-Markey bill passed the House loaded with enough offsets to render the cap completely non-binding on covered sectors. (What’s the problem with offsets? See here). The Kerry-Lieberman draft bill is the same. And any utility-sector only bill is likely to include just as many offsets, yet cover only about one-third of U.S. emissions, making matters even worse.

The truth is that we’ve never been debating a real, binding “cap” on greenhouse gas emissions, just an emissions target and a (pretty modest) carbon price signal. Call it “visor-and-trade” not “cap-and-trade.” And with that as the bar set by “cap” and trade legislation, it is certainly possible to get even better outcomes — faster transformation of the U.S. energy sector, faster clean energy innovation, and even faster emissions cuts — with a new clean energy strategy.

Snatching a win from the jaws of defeat

A series of proactive clean energy policy measures still have the chance to move the ball substantively forward before time runs out this year, while avoiding major concessions such as ceding EPA regulatory authority (something NRDC et al. was happy to give up in exchange for the deeply-flawed House-passed “cap” and trade bill, a fact Doniger fails to mention in his post). And if done right, such an effort could even start building a new bipartisan clean energy consensus, positioning things for a new strategy in the next Congress that marries a low but steadily rising carbon price to raise critical revenues with a series of proactive and comprehensive investments in energy technology innovation and deployment.

Alternatively, we can keep chasing the failed USCAP strategy down the rabbit hole…

“Do no harm” is a fine guiding principle

In the end, Doniger’s case for a climate/energy bill that “first does no harm” is something I can agree with wholeheartedly. Doniger writes:

[In crafting energy/climate legislation] there are some things that the Senate absolutely must avoid – things that would actually dig a deeper carbon pollution hole. The Senate bill must not include measures that increase carbon emissions, take away the laws already on the books to cut those emissions, or weaken other protections for public health and the environment.

The reality is that there are bad “energy-only” bills and good “energy-only” bills. The good ones are hardly “energy-only” at all, and will make substantive progress towards a low-carbon energy system — even without a “cap” on stationary source emissions.

The best chance of seeing a good energy bill pass Congress this year and drive America towards a clean energy future is if climate advocates, like NRDC’s Doniger and EDF’s Fredd Krupp rally behind a new play call to salvage clean energy victory from the jaws of impending defeat. Time is nearly up.

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 60 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…”

Sen. John Kerry (D-Mass.), 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 Sen. Lamar Alexander (R-Tenn.), 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.

Sen. Olympia Snowe (R-Maine) 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 bipartisan 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,” and stating that an economy-wide cap-and-trade was something America “simply cannot afford.”

Likewise, Sen. George Voinovich (R-Ohio) characterized the White House meeting as “a clear signal to the president, Sen. Kerry, and Sen. 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 Sen. 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]:

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 percent of all U.S. electricity to come from new, zero-carbon electricity sources by 2020 and 35 percent 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: Sen. Alexander has joined with Sens. Byron Dorgan (D-N.D.) and Jeff Merkley (D-Ore.) 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.

Endnotes:

[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 (Alaska), Sam Brownback (Kan.), Jeff Sessions (Ala.), and Bob Corker (Tenn.). 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 percent 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 Sen. Richard “Dick” Lugar (R-Ind.) and co-sponsored by Sens. Lisa Murkowski (R-Alaska and Ranking Member of the Energy Committee), and Lindsay Graham (R-S.C., 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 percent by 2015, 20 percent by 2020, 25 percent by 2025 … 50 percent 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 (Tenn.) and Mike Crapo (Idaho) 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 (N.D.) and Jeff Merkley (Ore.) and Republican Lamar Alexander (Tenn.), aims to put the U.S. 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 authorize 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 with 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 percent (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 Sen. Dick Lugar (R-Ind.). The final version introduced as S.3464 (see note [3] above) included a narrower incentive program for coal plant retirement. Republicans Lamar Alexander (Tenn.) and Susan Collins (Maine) and Democrats Tom Carper (Del.) and Amy Klobuchar (Mont.) 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.

