This piece was co-written by Kate Gordon, vice president for energy policy at American Progress.

A critical element of President Obama’s domestic agenda is transforming the United States to a low-carbon-pollution economy, which would spur recovery, create jobs, and generate long-term prosperity. The president also made clear in his State of the Union address this year that we need to ramp up our exports, especially of clean energy technologies, if we are going to stay competitive in the global economy. Comprehensive, bipartisan clean energy legislation that establishes a price on carbon pollution could provide the resources for a strong clean energy investment agenda. Yet an “energy-only” bill that excludes pollution limits and leaves carbon unpriced would make it difficult to raise the investment dollars we need to boost American competitiveness in the global clean energy market.

Achieving the president’s goals requires comprehensive clean energy and global warming pollution reduction legislation. Nearly every other country that has pulled ahead in the race to innovate, develop, manufacture, deploy, and export clean energy and efficiency systems has done so through a set of comprehensive policy and investment measures. For example, Germany has invested heavily in the creation of a domestic clean energy industry, in part due to the European Union’s overall “20-20-20” goal: 20 percent reductions in greenhouse gas emissions from 1990 levels, 20 percent use of renewable power, and 20 percent reduction in energy use. Germany has responded by spurring market demand; helping to finance clean energy innovation, production, and deployment; and investing in the infrastructure necessary to move renewable electricity to market. As a result, it is the “global leader in installed solar energy capacity … Germany was the number one renewable energy system exporter in the world from 2003 to 2008.”

China, meanwhile, races ahead of the United States. A Pew Charitable Trusts analysis found that China leads the world’s major economies in clean energy investments. According to their research, in 2009 “China invested $34.6 billion in the clean energy economy — nearly double the United States’ total of $18.6 billion.” China is now the world leader in solar PV cell production — a technology that was invented in the United States. It is time for us to catch up.

An effective clean energy investment strategy has two necessary and interrelated parts. This first is a shrinking limit and a rising price on carbon pollution to drive the private sector to invest in and deploy low-carbon technologies. The second is a set of targeted investments in clean energy technology sectors. These investments would help the United States overcome short-term barriers such as lack of up-front financing that have stalled the wind, solar, geothermal, and energy efficiency sectors from getting to commercial scale. They would also move forward the energy innovations of the future through research, development, and commercialization.

A global warming program that establishes a shrinking limit on carbon pollution and leads to a rising price on carbon would help drive massive private investment toward these clean energy technologies. Venture capitalist John Doerr and General Electric President Jeff Immelt noted that the United States must “send a long term signal that low-carbon energy is valuable. We must put a price on carbon and a cap on carbon emissions. No long-term signal means no serious innovation at scale, which means fewer American success stories.”

Forty-five members of the House Sustainable Energy and Environment Coalition recently urged Speaker Nancy Pelosi (D-Calif.) and Majority Leader Steny Hoyer (D-Md.) to ensure that “comprehensive energy legislation includes reductions in greenhouse gas emissions necessary to spur private investment in American clean energy technologies.” They also noted that “billions of dollars of private capital sit on the sidelines in the United States as investors and banks wait for the price signal that a limit on greenhouse gas emission [sic] will provide.”

And the head of New England’s power grid sounded a sobering note last week when he argued that renewable energy projects in the region are popular but on hold, mostly due to market uncertainty. “The single greatest issue facing the operation, expansion, and regulation of the power system is the uncertainty about national energy policy,” he said.

In short, these leaders are all saying that there is little short-term economic incentive to abandon the status quo absent a pollution price-even if that course leads to a long-run economic disaster.

Setting a price on carbon is not only critical for America’s long-term competitiveness; it is necessary to pay for the energy programs that will help companies, consumers, and workers make a smooth and swift transition to a low-carbon economy. The House and Senate have already proposed some very effective policies and programs to help with this transition, all of which carry significant costs.