The ingenious humanity that learned how to transform the planet and to assess the risks of having done so must now learn how to escape the existential climate threats it knows are out there.
New clean energy technology is the key to climate safety, and smart research and development (R&D) is the key to new clean energy technology. A July report from the MIT Energy Initiative, Venture Capital and Cleantech: The Wrong Model for Clean Energy Innovation, analyzes the clean energy technology (cleantech) boom and bust of the last decade, during which venture capital investors put $25 billion into the cleantech sector and lost over half of it. The authors conclude that “cleantech clearly does not fit the risk, return, or time profiles of traditional venture capital investors” and that “policymakers should capitalize on the momentum of recent announcements (Mission Innovation and the Breakthrough Energy Coalition) to develop a more functional ecosystem for cleantech innovation.” They go on to identify the public and private elements of such a system.
An important part of a successful new system will be putting a price on carbon, correcting the market failure that currently hobbles demand for clean energy by keeping economically costly fossil fuels cheap to burn. As Richard Newell, RFF’s incoming president, points out in “The Role of Energy Technology Policy Alongside Carbon Pricing” (in Implementing a US Carbon Tax: Challenges and Debates), “R&D without market demand for the results is like pushing on a rope and would ultimately have little impact.”
An obvious connection is to fund energy innovation with money from pricing carbon. One opportunity to do this lies in updating the Strategic Petroleum Reserve—by creating a public-private agency to hold and manage the reserve (a common arrangement in other member countries of the International Energy Agency) and charging a fee to industry to acquire the oil in the reserve, with the proceeds placed in a dedicated clean energy R&D fund. My RFF discussion paper, “Turning Rainy-Day Oil into Clean-Energy Gold: Funding Mission Innovation with a Strengthened Strategic Petroleum Reserve,” lays out this approach, which realizes value from the aging, little-used reserve while improving its capability as a short-term energy security buffer. Specifically, this energy intermediary policy would do the following:
- provide an extended, certain funding source for essential clean energy R&D;
- advance US leadership in an enormously rewarding global market for affordable clean energy technology;
- reduce oil use and carbon emissions in the transportation sector, now the biggest source of US carbon pollution; and
- improve the Strategic Petroleum Reserve by strengthening its coordination with other government and commercial stockholdings and transportation infrastructure and by introducing reliable industry funding for its operations.
Few doubt that the United States has the technical, organizational, and financial capability to create the needed new technology. Intellectual and commercial leaders in the US innovation ecosystem agree and back the critical role of public policy and resourcing in the innovation pipeline. But less than a year after COP 21, members of the Energy and Water Subcommittee of the Senate Committee on Appropriations have already rejected funds requested by the administration to move forward on the Mission Innovation commitment. However, the champions of progress are pressing on and talking optimistically about the future. A secure future requires policy innovation as well as technology innovation. This summer of historic heat, fire, and flooding is signaling us that there is no policy mission more important than beating the forces that have put the well-being of human life on Earth in jeopardy.