You know it's been a year of change when, in the same Times op-ed page, a prominent conservative economist advocates major government investments in new industries, and a prominent liberal columnist criticizes said investments as "pork," and calls for tax incentives over procurement.

Continue reading "Bartlett gets it right, Friedman gets it wrong" »

By John Alic

Throwing money at R&D can be a good thing. Indeed, it may sometimes be the only thing to do. But not for energy and climate change.

Energy analysts sometimes urge dramatic increases in government R&D spending while at the same time pointing to "barriers" that seemingly impede applications of existing, cost-effective technologies. Supposedly, if the impediments could be somehow removed, these technologies would wash through the economy, saving energy, reducing dependence on oil imports, and cutting carbon dioxide emissions. In fact, R&D seldom leads in any simple and direct way to applications. Diffusion is almost always and everywhere slow, even for breakthrough technologies. And there is nothing very special about energy technologies except the reluctance of advocates to recognize parallels with the slow pace of diffusion elsewhere in the economy.

Continue reading "Throwing Money at R&D" »

An efficiency stimulus plan seems at first glance to be an unadulterated good: it puts Americans to work, saves energy and money, and cuts greenhouse gas emissions, all with investments that should pay for themselves. But there are reasons to be nervous about the overwhelming focus on energy efficiency by green leaders and Obama's top energy and climate advisors. This narrow focus threatens to distract from the critical work ahead: overcoming the technology gap that exists between the current state (and cost) of today's clean energy technologies and fossil fuels.

An efficiency program will not create the new industries that the American economy needs to increase employment and productivity in the long term. An efficiency program will not create new exports that will bring global capital in to the American economy. And, equally as important as short term stimulus, America needs to have a plan to achieve those objectives as quickly as possible as well.

Obama's primary focus must be on making clean energy cheap -- what Google calls RE<C, renewable energy cheaper than coal -- not on reducing energy consumption.

Continue reading "Will Energy Efficiency Stimulus Distract America from the Real Task at Hand?" »

"Meanwhile, how much has our nation's future been damaged by the magnetic pull of quick personal wealth, which for years has drawn many of our best and brightest young people into investment banking, at the expense of science, public service and just about everything else?"

-Paul Krugman

By Michael J. Piore
David W. Skinner Professor of Political Economy, Massachusetts Institute of Technology

This post is the prepared paper for a lecture Professor Piore delivered on December 1st as part of a conference entitled, "How Will a New Administration and Congress Support Innovation in an Economic Crisis?"

This conference, and more particularly the background papers around which it is organized, constitutes a radical shift in the tenor of the technology policy debate. That shift is away from what Fred Block calls "market fundamentalism" and toward a call for active government involvement in the management of the economy. This shift is rapidly becoming pervasive in all areas of government and all aspects of economic activity. Indeed, it is actually less dramatic in technology policy than in many other areas, the tone of the paper not withstanding. The real message of the background papers is that the government has been much more actively involved not only in promoting technological innovation but also in giving it particular direction than the rhetoric surrounding the policy debate has admitted. So the paper framing the discussion here is less a call for new activity than for a more deliberate and self-conscious approach to the activities in which government is already engaged. But while in this case the tone may belie the substance, that tone heralds the emergence of a very general shift, one which is taking place across the policy spectrum, in areas ranging from social policy to credit policy, and even in the minutia of wage setting and compensation. And it is to the general problems posed by this shift that I want to speak here, although I will try to illustrate my remarks by reference to technology.

Continue reading "Learning on the Fly: Reviving Active Governmental Policy in an Economic Crisis" »

By Ron Hira
Assistant Professor of Public Policy, Rochester Institute of Technology

In introducing Bill Richardson as his Administration's Commerce Secretary, President-elect Barack Obama declared that Richardson would lead the charge to "create millions of new jobs that can never be outsourced." This kind of rhetoric shouldn't surprise anyone since Mr. Obama criticized the practice of companies moving jobs offshore often during the campaign and used it to his political advantage.

