Climate Bill Analysis, Part 2: Clean Energy R&D Investment May Be 30 Times Smaller than President Ob

May 18, 2009 | Jesse Jenkins,

[Updated 5/22/09: the ACES bill now includes a $10/ton price floor for auctioned pollution permits. The analysis below has been updated to reflect that change in the legislation]

Today, the House Energy and Commerce Committee began markup of the American Clean Energy and Security Act of 2009 (ACES). The bill promises to cap and reduce carbon pollution, create clean energy jobs, and spur technology innovation. Unfortunately, as our analysis of the use of carbon pollution allowances in the ACES bill revealed, the bill is on course to invest very little of the hundreds of billions of dollars in value created by the bill's cap-and-trade program over the coming years towards those objectives.

Most of the allowance value (74 percent) created by the ACES cap and trade program is dedicated to blunting the impact of the carbon price established by the program on industries and consumers (and securing the critical swing votes on the committee representing these entrenched energy and industry interests). In contrast, just 12 percent of the allowance value is dedicated to clean energy investments, broadly defined.

At an average allowance price of $10 to $20 dollars per ton of CO2 between 2012-2025, that would amount to clean energy investments of just $6-12 billion per year, and just $490-980 million for clean energy R&D (see our full analysis of the allowance allocations in ACES for more).

President Obama has repeatedly promised to, "Invest $150 billion over ten years in energy research and development to transition to a clean energy economy" (from The President's 2010 Budget Outline specifically dedicated $15 billion per year in new revenue generated by a cap and trade program to this purpose. Yet the bill before us, depending on the allowance value it establishes, would invest just one-fifteenth to one-thirtieth of the $15 billion President Obama has pledged -- and specifically requested from Congress. Furthermore, this new energy R&D spending may amount to just a ten percent increase in current federal energy R&D budgets.

Likewise, the total investments in a new clean energy economy, more broadly defined, are an order of magnitude smaller than proposals advanced by the Breakthrough Institute, Apollo Alliance and others have deemed necessary to drive clean energy innovation, create millions of new energy jobs, and jump-start a prosperous, clean energy economy.

Below the fold, you can see how the clean energy investments made by the ACES bill compare with what a range of proposals and current R&D funding levels...

The first graph focuses on clean energy R&D only. The second looks at clean energy investments more broadly, including investments to demonstrate, commercialize and deploy clean energy technologies, build critical infrastructure, and even spur energy efficiency improvements. In including investments in carbon capture and storage technology in these totals, I am no doubt being more generous with the term "clean energy" than many of my green colleagues would be, but I include this investment here, just as the ACES bill's authors and champions do. In short, the second graph represents "clean energy investments," broadly defined.

So, do you think ACES clean energy investments pass the grade?

(Click any of these to enlarge...)





Sources and Notes:
[1] See "First Analysis of Waxman-Markey Cap & Trade Allocation," Breakthrough Institute (May 15, 2009).
[2] See "Investing in the Next Generation of Energy Technologies," President Obama pledges to "Invest $150 billion over ten years in energy research and development to transition to a clean energy economy."
[3] Forthcoming, June 2009.
[4] See "Top Energy Scientists Call for $30 Bi Annual Investment in Clean Energy," Breakthrough Institute (December 3, 2007). Call for $30 billion in clean energy technology investments
[5] See Energy Discovery-Innovation Institutes: A Step toward America's Energy Sustainability. Brookings Institution (February 9, 2009).
[6] See "Budget and Performance," U.S. Department of Energy.
[7] See "Detailed Summary of Energy Investments in Stimulus," Breakthrough Institute (February 13, 2009).
[8] See "R&D in the FY2009 Budget," American Association for the Advancement of Science (March 23, 2009).
[9] See "New Apollo Program," Apollo Alliance (March 20, 2009).
[10] See "Fast, Clean, & Cheap: Cutting Global Warming's Gordian Knot," Harvard Law and Policy Review. Breakthrough Institute (January 2008).

See here for the Breakthrough Institute's full collection of ACES analyses (also collected here):


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By Energyland on 2010 05 16

Seven, that assumes the subsidies are stable over time. In contrast, an effective clean technology deployment program would target incentives to specifically drive cost reductions over time. For example, the subsidies would fall in time with economies of scale and cost curves, providing a steady incentive and pressure to innovate and improve cost margins. Japan did this for solar, and now solar is independent of federal subsidy (although at Japan's much higher electricity rates). Germany did not design their solar deployment incentives in this way, and there experience has been less ideal. See this post for more:

By Jesse Jenkins on 2009 05 26

As long as we have state and federal incentives to create "clean" sources, and subsidize the output, the incentive to drive down price by increasing efficiency is not there.

By seven on 2009 05 26