Climate and Energy Policy: Reset!

American energy policy is at a standstill.

While theoretically there could be action in a post-election lame duck session, Congress seems set to adjourn having taken no substantive long-term action on either climate or energy. Liberals are realizing that cap-and-trade is likely dead for the foreseeable future as a means to raise the price of carbon emissions. And for their part, growth-oriented conservatives are beginning to recognize that substantial expansions of nuclear power and offshore drilling are also going nowhere, victims of the deepening budget freeze-out and the fallout from the Gulf of Mexico oil spill.

Clearly, it’s time to hit “reset,” but how?

Well, last week I contributed to one potential road map for keeping things moving on climate and energy and while it’s no substitute for a comprehensive policy response, I think the ideas have merit in one area of need: cleantech innovation.

Worked out in a dialogue with Steven Hayward of the American Enterprise Institute and Michael Shellenberger and Ted Nordhaus of the Breakthrough Institute in California, our little game-plan comes in the form of a 35-page a white paper aimed at suggesting at least one plausible set of initiatives around which pragmatic sorts of all stripe might coalesce so as to ensure that the likely death of cap-and-trade doesn’t paralyze action on climate and clean energy next year.

The new paper, which you can see here, and which reflects some of the views of one scholar, as opposed to the Brookings Institution, per se, has already garnered some favorable discussion in columns by the New York Times’ David Leonhardt, Washington Post blogger Ezra Klein, Michael Levi of the Council on Foreign Relations, and TIME’s Bryan Walsh. But what I like about the essay is that it mounts what I believe is a deeply American, innovation-oriented take on cleaning up the energy system, reducing carbon emissions, and thereby transforming our drifting economy.

No, we in no way pretend to offer a comprehensive replacement for cap-and-trade carbon-pricing systems (which I have largely supported). And no, this isn’t the whole story of what needs to get done now, or even half of the response needed to act in ways commensurate to the scale of the environmental and moral problem so well reviewed by my colleagues Strobe Talbott and William Antholis in their powerful book Fast Forward.

But I do believe what we have to say about one segment of the needed acceleration may be helpful. Drawing on America’s bipartisan history of successful federal investment to catalyze technology innovation by the U.S. military, universities, and private corporations and entrepreneurs, the heart of our group’s is a $25 billion per year investment channeled through a reformed energy innovation system.

Along these lines, and among other things, we call for significant new investments in energy science and education; an investment of some $5 billion a year to scale up a full-blown system of regional university, corporate, laboratory energy discovery-innovation institutes such as the Metro Program has been calling for; the full scale-up of the dynamic energy innovation program ARPA-E; and a major leveraging of military procurement to purchase, demonstrate, test, validate, improve, and scale-up cutting-edge technologies.   The goal: Make clean energy cheaper, and drive–along with emissions reductions–progress toward the more export-oriented, lower-carbon, innovation fueled Next Economy we are always talking about here at the Metro Program.

Oh, and one other thing: We have some ideas about paying for all of this, although none of us is under any illusions that any of this is going to be easy.

In this respect, while we notice that health research, for example, is paid for through general revenues, we agree that any convergence around these ideas ought not add to the federal debt and ought to be internalized within America’s energy system. And so we suggest that to pay for a new “power surge” Congress could: 

• Modestly increase the royalties we charge oil and gas companies and direct revenues to energy innovation efforts. This could include revenues from any proposed expansion of oil and gas exploration and production
• Implement a small fee on imported oil to pay for efforts to drive energy innovation and enhance American energy security
• Establish a small surcharge on electricity sales, known as a wires fee. Implemented in this manner, an energy modernization fee could serve a similar function as the Highway Trust Fund, providing critical revenues to modernize the U.S. energy system and drive the invention and commercialization of new clean energy alternatives
• Phase out current subsidies for wind, solar, ethanol and fossil fuels alike, which have not created sufficiently strong incentives for innovation and price declines
• Dedicate revenues from a modest carbon price to finance the necessary investments in clean energy technology. A $5 per ton tax on carbon, about a third of what recent proposed cap and trade legislation would have cost consumers and businesses, would be more than sufficient to pay for an ambitious federal clean energy research, development, and procurement program

Any one of these funding sources could raise sufficient funds from within the energy sector itself without appreciably increasing energy prices or impacting American firms or consumers. Different approaches may be combined and tailored to different energy sectors, piece-by-piece, rather than seeking a one-size-fits all approach.

In the end, our approach is hardly complete. Our ideas on energy innovation are in no way intended as a replacement for carbon pricing and more comprehensive climate and energy system responses. What is more, we have left aside numerous important but difficult issues–such as transmission system and renewables facilities siting quandaries not to mention numerous deployment issues–that are plainly crucial to any energy innovation rev up. And yet, we do offer one set of broadly palatable ideas that will definitely help us with our long-term energy system problems but might also help us reenergize the economy even help move the discussion along in the next few years. 

Or such is our hope. At the very least it would be nice if our partial array of ideas helped prompt a new, pragmatic discussion about what is possible at a time of potentially serious lost momentum.