Alas, the reality is that Mr. Obama has not backed up his rhetoric with a plan to create and retain jobs here. His proposals on tax deferment and a 1% tax credit for so-called "Patriot Employers" would have an insignificant impact on what is a major structural shift in how the economy operates. And early indications are that Mr. Obama is not going to make either of these proposals, which would face fierce political opposition from companies, a priority. There are no other specific proposals from Mr. Obama that address outsourcing, and it's doubtful that any are forthcoming. His economic advisors are either involved in shipping jobs overseas as CEOs or have supported the practice in policy, think tank or academic positions.

Continue reading "Offshoring, Innovation & Economic Stimulus: Creating Sticky Jobs Through Policy" »

By Sunil Paul
Founder, Spring Ventures

Experience is a wonderful thing, but sometimes it leads to the wrong conclusion. We've all heard the chestnut about generals fighting the last war. Today in the cleantech world, the rules of government engagement that we learned from our proving grounds in information technology and biotech are hurting us. We have to reform our strategy if we're to build the clean-energy Googles, the green-business Amgens, and green-job Dells of the future.

When many of us built successful internet and computer companies we we avoided active government engagement. We didn't particularly want government as a partner or customer and certainly not as a regulatory agent. We thought government support was the kiss of death. When we did engage it was usually after our companies were large and profitable and then only after we perceived assaults like regulation, internet sales tax, export controls, intellectual property, and stock option accounting. Even today, if you are a software, computer, or internet startup, you can largely ignore the government other than obeying the law.

Continue reading "Forget What You Know: Why Cleantech Entrepreneurs Need to Forget the Lessons from the IT Revolution" »

"Energy efficiency cannot be seen as Job 1 and the other stuff Job 2. You've got to do them all as Job 1 because they all have to work."

-Dr. Nathan Lewis, California Institute of Technology, in today's New York Times piece, "Hard Task for New Team on Energy and Climate. Dr. Lewis explains why any program on climate-friendly energy must move forward on three prongs simultaneously: increasing efficiency, moving existing nonpolluting energy technologies more rapidly into the market, and advancing on the frontiers of energy science in search of radical breakthroughs.

Download the PDF here.

The New York Times editorial board, including respected environmental writer Bob Semple, broke from its past focus on carbon pricing as the primary solution to climate change in an editorial about Obama's newly announced energy and climate team. The piece praised Energy Secretary-designate Dr. Steven Chu for his views on the climate challenge:

"What sets [Chu] apart is his fierce conviction that innovation is just as important as regulation, and that big energy problems, like climate change and the world's dependency on fossil fuels, will not be solved without major private and public investment in the development and deployment of nonpolluting technologies."

Continue reading "The Times, it is a-Changin'" »

By Victor W. Hwang
Managing Director, T2 Venture Capital

There is much talk today about the need to invest in innovation. Saying this will not make me many friends, but I'll say it anyway: you really shouldn't listen to venture capitalists. Asking a typical venture capitalist to tell you how to enhance innovation is like asking a football player how to manufacture modern athletic footwear. The truth is that most venture capitalists don't really know why the American innovation system works the way it does; they just think they're really smart.

Smart government policy generally tries to smooth out inefficiencies, but venture capitalists like inefficient markets. Inefficiency means there is imbalance in a system, which means someone can make a profit by "arbitraging" that inefficiency (in simple terms, "buying low and selling high"). Thus, when you hear most venture capitalists opining about how to stimulate innovation, their ideas generally emphasize subsidies for existing market leaders: tax credits for R&D or infrastructure development or investing, government as a major customer, government risk-sharing for private capital, etc. What is not being discussed, however, is more important: what policies will create a level playing field for all innovators, not just help the large players win bigger? The stereotype of innovation in America, after all, is about the little "garage startup" that competes with and ultimately brings down the entrenched old boys.

Continue reading "How to Really Spur Innovation (Or Why You Shouldn't Listen to Venture Capitalists)" »

By Robert Atkinson
President, Information Technology and Innovation Foundation

Global warming may finally get the political attention and action it deserves. Indeed, it's hard to go a single day without reading something about the crisis and what we should do about it. But if we are going to effectively respond it is critical that public policy focus on the right thing, which is spurring radical technological innovation.

