Why Innovation Should Be at the Heart of Climate Policy

An Interview With Matthew Stepp of CCEI

As a graduate student at the Rochester Institute of Technology, Matthew Stepp was frustrated by the fact that the major climate change policies under debate – carbon pricing, electric vehicle subsidies, feebates – weren’t enough to deeply cut carbon. He was also skeptical that the climate advocacy’s vague call for movement building could change the political economy calculus.

At the Breakthrough Institute, where Stepp was a Generation Fellow, he found others who shared his frustration and were attempting to outline new policies that could effect technological change. Four years later, and Stepp is now the leader of the first think tank in Washington, DC, that is dedicated to spurring clean energy innovation, much like what was accomplished with the shale gas revolution.

The Center for Clean Energy Innovation has a very straightforward mission: make clean energy innovation policy the core solution to global climate change. “Right now, energy innovation isn’t considered a mainstream solution, which is troubling because climate change is inherently one of the greatest technological challenges of our time,” Stepp said. Breakthrough caught up with Stepp to discuss how we might move to a low- to zero-carbon future.

Breakthrough and CCEI largely agree that innovation in clean energy technologies is critical to achieving a low- or zero-carbon energy future. But what specific innovations are critical? What are the technological breakthroughs we need to achieve?

There are so many! I’d start with the big four: super cheap batteries for cars and the energy grid; much more efficient solar panels at a fraction of the cost; much cheaper small modular nuclear reactors; and much cheaper carbon capture and sequestration technologies. If these breakthroughs occurred, we’d be remarkably closer to global decarbonization as quickly as possible. Additional innovations are also needed to make offshore wind economically viable, fuel cells cheap and safe, biofuels cheap and less carbon intensive, and ocean-based energy a reality this decade (and not 50 years from now).

What's your vision for the energy system in 10 years? Twenty years? How quickly do you think we can transition to an energy system with drastically reduced emissions?

Historically, energy transitions take a long time, say 50-60 years, from when a new technology is invented until it’s widely dispersed. We have a good sense on what it takes to do this, at least on a national scale. Unfortunately, we don’t have that kind of time and we have to do it on a global scale across countries at different stages of development. Ultimately, my vision for the energy system is that it will be smarter, dynamic, equitable, consumer-driven, and low-carbon. Countries wouldn’t have to rely on natural resources to underpin economic growth. Every person on the planet will have access to the same levels of energy that I do today without having to make life decisions every time they switch on the lights. I don’t have preferred technologies and really think the world is going to implement a suite of options depending on regional and national characteristics (much like it is today). As long as those technologies are low-carbon and affordable, I’m OK with them. In ten or twenty years we are well on our way to realizing this vision.

A lot of people view a carbon price as essentially a "silver bullet." If we could put the correct price on carbon, then the market would do it's work and we'd just end up with a lot more clean energy. Do you agree with that view?

I certainly don’t agree that if we set the right carbon price, the market will magically come up with the solutions. It’s too simple and ignores a century of technology history. The market is simply unwilling or unable to make the high-risk investments in technology development necessary to mitigate carbon. Apple didn’t innovate the iPhone because we taxed landline phone service. They did so because they’re good product engineers who recognized good government innovations that could make an amazing phone. I could make the same argument for most technologies, big and small. It takes both an aggressive public sector in partnership with the private sector to get the innovations we need. A carbon tax could be helpful in other ways, namely to fund clean energy innovation programs and accelerate deployment when we have the cheap technologies we need, but it’s more a complement, not a panacea.

Is there one policy reform that could have a dramatic impact on its own? Or are we most likely looking at piecemeal solutions to mitigating climate change?

I don’t think there is one big reform to solve climate change. It’s going to take big investments in RD&D, reforming public institutions towards innovation, tax reform, manufacturing support, more aggressive trade policy, and international coordination to name a few. If I had to only pick one, I’d pick fully funding ARPA-E at over $1 billion per year, but even ARPA-E isn’t enough on its own.

Your recent report The Logic Chain to an Effective Global Clean Energy Policy argues that we need to first establish that climate change is real and is man-made. How do we realistically achieve more R&D for clean energy when many Republicans in Congress refuse to acknowledge those points?

There’s two ways of looking at Republican climate skepticism, in my opinion. First, many refuse to acknowledge human-made climate change because they’re fearful of what the dominant policy approaches will do to the economy. I think if there is a space where Republicans agree climate change is a major problem, but disagree on the approaches and want to work on new ideas, many will trend away from outright denial. Second, many refuse to acknowledge human-made climate change because they’re fearful that it’s all a way to change how we live our lives, rightly or wrongly. It’s easier to put their heads in the sand, if they’re told they need to fundamentally change the way they live. I don’t think this is the mainstream message from climate advocates, but there is enough that it fuels deep mistrust. Ultimately, these skeptics will trend away from denial when “going green” is an economically advantageous decision, not an environmentally-driven one. Of course, there will always be a small share of folks ideologically against believing in climate change. But I think that share of folks is small and cheaper technology and a more flexible policy debate can alleviate much of the skepticism.

Is there a bipartisan roadmap for energy innovation, and if so, what does it look like?

We can’t realistically expect much from the federal government now through the presidential campaigns into early 2016. There is simply too much gridlock and ill will among parties to do any big energy policy reform. Instead, public investments in energy innovation will continue along the status quo and there may be some modest work on energy tax credits. That’s not to say there won’t be windows of opportunity. For example, the federal National Lab reform commission finishes its work in early 2015, setting the stage for potentially high-impact reform.

What can states and cities do in the absence of federal leadership?

States and cities can certainly fill some, but not all, of this federal leadership deficit. Only a handful of states do any type of aggressive innovation policy, as most are focused on state economic development through subsidies. Take for example, the increasing chatter around Green Banks at the state level. These banks could have a big impact on innovation, but states are choosing to create low-risk, low-hanging fruit institutions that will surely help get a few more houses retrofitted with solar panels, but nothing near the scale of change needed. If state and cities want to supplement federal leadership, they need to get really serious about innovation.