October 16, 2009
European Commission Creates Roadmap, Not Budget for Clean Energy Investment
On Tuesday, Breakthrough reported that a leaked draft of the European Commission's (EC) Strategic Energy Technology plan (SET) revealed plans for the European Union (EU) to invest $73 billion in clean energy technology. The official communication, released on Wednesday, was not a budget appropriation, but it was, however, a proactive clean energy investment "roadmap" of the next decade for the EU, Member states, and the private sector.
In the report, the European Commission acknowledged that the EU faced a critical challenge: reinventing its energy system. Towards that goal, the EC designated a role for the public sector explaining that the market was not capable, on its own, of ensuring a rapid transition to a clean energy economy:
"Markets and energy companies acting on their own are unlikely to be able to deliver the needed technological breakthroughs within a sufficiently short time span to meet the EU's energy and climate policy goals...Public policy and public investment partnering with the private sector is the only credible route to meet our goals, established for the public good."
The proposal was designed to demonstrate how much clean energy funding is necessary in order to realize the EC's "vision of a Europe with...a diverse portfolio of clean, efficient, and low-carbon energy technologies as a motor for prosperity," and the sources where such monies might be obtained.
While the roadmap does call for a total of $73 billion (EU 50 billion) over the next ten years, it still holds the private sector responsible for approximately 70% of the non-nuclear research financing, attributing 30% of the responsibility to the public sector, on both a national and community level. According to the EC:
"In general terms, the higher the technological uncertainties, the more public support is needed...Otherwise, the private sector should be able to cope on its own."
Interestingly, the report describes the demand for increased investment as an "opportunity" for the private sector and a "burden" for the public sector, but no matter what its called, the EU's ability to achieve the clean energy goals set forth in this plan will be dependent on public funding. As the EC itself acknowledges, the market cannot deliver innovation in clean energy technology quickly enough, nor can it internalize the high uncertainty, risks, and market failures that consistently plague private-sector investment in early-stage R&D and demonstration.
If the EC and subsequently, the EU, is serious about becoming a world leader in clean energy technology and affording the $73 billion dollar price tag, it must reconsider, if not completely reverse its investment ratio. Due to the high level of risk associated with all steps in the clean energy innovation process, the EU, as a governing body, and individual national governments must not only implement public policies and incentives to spur private investment, they must also finance the process. Figuratively speaking, governments at both the national and community level must put their money where their roadmap is.
Still, the EC's SET Plan is indicative of a proactive stance, in the EU, to transition to a clean energy economy by making clean energy cheap and abundant and perhaps, become a major competitor in the clean energy race. As the U.S. debates the Senate version of the climate and energy bill, the EC's roadmap for clean energy investment should serve as an example of a plan that acknowledges the scale of the technology challenge that the world faces as well as the levels of investment necessary to finance the clean energy technology innovation process. Although, significantly more public investment will be the tall order from both nations if they want to stay abreast of China in the gathering clean energy race.