Unfortunately, too many environmental groups are actively encouraging Americans to believe that this problem can be solved if we all just change our behavior a bit: if we just take the bus a bit more; or install compact fluorescents; or even have a green Christmas by giving fewer gifts and reusing wrapping paper. The Sierra Club, for example, states that "We can make simple decisions on national, state, local, and personal levels that will reduce global warming pollution. The Sierra Club's network of activists and volunteers are dedicated to cleaning up our vehicles, buildings, and electricity grid to drastically cut carbon emissions and curb global warming."

Continue reading "Going Green Means Going R&D" »

" We believe that aggressive support of energy science and technology, coupled with incentives that accelerate the current development and deployment of innovative solutions can transform the entire landscape of energy demand and supply.

What the world does in the coming decade will have enormous consequences that will last for centuries. It is imperative that we begin without further delay. "

-Steven Chu (USA) and Jose Goldemberg (Brazil), Co-Chair's Preface, "Lighting the Way: Toward a Sustainable Energy Future."

The New York Times ran a landmark article today, "Money and Lobbyists Hurt European Efforts to Curb Gases," about the failure of cap and trade in Europe. It should be required reading for anyone concerned about climate change policy in the United States and abroad.  It opens with this:

The European Union started with a high-minded ecological goal: encouraging companies to cut their greenhouse gases by making them pay for each ton of carbon dioxide they emitted into the atmosphere.

But that plan unleashed a lobbying free-for-all that led politicians to dole out favors to various industries, undermining the environmental goals. Four years later, it is becoming clear that system has so far produced little noticeable benefit to the climate -- but generated a multibillion-dollar windfall for some of the Continent's biggest polluters.

As President-elect Barack Obama considers how to curb the gases that contribute to global warming, Europe's struggle with the problem illustrates the momentous task ahead for the United States.

The piece comes after the GAO just released a highly critical study of the use of offsets in Europe's Emissions Trading Scheme and amidst the chaotic climate negotiations at Poznan, where several European nations are balking at strict emissions caps.  It also comes only a few weeks after President-elect Barack Obama pledged his support for cap and trade at a major climate conference in California.

Continue reading "NY Times Reports Failure of Cap & Trade" »

By Daniel Sarewitz
Director, Center for Science, Policy, and Outcomes
Arizona State University

The world, it almost goes without saying, is a mess. Or perhaps better put, it is a bunch of messes. The incipient collapse of the global economy, the rise of global terrorism, the proliferation of dangerous weapons, the continued spread of AIDS, the oligarchy in Russia, the endless conflict between Israel and Palestine, the decline of global fisheries and tropical forests, choose your favorite mess. My own interest has been in messes that implicate, in one way or another, science and technology, for example climate change, a depressing mess if there ever was one.

Continue reading "Progress for Progressives: Technology and Effectiveness in Human Affairs" »

Last night, the US House of Representatives approved $14 billion in emergency loans to keep GM and Chrysler on life support into the new year.  Senate Republicans are in revolt though and may block passage without new amendments to allow more dramatic restructuring of the company's debt.

"If we don't have the forced restructuring plans in place, many of us don't believe that American car companies will come out of this in a competitive position and the taxpayers' money will be wasted," Senator John Ensign told the Washington Post (R-Nev.).

I hate to say it, but I'm forced to agree with Republicans on this account: $14 billion to prop up GM and Chrysler until Obama takes office is an obvious half measure, a stall tactic that will merely punt the tough decisions down the line another couple months.  While it may buy us a month or three, the proposed bailout will amount to nothing in the long term unless more dramatic actions to restructure and reinvent the American auto industry are taken.

Continue reading "Stop Stalling: Time to Hit the Reset Button on Detroit" »

"The framework of the European system put governments in the position of behaving like 'a grandfather with a large family deciding what to give his favorite grandchildren for Christmas,' Mr. Trittin said in an interview."

-From this New York Times article about the pitfalls and failures of cap and trade in Europe.

