As gas prices rise and the debate over the nation’s energy policy continues to heat up, the future of America’s clean technology industry remains in doubt. Although the clean tech sector has enjoyed robust growth in recent years, the pending expiration of federal and state support could force the industry into an extended period of consolidation and contraction.
How can the U.S. avoid a “clean tech crash?” What reforms are needed to help spur green growth?
On April 25, Mark Muro answered your questions on America’s clean tech industry during a live web chat with moderator Vivyan Tran of POLITICO.
12:29 Vivyan Tran: Welcome everyone, let’s get started!
12:29 Comment From Anne: In your recent paper, you mention that federal clean tech funding is set to fall 75% by 2014. Are we likely to see an industry crash soon?
12:31 Mark Muro: Not necessarily. Responsible Congressional management of the situation will make a difference. However, if all of the 62 clean tech-related policy supports we assessed go away as scheduled and Congress does nothing, there will be serious disruptions.
12:32 Comment From Robert: What reforms are needed to help address the current challenges facing the U.S. clean tech sector?
12:36 Mark Muro: To manage the coming policy pullback around clean tech, Congress first needs to find a pragmatic middle way between letting those 62 clean tech subsidies go away and simply extending them wholesale. The latter is neither affordable nor politically possible, but simply letting them go away would be a disaster. For that reason, Congress needs to develop a new brand of support that is temporary, predicable, but steadily declining over time. Call it an extended but modernized approach. That will give predictability to investors, but also prod further innovation and tech improvement.
12:37 Comment From Liz: Given the current gridlock in Congress, can the federal government help solve America’s green tech dilemma? Or does this task turn to state and local governments?
12:40 Mark Muro: The federal government can’t “solve” the full market, finance and technology challenge of growing a flourishing set of clean tech industries, but it can act to remove policy uncertainty and craft reliable but steadily declining policy supports. Beyond that, it can and should invest heavily into innovation programs and work to support the emergence of big, steady markets. Otherwise, states and regions are going to have to come to the fore.
12:40 Comment From Brittany R: Your recent report talks about a 75% drop in federal clean tech funding—but wasn’t this part of the plan all along, due to the expiration of ARRA?
12:42 Mark Muro: To a degree you’re right about ARRA. It’s a big piece of the challenge here and was always scheduled to wind down. What I and my colleagues at the World Resources Institute and Breakthrough Institutes were surprised about was that ARRA is only part of the problem. Two thirds of the scheduled dollar pull-back is actually in dozens of other programs.
12:42 Comment From Ben: Can the clean tech industry turn into a real economic driver?
12:45 Mark Muro: It depends on how you would measure it being a “driver.” While as yet small in job terms, clean tech already is an important source of innovative activity. And in some regions such as Albany, NY it’s actually a significant local contributor. And given the soon-to-be trillion dollar market worldwide, clean tech remains a critical emerging industry.
12:45 Comment From JP: What are some of the new forms of support for the industry that you refer to?
12:48 Mark Muro: One of our key ideas is the notion of predicable, steady extensions of support that nevertheless include a set of progressive step-downs. California has an important solar support that is now moving through a series of 12 pre-scheduled step-downs. This has the effect of providing predictability to the solar industry, but also constant pressure to compete directly on price by improving the product. That strikes me as getting the incentives right. It’s a model for reform nationally.
12:49 Comment From Jake: Do you ever see the United States becoming a net exporter of clean tech to other countries? Could this sector one day be the next great American industry?
12:51 Mark Muro: I do. As it is, we have exported our innovations and ideas, so that we are watching the commodity production of products based on our technologies. The need is to innovate fastest and get much faster at scaling up production, which is going to require rebuilding U.S. supply chains and making export of high-quality goods a national priority.
12:51 Comment From Winston: Because natural gas is so cheap and plentiful these days, is it preventing the clean tech sector from really taking hold in the U.S.?
12:54 Mark Muro: There is no doubt the gas glut is making things tougher. It will be difficult for wind generation to expand beyond its toehold in optimal locations given $2 natural gas. However, solar will continue to become more competitive. But you’re right that cheap gas makes things harder.
12:54 Comment From Roberto: Based on your new report, what are some key points that you might make to the next president—either Obama or Romney? Are there a few big things he should do in his first 100 days to get clean tech on the path to prosperity?
12:57 Mark Muro: I think that the next president has got to realize that there is a pragmatic, more cost-effective and smarter way to proceed here. The next president needs to say that he will not walk away from clean tech industries, but that he will require new, smarter ways of fostering them that manage their progress toward true cost competitiveness.
He should say he will look at both fossil fuel and clean tech supports with a similar eye towards saving money and driving innovation.
12:58 Comment From JP: Is there a strong and viable political lobby for the clean tech industry?
12:59 Mark Muro: Clean tech is still a junior player in Washington, one with a few sophisticated and powerful industry associations but much less clout than the fossil fuel players that still dominate things.
1:00 Comment From JP: In my view a key consideration for political viability is to have the subsidies and economic support for the industry’s growth translate into more community-based market activities e.g. incubators, everyday products and promotion of the use of the technology.
1:01 Mark Muro: That’s a great point. It’s one of the reasons my colleagues and I at the Metropolitan Policy Program at Brookings are so interested in tracking, studying and supporting the dynamic, varied regional economies in U.S. states. Clean tech exists diversely and vibrantly in dozens of U.S. regions; we should look there—and to states—to forge a coalition of the willing to foster these innovation industries.
1:03 Mark Muro: Ok guys, thanks so much for the great questions. Do check out our work on clean tech at the Metropolitan Policy Program and with my colleagues at WRI and Breakthrough on the “Beyond Boom and Bust” report.
Take good care!
1:03 Vivyan Tran: Thanks for the questions everyone, see you next week.