Kerry-Lieberman: Short on Innovation

As the spin cycles speculate on whether the Kerry-Lieberman Senate climate bill has a chance to pass this year, I’ve been looking at its clean energy innovation provisions and am underwhelmed. I’ll defer to our colleagues at the National Commission on Energy Policy for a good side-by-side comparison of Kerry-Lieberman with the Waxman-Markey bill that passed the House last year. But suffice it to say Kerry-Lieberman looks surprisingly similar to the only so-so House bill on innovation matters.

The Advanced Research Projects Agency-Energy (ARPA-E), which is beginning to support “disruptive” efforts to develop transformational clean energy breakthroughs, is slated to receive cap-trade allowances.

Allowance sale revenue is also reserved for support of state-level renewable energy and efficiency programs to help accelerate market uptake and deployment of low-carbon products and services, like building retrofits and solar panel installations.   

And beyond that there’s the usual grab-bag of technology-specific and fragmented research and deployment efforts (with the feel of interest-group pandering) around nuclear power, clean coal, advanced batteries, natural gas vehicles, plug-in hybrids, the steel industry, and so on.

The problem, though, is that while all of these items are well and good, nothing here answers to the urgency and scale of the nation’s energy innovation needs.

All told, the Kerry-Lieberman outline would, like Waxman-Markey, apply about 2 percent (or $1 billion to 2 billion a year) of its allowance revenue to clean energy R&D in the bill’s early years, and about 5 to 7 percent ($3 billion to 7 billion) to clean-tech research and deployment in various sectors over time—a little less than the House bill did. (Check here for my Brookings colleague Ted Gayer’s helpful tabulation of the year-to-year allowance distributions in the bill). So that’s real money.

However, while solid-sounding by itself, that’s paltry in the real scheme of things. All told, by our calculations, the U.S. needs to be spending $15 to $25 billion a year on federal clean energy R&D alone just to attain a research intensity on a par with other innovation driven sectors as health, or IT, or for that matter agriculture. Since that number is currently running to only $4 billion or 5 billion a year, the stark fact is that the nation needs to come up with another $10 or 20 billion in clean energy research investment each and every year for the foreseeable future—and starting now. 

From that perspective, that Kerry-Lieberman would only manage to reserve for energy R&D pursuits $1 billion to 2 billion a year—or maybe $4 to 8 billion to be generous—must be counted a major disappointment. Once again, it’s extremely disappointing to see that the basic congressional dynamic continues to require massive allowance giveaways that “give away the store” in order to obtain the political support of interest groups. And its disappointing to see once again the failure in this process to serve the nation’s clear interest.

In the end, the American Power Act—like its House predecessor—underscores that Congress and the country are simply not yet serious about de-carbonizing the nation’s energy system, catalyzing a clean new economy, and limiting global warming to acceptable levels. Here’s hoping further negotiations will bear down more thoughtfully on those critical imperatives.