By Marty Hoffert

It's hard to believe that we have to pay Detroit with massive government bailout money to get them to innovate the kind of green, high tech cars that could save their own companies. But that's the case. Tom Friedman opined recently that Steve Jobs might make a good CEO for General Motors -- Apple being a poster child for an entrepreneurial company whose business model is based on continued high-tech innovation.

Long enough have US auto companies locked in the paradigm of large SUVs and trucks subsidized by multinational oil companies and sheikdoms. Rather than go to the government, the automakers should seek financial help from the oil companies they have enriched for years. Only fair that US car makers, who profited by addicting us to petroleum gas-guzzlers (don't tell me it was consumer demand when they manipulated demand by advertising those sexy Hummers) and now face bankruptcy, should ask Big Oil for a bailout. What's $30 billion to Exxon-Mobil?

Continue reading "Energy Innovation for a Better World" »

By Jesse Jenkins and Adam Zemel

Barack Obama made public today his intentions to appoint Steven Chu, director of the Lawrence Berkeley National Laboratory, as Secretary of Energy and Carol Browner, former EPA Administrator and current transition team advisor for energy and environment, as the administration's new "Energy and Climate Czar."

Breakthrough gives Obama's selection of Dr. Steven Chu a preliminary thumbs up, while the selection of Browner - who seems to see regulations as the primary driver of innovation - raises concerns about the kind of counsel Obama will receive from his new point person on energy and climate change.

Continue reading "Will the Academic and the Regulator Invest?" »

Last weekend, President-elect Obama made a historic announcement that his economic stimulus program would include the largest infrastructure investment since the creation of the Interstate Highway System under President Eisenhower:

"The key for us is making sure that we jump-start that economy in a way that doesn't just deal with the short term, doesn't just create jobs immediately, but also puts us on a glide path for long-term, sustainable economic growth. And that's why I spoke in my radio address on Saturday about the importance of investing in the largest infrastructure program--in roads and bridges and, and other traditional infrastructure--since the building of the federal highway system in the 1950s..."

Obama is getting increasingly bold, and he understands the importance of making long-term public investments as opposed to simply distributing another round of rebate checks. But as David Brooks pointed out yesterday, Obama's current stimulus plan lacks creativity and doesn't create new growth areas:

Continue reading "Beyond efficiency" »

Last week in response to Michael and Ted's piece in The American Prospect, Bradford Plumer at The New Republic's "The Vine" wrote a piece called "Should We Forget About Carbon Pricing? (No.)" The post, which mischaracterizes the stances Michael and Ted take in the Prospect piece, also propagates the myth of successful emissions reductions in Europe.

Plumer writes:

"Ted Nordhaus and Michael Shellenberger have yet another essay arguing that environmentalists should abandon all hope of trying to cap or tax carbon emissions, and instead focus solely on subsidizing clean-energy sources if they want to avert drastic global warming.

...Simply having the Energy Department dole out $50 billion per year to clean-energy producers (as Nordhaus and Shellenberger suggest) will pale beside the amount of private-sector money that will flow to alternative energy and efficiency improvements if carbon is priced properly."

This characterization of S&N's positions in The American Prospect and the Breakthrough Institute in general is a strawman.

Continue reading "In "Vine" Veritas? (No.)" »

"We've got to find a more moderate middle here because you're playing with fire."

-Senator Claire McCaskill (D-Missouri), making the case that Obama should postpone his cap-and-trade agenda.

By Daniel M. Kammen

The scientifically established need to adopt and accelerate a low-carbon, more sustainable future has finally been put squarely in the center of U. S. policy. President Elect Obama has taken the courageous and necessary step to announce that not only will this become a federal priority, but the U. S. will also take an active international leadership role in developing a workable and global approach to this issue. At Schwarzenegger's climate conference last month, these words brought a bi-partisan crowd of lawmakers to their feet for a standing ovation.

To accomplish these goals, the New Administration will need a diverse set of tools to address global warming. Despite years of under-investment [1], thankfully a diverse and growing set of science and engineering tools do already exist, as do a number of public policy and pollution market mechanisms that can be brought to bear to reward efficient and clean energy development, and to monetize pollution.

