'Post-partisan' proposal emphasizes limited subsidies, small carbon tax

Clarification appended.

The United States should emphasize innovation to drive down the cost of clean energy technologies and curb greenhouse gas emissions, according to a report released today by three think tanks.

A paper by authors from the conservative American Enterprise Institute, the liberal Breakthrough Institute and the Brookings Institution, which describes itself as nonpartisan, says policies focused narrowly on driving down clean-energy costs by improving the technologies will win support from an electorate weary of "climate wars" that have long polarized political debates.

Co-authored by Steven Hayward of AEI, Mark Muro of Brookings, and Ted Nordhaus and Michael Shellenberger of the Breakthrough Institute, the report focuses on four "post-partisan" proposals with price tags ranging from $15 billion to $25 billion per year.

"This is the first time that really, the two most influential think tanks in Washington have come together around an energy innovation proposal," Shellenberger said in an interview. His think tank is based in Oakland, Calif.


The groups aim to build consensus around a proposal that "reasonable liberals and conservatives" can get behind, he said. "This is the beginning of a new consensus, not the end," he said. "We don't have a bill, we don't have any co-sponsors, we don't think this is going to pass in the next Congress."

Schellenberger describes the groups' proposal as limited and direct.

"It is limited because it is focused, not on reorganizing our entire highly complex energy economy, but rather on specific strategies to drive down the real cost of clean energy technologies," he said in an e-mail. "This framework is direct because the federal government would directly drive innovation and adoption through basic research, development, and procurement in the same way it did with computers, pharmaceutical drugs, radios, microchips, and many other technologies."

The groups' paper focuses on four approaches to energy innovation:

  • The federal government should expand spending on energy science and education. The Energy Department's Office of Science should have its budget doubled to address scientific obstacles to energy technologies, while a slew of innovation institutes should channel up to $5 billion per year toward energy challenges, and energy education for students of all ages should be earmarked for at least $500 million per year.
  • The energy innovation system should be completely overhauled to focus on lining up with private-sector and Defense Department demands. In a nod to Energy Secretary Steven Chu's vision for a series of innovation "hubs," the report calls for a national network of decentralized energy innovation institutes bringing public and private researchers together with investors in the mix from the start. It also recommends that DOD's buying power and intense need for energy products be leveraged by targeting federal efforts on that market, giving DOD a greater role in administering DOE's new Advanced Research Projects Agency-Energy, or ARPA-E.
  • Federal subsidies should be overhauled to favor products that consistently fall in price. "Today, firms get subsidies that reward production of more of the same product, not innovation that results in lower prices," the report says, calling for reforms for fossil fuel and clean technologies alike. Congress should provide up to $5 billion per year to help DOD test, demonstrate and purchase energy technologies that can be revolutionary in the private marketplace, as well; the report notes that advanced biofuels, solar thermal and power systems, improved batteries and small nuclear reactor technologies all show promise for DOD use.
  • Finally, energy investments should be made cost-neutral by some combination of pay-fors that could include phasing out existing subsidies, increasing oil and gas royalties, adding a fee for imported oil, placing a surcharge on electricity sales or imposing a modest carbon price.

The carbon tax, the report says, in the range of $5 per ton, would cost consumers and businesses about a third as much as recent cap-and-trade legislation, according to the authors.

"Any one of these funding sources could raise sufficient funds from within the energy sector itself without appreciably increasing energy prices or impacting American firms or consumers," according to the report.

Familiar ideas, new packaging

Many of the ideas in the joint proposal have been around for years.

DOD already plays an important role in furthering the development of many energy technologies, having been a key driver for fuel cells for building use and advanced biofuels for aviation, for example.

And proposals to dramatically increase funding for DOE's Office of Science and research and development efforts have been included in various legislative efforts on Capitol Hill, with limited interest from Congress.

Shellenberger stressed that putting the proposals together as a coherent package was new and helpful and that the proposal includes elements that hold appeal on both sides of the political aisle. Liberals will still want pollution regulation, while conservatives will still focus on nuclear power, he said.

"Liberals are acknowledging that we need an approach that puts technology first," he said, citing regulations on acid rain and ozone that came only after technologies to control the pollutants were in the marketplace.

Conservatives understand how successful the military has been, Shellenberger said, especially in using its procurement might to channel technology advances. "Our view is that what was important in the framework was to be clear about what really matters, and to provide options to pay for it," he said.

Click here to read the report.

Clarification: Views attributed in the second paragraph of an earlier version to the American Enterprise Institute, Breakthrough Institute and Brookings Institution were expressed in a report written by authors from the three organizations, not by the organizations themselves.

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