Having passed the U.S. House of Representatives on May 28, the America COMPETES Act, America’s flagship competitiveness legislation, will soon be debated in the U.S. Senate. The Act was originally passed in 2007 in response to mounting concern that the United States was failing to effectively compete economically with other nations, imperiling the nation’s future prosperity.

Now, a new outbreak of anxiety has engulfed the nation’s competitive standing particularly as regards the nation’s fledgling clean energy industry. Presently, the United States lacks an effective strategy to compete in this high-growth industry, which is expected to surpass $600 billion globally by 2020. Fortunately, the America COMPETES reauthorization offers a key opportunity for Congress to strengthen U.S. clean energy competitiveness.

At this critical moment, three think tanks — the Breakthrough Institute, Brookings Metro Program, and the Information Technology and Innovation Foundation (ITIF) — have released a new policy report calling on Congress to extend the America COMPETES Act and enact a comprehensive set of investments in clean energy technology and embrace bold new paradigms in education, research, production and manufacturing.

There are many challenges to the development of a robust clean energy technology industry in United States, particularly as other nations move aggressively to compete for global clean energy markets and surge ahead of the U.S. on key metrics.

Currently, the U.S. suffers a competitive education gap, graduating fewer scientists and engineers than its economic competitors each year. The United States’ historic lead in energy innovation is slipping as other nations implement national innovation strategies and U.S. firms increasingly move state-of-the-art energy research operations overseas. And according to a November report by the Breakthrough Institute and ITIF, “Rising Tigers, Sleeping Giant,” the United States now lags nations in Asia in the production of virtually all clean energy technologies. It’s little surprise, then, that the U.S. trade deficit for renewable energy goods has increased by 1,400 percent over the last five years.

The new policy report, “Strengthening Clean Energy Competitiveness: Opportunities for America COMPETES Reauthorization,” recommends that Congress enact several measures to keep the U.S. competitive in the face of aggressive challenges from abroad. These measures include:

• Investing in a new generation of clean scientists and engineers
• Investing in increasing funding for clean energy R&D at existing agencies and in new innovative programs like Energy Frontier Research Centers, DOE Innovation Hubs, and ARPA-E
• Supporting American clean energy manufacturers with a new industrial innovation institute, new clean energy supply chain initiatives, and low-cost financing to help U.S. manufacturers retool for the clean economy
• Spurring the development of clean energy industry clusters by funding new regional cluster initiatives and clean energy research consortia.

By re-thinking how the federal government can foster innovation and competitiveness in clean energy, from education and research to commercialization and production, the United States can once again become a global leader in clean energy technology. Let’s make the reauthorization of America’s signature innovation law a moment of policy innovation in support of clean energy competitiveness.

Jesse Jenkins is Director of Energy and Climate Policy at the Breakthrough Institute.

Rob Atkinson is founder and President of the Information Technology and Innovation Foundation and Nonresident Senior Fellow at the Brookings Institution Metropolitan Policy Program.

What is clear, though, is this: To get to a good bill senators need to deal properly with the revenue–whether from offshore oil drilling or pollution allowance auctions or whatever else is in the bill. And to do that they need to make sure a huge chunk of it gets applied to clean-energy research and development. Get that right and much else needn’t be perfect. Blow that, and the bill is likely not worth it.

… The bottom line is this: Putting a price on carbon, or regulating emissions, … while absolutely necessary, will not be sufficient to address the nation’s climate problem and will, importantly, not put the U.S. in the position to seize the extraordinary opportunities that will come with rebuilding to global energy economy. Also necessary, as we keep saying, will be a major drive to promote large-scale technology breakthroughs. No matter how you measure it, U.S. government investment in clean energy R&D remains grossly inadequate. Right now clean energy R&D accounts for only around $3 billion a year. But if we’re going to see real progress in de-carbonizing the present economy and creating the next one this number should be closer to $15 billion and probably as much as $25 billion per year.

So that’s the target: $15 to $25 billion a year is “the number”–the critical investment threshold for federal clean energy investment that must become a core benchmark for evaluating any and all federal climate, energy, or indeed appropriations deal making.