Beyond these efforts, however, additional tools are needed, namely those that mobilize novel financing opportunities to bring capital into the clean energy arena. There are many barriers to reducing energy consumption and increasing the use of renewable energy. One major barrier is high first cost ("upfront cost"), which is both a psychological and financial barrier for many people, institutions, and industries. How many of us would have cell phones, if we had to pay for 20 years of minutes up front?

Continue reading "The Financing Revolution for a Low-Carbon Economy" »

By Fred L. Block

It's hard to find a silver lining in the historic financial crisis we now face. But the crisis offers a unique opportunity for President-elect Obama to rebuild the foundation of the economy by revitalizing one of our greatest assets - our ability to innovate by mobilizing science and technology for production.

We desperately need a massive economic stimulus package to put people back to work and provide relief to those hardest hit. But an opportunity would be lost if the package simply restored things as they were. Instead, we should work to build a stronger, more sustainable economy by developing and deploying key technological innovations, such as wind and solar power, into widespread use quickly. This is not just a matter of spending money. We also have to create new institutions and new ways of doing business. We need not just stimulus, but "stim-novation," a combination of stimulus and innovation, and government must play a major leadership role in promoting that.

Continue reading "Innovating the Way to Economic Recovery" »

Technology is a cornerstone of American prosperity, the primary source of our economic competitiveness, and a constant presence in our everyday lives. From the 19th century's advances in manufacturing and transportation to today's cutting-edge developments in biotechnology and computer science, Americans have been world leaders in creating, producing, and deploying innovative technology. Nobel Laureate Robert Solow's classic 1956 study in The Economic Record demonstrated that technological progress drove at least 80% of economic growth in the United States between 1909 to 1949, and innovation continues to be the most powerful engine of our prosperity.

Today, President Obama and the new Congress face a historic opportunity to promote new technology innovation, particularly in the clean energy sector. Innovation is essential to driving down the price of clean energy technologies, which is a prerequisite to achieving mass commercialization and a rapid transformation of the global energy system. But to harness this solution we must take a new look at the process of innovation and determine the best mechanisms for public policy to catalyze and accelerate technology development.

The Breakthrough Institute is committed to fostering a discussion on these questions and is therefore hosting a "Special Innovation Issue" on our website to feature contributions from some of the country's top innovation experts, exploring the role of innovation policy and how public policy can best promote innovation. Stay tuned.

Dominic Lawson, columnist for the British newspaper "The Independent," issued a scathing condemnation of the Poznan Climate Talks aimed at renewing the Kyoto Protocol after 2012:

The truth, however, is that Kyoto, as a means to reduce carbon emissions, has been like Monty Python's parrot, long dead, despite all the protestations to the contrary by its salesmen.

You don't have to be a "climate change sceptic" to assert this unwelcome fact. Professor Gwyn Prins, Director of the LSE's Mackinder Centre for the Study of Long Wave Events, has been advocating measures to reduce what he sees as man-made climate change since 1986. He was a lead author on the Third and Fourth Assessment Reports of the Intergovernmental Panel on Climate Change, and on the Advisory Board of Friends of the Earth UK. For some years now, Prof Prins has been warning that the Kyoto approach is hopelessly flawed - and his unpopularity in the environment ministries of Europe has grown, precisely as his criticisms of their approach have been vindicated.

Continue reading "Kyoto: Like A Parrot Long Dead" »

Faced with the news that more than half a million jobs were lost last month, politicians in Congress and both the Bush and Obama administrations have been jolted into action on a bill to bailout the auto industry, whose collapse, experts say, could result in more than three million lost jobs.

In testimonies last Friday, the CEOs of Chevrolet and GM said that without an immediate cash infusion they would not make it through the New Year. Ford, while not in such dire straits, still requires a nine billion dollar line of credit to avoid catastrophic collapse.

Continue reading "Bridge to Nowhere?" »

Last week the United States Government Accountability Office released its evaluation of Europe's Emissions Trading Scheme, the European Union's cap and trade program designed to control greenhouse gas emissions. The GAO was asked to investigate the effectiveness and outcomes of the ETS in order to inform the ongoing debate on emissions reduction strategies in the United States.

