Market Investment Outpace/Outperform Federal ‘Clean Energy’ Investment (GHG reductions without social cost)
“Over the 2000–10 period, the U.S.-based oil and natural gas industry invested $71 billion in technologies that reduce greenhouse gas emissions, far more than the federal government ($43 billion) and almost as much as the rest of private industry combined ($74 billion).”
“The United States has failed to create a comprehensive energy policy that provides robust and consistent support for innovation,” the familiar complaint goes.
Although the Recovery and Reinvestment Act of 2009 stimulated public investments in energy innovation, many of these programs and incentives have since expired or concluded, leaving the energy innovation ecosystem underfunded and skewed towards supporting deployment incentives over technology R&D, demonstration, and manufacturing.
Such comes from Breaking Down Federal Investments in Clean Energy (March 2013), published in Energy Innovation Tracker, a website devoted to providing data on U.S. energy-innovation spending. Authors Megan Nicholson and Matthew Stepp bemoan the state of innovation funding in the U.S., defined as federal spending on greenhouse gas (GHG) emission reductions.
Funded by The Nathan Cummings Foundation, this project’s taxonomy of “innovation investments” aims wrong and misses even that target.
My forty years in this field has taught me that:
- There are many players in this innovation game–some more active than even the Federal Government;
- Government GHG investment in the name of “market failure” is prone to “government failure.” And it is more prone to crony
capitalismand stellar failures like Solyndra;
- Innovation means many things to many people, and innovation can often result from attempts to deal with something unrelated to the area the innovation actually occurs in. Restated, many self-interested, non-governmental investments unintentionally reduce GHG emission ‘as if lead by an invisible hand’;
- Having a centrally controlled innovation plan is more likely than not to impede, rather than spur, innovation.
According to the Tracker:
America needs “cheap, new, clean energy technologies”
America’s needs to “to drastically cut carbon emissions as quickly as possible.”
Clean energy technologies are “wind, solar, biomass, etc.”
While these may be goals for some, others would suggest that more affordable and reliable energy, or higher productivity for wealth creation to lift the poor out of poverty, or any number of other goals, are just as important. As the Nathan Cummings Foundation is committed to democratic values and social justice, including fairness, diversity, and community, they should recognize the fallacy of division inherent in asserting that a diverse population with diverse values “need” certain technologies that focus on a limited set of characteristics and then label those and only those as ‘innovative.’ How accepting of diversity is that?
Private Sector Dwarfs Feds’ Investment
Over the 2000–10 period, the U.S.-based oil and natural gas industry invested $71 billion in technologies that reduce greenhouse gas emissions, far more than the federal government ($43 billion) and almost as much as the rest of private industry combined($74 billion). [disclaimer; I wrote that study]
The point is that private sector investments are at least as crucial to innovation as are government investments. They are arguably much more efficient because they are far more consumer-driven.
It should be noted that not all of those investments, for any of the investor types, were necessarily primarily aimed at reducing greenhouse gas emissions.
They may have been made for other reasons, and greenhouse gas emission reductions were an ancillary outcome. The point is, evaluating the ‘energy innovation ecosystem’ based on the ex-ante ‘comprehensiveness’ of a program, ignores the basic nature of innovation.
Innovation = Improvement Not Intervention
As I wrote back in April, 2012, California, the poster child for government intervention and “comprehensive energy policy,” shows just how unnecessary and counterproductive such central plans can be.
California’s “comprehensive energy policy” forces utility customers to pay more for certain renewable energy as a mandated portion of the overall electricity mix, as well as fund ‘innovation’ research, development and demonstration projects. However, most of the required renewable energy is made up of wind and solar, intermittent technologies that forces inefficient operation of the grid.
This increases net emissions as balancing plants are forced into inefficient operation. Further, and of special note to Nathan Cummings Foundation, such intervention under AB32, under the guise of ‘comprehensive planning,’ is perhaps one of the most regressive program ever conceived.
Instead of Regulation ….
As I wrote in the LA Sentinel back in July, 2008, while most California families will find it difficult to absorb thousands of dollars in increased energy costs due to California’s climate law, minority and disadvantaged communities will bear the brunt of the hardship because the poorest households spend a much larger percentage of their income on energy costs.
Perversely, AB32’s drive —California’s version of ‘comprehensive and innovative’ — to reduce greenhouse gasses is also likely to slow relocation or upgrades to existing facilities that pollute areas populated by the minority and disadvantaged community.
Nationally, technology improvement has already occurred without cap-and-trade, without costly renewable standards, and, frankly, without many proposed government interventions, including a “comprehensive energy strategy focused innovation ecosphere.”
We’re doing just fine with spontaneous order–as has already been demonstrated in the 17% improvement in the national greenhouse gas intensity of our economy just over the past 10 years. In 2008, goods and services produced in the U.S. accounted for 30% of all of the world’s production as measured by gross domestic product. In the same year, the U.S. share of global greenhouse gas emissions was about 19%. We emit more because we do more, but we do it more efficiently.
We don’t need a comprehensive energy policy to drive innovation. We have a comprehensive policy that’s resulting in plenty of innovation. That policy is called the free market, and although it’s under attack, it still results in innovation that is second to none.