Mark notes the rumors and reports of the still-not-yet-public drafts of the K-G-L bill do not bode well for the bill’s ability to clear this critical clean energy innovation threshold…

Mark also notes that if Congress still insists on moving forward with more offshore drilling — a key pillar of the political dealmaking behind the Senate climate bill push — the new revenues from oil and gas production should be directed towards clean energy innovation investments as well. Here’s Muro:

The price of drilling’s inclusion should clearly be not just strict new drilling safeguards, but a hard link of drilling to clean technology innovation as well. That is, Senate dealmakers should in effect embrace the outline of a recent GOP plan to put hundreds of billions of new oil and gas royalties into a fund to accelerate clean energy innovation that would help make clean energy cheap and truly help wean America from its carbon dependency.

While the political inevitability of new offshore drilling sure looks to have vanished since Breakthrough’s Yael Borofsky and I outlined the same concept about a month ago, the larger point still stands: IF we drill, the money had better be put to good use, and that means investing in our clean energy future.

Read Muro’s full post at the New Republic here.

See also:

Originally posted at the Breakthrough Institute

The only problem with it is that it’s wrong on its face.

America is already exporting clean energy jobs — or seeing them created abroad in the first place. After pioneering wind and solar power, electric cars, and nuclear plants, America turned its back on the public investments in cutting edge technology that catalyzed these innovations, forfeiting cleantech industries to foreign countries who did not make the same mistakes. The cap-and-trade program at the heart of the climate bill authored by Rep. Markey may help create more clean energy jobs overseas, but it won’t bring those jobs back to America. Conventional responses to today’s competitiveness challenge won’t cut it. Here’s what will …

Most clean energy jobs can easily be shipped overseas (or created there in the first place)

Unless our vision of a prosperous American clean energy economy revolves solely around jobs retrofitting homes to be a bit more efficient or installing (Asian and European built) solar and wind farms or high-speed trains, the reality is that the global cleantech sector is increasingly competitive, and the United States is already ceding thousands of jobs in clean energy manufacturing and innovation.

According to one study from the Renewable Energy Policy Project, 70-75 percent of the total labor required for a typical wind turbine or solar panel is ‘upstream’ of the installation and maintenance — the only jobs that truly ‘can’t be outsourced’ — mostly in manufacturing the various component parts.

That’s bad news for the U.S., which now lags behind competitors in Asia (and Europe) in the production of virtual all clean energy technologies, from wind to nuclear power and from high-speed trains to plug-in hybrid cars and the advanced batteries that power them, as the Breakthrough Institute and ITIF‘s comprehensive report, “Rising Tigers, Sleeping Giant” documents.

So forget the notion that clean energy jobs can’t be outsourced. Recent research by the office of Senator Ron Wyden (D-Ore.) showed that in the last five years the U.S. trade deficit in renewable energy goods has ballooned by 1,400 percent to $5.7 billion in 2009. Roughly 70 percent of the renewable energy systems and components installed in America are now manufactured by workers overseas, according to estimates from the Apollo Alliance. And even the American Wind Energy Association, the industry’s trade group, concedes that about 50 percent of the components installed in American wind farms are manufactured abroad.

Outsourcing clean energy innovation

If things don’t change, cleantech scientists and researchers will be the next to follow the cleantech factory worker overseas. Jobs in clean energy research, innovation, and new product development — traditional areas of U.S. leadership — are already on their way abroad as high tech giants and startups alike shift innovation activities to be close to vibrant clean energy manufacturing centers and markets overseas.

Applied Materials, the leading producer of the equipment used to manufacturing solar cells, recently opened the world’s largest and most advanced solar energy R&D center in Xi’an, China, creating hundreds of high-tech jobs there and shipping out their Chief Technology Officer and Silicon Valley luminary, Mark Pinto, to oversee the project. IBM recently announced a $40 million investment in a new “energy and utility solutions” lab in China that will perform cutting edge work on smart grid and other clean technologies. And U.S. technology powerhouse GE is putting their Chinese research centers in the lead developing new clean tech products like wind turbines and power control electronics.