A carbon pricing scheme has two basic purposes: to reduce carbon emissions and to drive private investment in low carbon technologies. However, according to the GAO, the ETS has failed to accomplish either objective in any measurable way:

Continue reading "GAO Report Skeptical of ETS, Critical of CDM" »

Gwin Pryns, author of "The Wrong Trousers: Radically Rethinking Climate Policy (pdf)," recently published "Time to Ditch Kyoto: the Sequel." The short pamphlet was handed out at the United Nations Climate Change Conference in Poznan, Poland.

Towards the end (pdf), Prins summarizes his point about a new direction for an international agreement on climate change:

"Poznan has an opportunity to... put in place the foundations and essential architecture for a radically re-engineered climate policy for adoption at the Copenhagen meeting next...That architecture will not depend upon carbon trading in the present form; it will not lead with emissions targets tied to specific dates (although benchmarks are part of the sectoral strategy for reducing energy intensity); it will not focus upon international legal agreements that are dubiously enforceable, if at all."

Continue reading "Prins to Poznan: Seriously, Time to Ditch Kyoto" »

Last week a coalition of the big green groups released a 400 page report recommending the actions that President Obama should take in regard to climate change. It is the first time that greens have all truly embraced investing in a clean energy economy, which is a positive step; but there is also a lot in the report that gives reason for pause.

Although the report's first recommendation is for a carbon cap and auction, it states that the revenue from this system should be used for investment and not for rebates. At the same time, the report names cutting pollution as a higher priority than the two other goals of the President's economic recovery strategy: "repowering America with clean energy" and "ending our dependence on oil ."

Continue reading "Green Group Report Mixed Bag On Climate and Energy" »

The executives of General Motors, Ford and Chrysler made yet another trek to Washington DC this week - this time ditching the corporate jets to drive hybrid cars - and once again pled for a federal bailout to prop up their struggling companies. Up to $34 billion taxpayer dollars are apparently all that stands between at least two of the "Big Three" automakers and bankruptcy.

GM's executives told Congress the company will fail very, very soon unless it receives at least $12 billion in loans in the coming months. Chrysler warned they could go belly up by year's end without $7 billion in government aid. Even Ford, which is doing a bit better than its two Detroit brethren, is asking for an open, taxpayer-funded line of credit of up to $9 billion dollars.

All this means its time for Congress and the American public to face two basic facts.

Continue reading "Too Big To Fail? Too Big, Period." »

At home over Thanksgiving, the state of the economy was on everybody's mind. It's always interesting hearing people express thoughts about economics. Everyone participates in the economy and deals with mortgages and credit scores and student loans, but very few have had formal training in economics. This leads to a distorted or incomplete view of how the economy functions beyond the individual level. For example, when I was talking with some friends on Friday night, they told me they had spent the day "stimulating the economy."

At first I thought this meant they had spent their Friday passing federal spending projects that created jobs and suspended PAYGO provisions in order to inject capital into the economy. Clearly, this wasn't what had happened. I quickly realized that they were talking about their Black Friday shopping.

Continue reading "Black Friday Stimulus?" »

The San Francisco Chronicle ran an op-ed by Teryn Norris today calling for major deficit spending on long-term clean energy investments to remake the U.S. economy. These strategic investments will create new industries, infrastructure, technology, and human capital to drive the U.S. economy for decades to come.

You can read the op ed at the Chronicle here.

A group of more than 300 economists led by three Nobel laureates submitted a letter last month urging Congress to deficit spend at least $300 billion to $400 billion per year to jump start the economy and avoid the possibility of a depression. Nobel Laureate Paul Krugman is calling for $600 billion per year, and similar numbers are being discussed in Congress.

But rebuilding a strong economy will require more than short-term stimulus. One important but oft-neglected lesson from this crisis is that smart, long-term investments - as opposed to short-term speculation and consumption - are essential for creating new and lasting prosperity.

Read the full article...