It is time to hit the reset button on energy policy, according to scholars with American Enterprise Institute, Brookings Institution and the Breakthrough Institute, who are today releasing a new report, "Post-Partisan Power," which calls for revamping America's energy innovation system with the aim of making clean energy cheap.
The new report calls for increasing federal innovation investment from roughly $4 today to $25 billion annually, and using military procurement, new, disciplined deployment incentives, and public-private hubs to achieve both incremental improvements and breakthroughs in clean energy technologies. The authors point to America's long-history of bi-partisan support for innovation.
Writes David Leonhardt in today's New York Times, "the death of cap and trade doesn't have to mean the death of climate policy. The alternative revolves around much more, and much better organized, financing for clean energy research. It's an idea with a growing list of supporters, a list that even includes conservatives -- most of whom opposed cap and trade."
Mark Muro of Brookings tells Politico the proposal's four parts "are broadly popular, provide a very broad and appealing American vision of economic transformation and are certainly far more doable than a global pricing system at this point." Added Steve Hayward of American Enterprise Institute, "The entire climate and energy agenda that we've been talking about for several years now has hit a dead end, so it's time to hit the reset button."
Summary of Recommendations
1) Invest in Energy Science and Education
- Secure funding necessary to complete the doubling of Department of Energy (DOE) Office of Science budgets. Direct a significant portion of new funds to programs related to energy sciences, including roughly $300 million in annual funding to scale up the Energy Frontier Research Centers (EFRC) program over the coming years.
- Invest roughly $500 million annually to support K-12 curriculum and teacher training, energy education scholarships, post-doctoral fellowships, and graduate research grants. Just as the United States rose to the Cold War challenge by enacting the National Defense Education Act and leveling critical investments in science, technology, engineering, and mathematics education, a new national commitment is needed today to train, educate, and inspire a generation of energy innovators, engineers, and entrepreneurs.
2) Overhaul the Energy Innovation System
- Help reform the U.S. energy innovation system by investing up to $5 billion annually to establish a robust national network of regional energy innovation institutes bringing together private sector, university, and government researchers alongside investors and private sector customers. Funded at $50-300 million annually, each institute will foster competitive centers of clean energy innovation and entrepreneurship while accelerating the translation of research insights into commercial products.
- Bring the Advanced Research Projects Agency for Energy (ARPA-E) to scale by providing $1.5 billion annually, while dedicating a significant portion of new funding to dual-use energy technology innovations with the potential to enhance energy security and strengthen the U.S. military. The Department of Defense (DOD) should work actively with ARPA-E to determine and select dual-use breakthrough energy innovations for funding through the ARPA-E program and potential adoption and procurement by the DOD.
3) Reform Energy Subsidies and Use Military Procurement and Competitive Deployment Incentives to Drive Price Declines
- Reform the nation's morass of energy subsidies. Instead of open-ended subsidies that reward firms for producing more of the same product, employ a new strategy of competitive deployment incentives, disciplined by cost reductions and optimized to drive steady improvements in the price and performance of a suite of emerging energy technologies. Create incentives for various classes of energy technologies to ensure that each has a chance to mature. Decrease incentive levels until emerging technologies become competitive with mature, entrenched competitors to avoid creating permanently subsidized industries or picking winners and losers, a priori.
- Expand DOD efforts to procure, demonstrate, test, validate, and improve a suite of cutting-edge energy technologies. New, innovative energy alternatives are necessary to secure the national defense, enhance energy security, and improve the operational capabilities of the U.S. military. Provide up to $5 billion annually in new appropriations to ensure the Pentagon has the resources to pursue this critical effort without infringing on funds required for current military operations.
- Recognize the potential for nuclear power -- particularly innovative, smaller reactor designs -- to enhance American energy security, reduce pollution, and supply affordable power. America cannot afford to bank on one technology alone, however, and must pursue all paths to clean, affordable energy, supporting all innovative, emerging clean energy sources, from advanced wind, geothermal, and solar to electric vehicles and advanced batteries, allowing winners to emerge over time.
4) Internalize the Cost of Energy Modernization and Ensure Investments Do Not Add to the Deficit
- Secure revenues to ensure these productive new investments do not exacerbate the national debt, through one or a combination of the following means: phase out unproductive energy subsidies, which have not sufficiently driven innovation; direct revenues from oil and gas leasing to energy innovation; implement a small fee on imported oil to drive energy innovation and enhance American energy security; establish a small surcharge on electricity sales to fund energy modernization, similar to the Highway Trust Fund; and/or dedicate revenues from a very small carbon price to finance necessary investments in clean energy technology.