In the realm of startups, the United States still leads in total venture capital (VC) investments in cleantech, according to research from the CleanTech Group, which closely monitors the sector. But the North American share of VC funding fell from 72 percent in 2008 to 62 percent in 2009, a four-year low for the region, with North American cleantech startups raising $3.5 billion in VC funding that year, down 42 percent from 2008. It was Chinese firms that dominated initial public offerings (IPOs) in cleantech sectors, however, with 17 Chinese companies securing $3.4 billion, or 72 percent of global IPO proceeds in 2009.

Competing for clean energy industries: what works (and what won’t)

So the fact is, not only can clean energy jobs be shipped overseas, they already are — or are being created abroad to begin with.

That’s why it’s concerning (to say the least) to see this kind of rhetoric about ‘green jobs that can’t be outsourced’ proliferate. If American politicians are serious about creating clean energy jobs in the United States — the kind of high tech and manufacturing jobs that are central to both a vibrant American middle class and a prosperous national economy — they need to focus on developing and enacting a robust and comprehensive clean energy competitiveness strategy. It’s time to explicitly recognize that American clean energy jobs, like any other high tech or manufacturing-based sector, need to be proactively created and retained.

The problem, however, has been that insofar as our nation’s politicians and pundits have even acknowledged America’s clean energy competitiveness challenges, they have, with a few exceptions, responded with conventional thinking, calling for carbon prices or tariffs or protectionist measures that will do little to restore America’s competitiveness or create hundreds of thousands of U.S. clean energy jobs.

A carbon price could certainly help create demand for cleantech products, but at the levels considered by Congress, such demand would be modest. More to the point: that demand could easily be satisfied by continuing to import foreign-built clean technologies, so we can’t count on carbon prices or cap and trade to bring clean energy jobs back to America. In the end, carbon prices are absent from China, Japan or South Korea’s effective clean energy competitiveness and jobs strategies. Why do we think carbon prices will be central to ours?

Carbon border tariffs or protectionist ‘Buy American’ provisions may also help somewhat, but each treats the symptoms, not the causes of America’s lagging competitive position in clean energy markets.

Instead, what the United States needs to build a competitive clean energy sector capable of supporting hundreds of thousands of good-paying jobs across the clean energy value chain is a comprehensive set of sustained public investments in cleantech research and innovation, education and workforce training, advanced manufacturing, and market creation (more on that strategy here).

This is how America has always sparked the innovation and high-value manufacturing that creates long-term jobs and built enduring industries that have formed the foundation for generations of economic prosperity. The primary reason the United States led in aerospace, communications technology, information technology, computing and the major new energy technologies of the later 20th century (gas turbines, nuclear, wind, and solar power) is because the U.S. government made a series of smart investments on the cutting edge of each of these technology fields to catalyze entrepreneurship and innovation.

We love to valorize private sector entrepreneurs, and it is true that the private sector is where much of this innovation ultimately happens. But we simply do not see entire new high-tech sectors emerge without the kind of direct, proactive, and comprehensive suite of investments in innovation, education, infrastructure, manufacturing, and market creation that led to each of the 20th century U.S. technology booms mentioned above.

We don’t see the Silicon Valley high tech boom of the late 1990s without the more than three decades of government investments in the region’s communications technology, IT and computing sectors that preceded that heyday of private sector entrepreneurship. We don’t become world leaders in commercial aviation or aerospace technologies unless the U.S. government takes the lead in procuring and improving jet engines or fully commits itself to the Space Race.

The irony is that while so many in our class of political ‘elites’ seem to have forgotten the real history of American technology leadership, policymakers in China, Japan, South Korea, Germany, Denmark etc. have all taken these lessons to heart.

The simple fact is, smart public investments at the leading edge of emerging technology sectors is how new industries are born and how the U.S. stays competitive. If American policymakers want to create and retain new clean energy jobs and industries, and aren’t satisfied with simply ‘capturing’ the 25-30 percent of the value chain involved in retrofits, installations and maintenance, then we cannot afford to ignore this history any longer.

Originally posted at the Breakthrough Institute

See also:

• “A Clean Energy Competitiveness Strategy for America”
• “Winning the Clean Energy Race: A New Strategy for American Leadership”
• “Rising Tigers, Sleeping Giant: Report Overview“