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By Matthew Stepp on Feb 14, 2013 with 1 response

President’s Call for Addressing Climate Change Lacks Vision and Scope

President Obama aggressively called for addressing climate change in his fifth State of the Union address, but ultimately came up short of outlining a clear and compelling vision with the necessary policy scope to address the significant technological challenges impacting clean energy.

Here are my five top take-aways:

1) Demanded Action to Address Climate Change

It is indicative of the sad state of the U.S. climate debate when a mere mention of support for addressing climate change elicits celebration. Nonetheless, the President deserves credit for calling on Congress to take action against climate change and using about 10 percent of his speech to discuss what he would like to see.

“But for the sake of our children and our future, we must do more to combat climate change. Yes, it’s true that no single event makes a trend. But the fact is, the 12 hottest years on record have all come in the last 15. Heat waves, droughts, wildfires, floods – all are now more frequent and more intense. We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence. Or we can choose to believe in the overwhelming judgment of science – and act before it’s too late.”

2) Aggressively Called for Increasing Public Investments in Energy R&D

One of the biggest issues impacting clean energy innovation is declining public investments. Of particular concern are stagnant energy R&D programs, which are a fraction of what is necessary to aggressively develop breakthrough clean energy technologies. According to the Energy Innovation Tracker, federal funding for energy R&D totaled $3.6 billion in fiscal year 2012. In comparison, the Defense Department’s R&D budget that year was $72.3 billion, or more than 20 times as much.

The President made two bold statements to address this problem. First, he called (again) for bringing government investment in R&D back to levels not seen since the Space Race. Current public investments in nondefense R&D are only 0.4 percent of GDP, compared to historically productive levels (from 1965 to 1968) when it accounted for one percent of GDP. To recapture these investment levels requires more than doubling public support for nondefense R&D, which would directly benefit clean energy innovation.

3) Endorsed ITIF’s Proposal for Energy Trust Fund, Limits Scope

The President also endorsed ITIF’s proposal (pdf) for an Energy Trust Fund linking revenue from oil and gas production to energy innovation. This idea has been endorsed by Republican Senator Lisa Murkowski as well as a number of thought leaders, including Securing America’s Future Energy (SAFE). The basic premise is to use oil and gas revenue from bonus bids, lease payments, and production royalties as a consistent base of support for energy innovation. ITIF estimates that offshore drilling alone could bring in over $5 billion per year – about the amount the United States invested in energy R&D in FY2012. Onshore oil and shale gas sources would add more revenue and allow for an expansion of energy R&D budgets.

Unfortunately, the President limited his proposal to just low-carbon transportation R&D. While investments in breakthrough transportation technologies like energy storage, advanced biofuels, and natural gas are absolutely necessary, the problems facing clean energy are much bigger in scope. The United States (and the world) needs better, cheaper, and cleaner technologies across all sectors of the economy including next-generation solar PV, utility-scale energy storage, offshore wind, and advanced nuclear energy. Creating a dedicated funding stream for low-carbon transportation R&D is a good first step, but to silo it from the rest of America’s energy innovation challenges perpetuates the fragmentation of an already weak innovation ecosystem.

4) Embraced a Federalist Race to the Top Approach, Limits to Energy Efficiency

The President also announced support for an Energy Efficiency Race to the Top program modeled after the successful education policy of the same name. The idea is to facilitate state competition for public funds to create high-impact, creative solutions that meet certain program goals and metrics. In this case, the President wants states to come up with the most effective policy programs and implementations that would double energy efficiency statewide by 2030. The most competitive state ideas that meet this goal win federal dollars towards the program and demonstrate best practices for other states seeking ways to similarly cut energy consumption in a cost effective way.

As opposed to offering loosely structured state block grants, the Race to the Top is an excellent idea that leverages federal dollars towards smarter, higher-impact state policies directly tied to deployment goals. And if successful, doubling energy productivity would have significant benefits for reducing emissions and boosting U.S. competitiveness.

With that the President shouldn’t limit his proposal to just energy efficiency. The Race to the Top model could be a breakthrough policy for supporting a number of energy innovation issues including deploying emerging energy power generation technologies with utilities and smart grid implementation. In fact, a Race to the Top model could effectively tie state and regional competitive advantages like National Labs, universities, industry, and utilities to the marketplace to accelerate the deployment of next-generation clean energy technologies. Programs like ARPA-E, SunShot, and the Innovation Hubs have already set aggressive technology goals that could easily be used in an expanded Race to the Top model.

5) Muddied the Climate Policy Waters by Calling for Cap-and-Trade

While the President proposed a number of limited energy innovation policies, his overall vision for climate policy was marked by calling for renewed discussion of market-based strategies like cap-and-trade.

“Now the good news is, we can make meaningful progress on this issue while driving strong economic growth. I urge this Congress to get together, pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago. But if Congress won’t act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.”

Unfortunately, what the climate debate needs least is further deliberation of politically failed and structurally flawed climate approaches of years past. Cap-and-trade does not adequately advance energy innovation or reduce carbon emissions. U.S. emissions are falling not because of the state-based Regional Greenhouse Gas Initiative cap-and-trade program – they are falling because cheap and cleaner natural gas is replacing coal and the recession has reduced energy demand. Shale gas-based carbon reductions are a powerful lesson for reducing emissions quickly through cheaper, low-carbon technology options and not with carbon caps and prices.

To be fair, a cap-and-trade program would provide some benefits, namely accelerating coal-to-gas switching already underway. But ultimately switching from fossil fuels to clean energy will take much more than what even the most politically audacious cap-and-trade program has to offer.

And this is not to say a “market-based” climate policy couldn’t be effective, especially if a much simpler carbon tax were proposed as a revenue stream for clean energy technology development and deployment. ITIF has proposed such a market-based solution (here), as has the Brookings Institution (here) and the Breakthrough Institute (here). But doing so requires framing climate change as an innovation and technology challenge. Republican Senator Lisa Murkowski explained this best by replying after the speech, “I think it depends on how you define ‘climate.’ If we’re talking about ways to reduce our emissions through the use of our technologies, sign me up. If we’re talking about a command-and-control approach, I think you’re going to have some real struggles in Congress.”

It is time for Congress and the President to realize that the best market-based approach to solving climate change is making clean energy technologies cost- and performance-competitive with fossil fuels through technology innovation. To get there, we need stronger, smarter, and more consistent federal and state support for R&D through deployment and manufacturing of clean tech. The President outlined some progressive vehicles to take us down this path, but more must be done to make the transformation happen.

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