Can the Government Do With Clean Energy What It Did With the Internet?

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Cap and trade appears to be politically dead. But could a bipartisan solution to global warming be around the corner? The New York Times' David Leonhardt this week writes about the possibilities of "much more, and much better organized, financing for clean energy research." As he points out, "the reliably conservative American Enterprise Institute and the left-of-center Brookings Institution" have a "joint proposal to increase federal spending on clean energy innovation." A buildup in research-and-development spending seems more politically feasible, and has good precedents in government-spurred advancements in radar, biotechnology, and the Internet, which ultimately created jobs. So what are the pros and cons? Here's the debate.

  • 'Government-Directed Research Can Work,' observes Leonhardt, pointing to the example of the Defense Department and the Internet. Of course, "no one knows exactly where the money will come from," but investment in new technology seems an "easier sell" than cap and trade. Here are some reasons investment might be the way to go:
When will Congress take another shot at cap and trade? Second, how confident should we be that cap and trade will work as advertised? ... As beneficial as these changes might be, they would not help China and India keep global emissions from reaching levels that scientists consider ominous. ... They need breakthrough technologies that can compete on a grand scale with coal and oil--the kind China is now pursuing and a major research program in this country could, too.
  • Good Idea, but Not the Best of All Worlds  "The basic insight here," explains The Washington Post's Ezra Klein, "is that the whole game is technological breakthroughs. Either we come up with some way of generating clean energy that's cheap and plentiful enough to replace fossil fuels in both the developed and the developing world, or we're cooked." Cap and trade aims to produce "those innovations by making dirty energy more expensive," while the "industrial policy approach" goes at it from the other direction: "making clean energy cheaper." Of course, he says, one problem with having the government invest in research is that "market types will tell you that the government isn't great at picking winners. That's true," admits Klein, and "the best of all worlds would've been a price on carbon married to a big investment in clean-energy research. But this is not the best of all worlds."
  • Focusing on Carbon Cuts is 'Put[ting] the Cart Before the Horse,' agrees Bjorn Lomborg, director of the Copenhagen Consensus Centre. It's wise to "[invest] in research first," he argues. "Breakthroughs do not result automatically from a combination of taxes on fossil fuels and subsidies for present-day green energy."
  • This Sounds Like Consensus, notices Good's Andrew Price. "A whole chorus of voices on climate change has somehow slipped into multi-part harmony: Forget carbon taxes; spend on clean energy research." This "makes a lot of sense," he says: "the amount of money we spend on energy-related research and development is pretty small compared to other areas." He points out, though, that "it's unclear if the Republicans are up for spending money on anything right now, no matter what the American Enterprise Institute says."
  • There Is No Silver Bullet, Though, protests Grist's David Roberts. He agrees that " benefits and the costs of cap-and-trade have been exaggerated." But while he has "nothing against R&D spending-- far from it--... [he objects] to the notion that it's an alternative to cap-and-trade or that it will prove, in practice, any less partisan." We need to implement multiple policies to meet the challenge of climate change, he argues. We should be aiming for both clean energy investment and cap and trade. "The single most distorted aspect of the U.S. climate conversation is that it proceeds as though all the risks are on the side of doing too much." Economist Tyler Cowen sounds a similar note by pointing out that, though "maybe only really cheap solutions will be adopted in any case and the rate of their discovery may depend more on research subsidies than on prices at the user level ... in the meantime, it still makes sense to clean up dirty coal, limit cow farts by taxing meat, and spread better indoor heating and cooking technologies in the poorer countries."
  • 'Breakthroughs in the Short Term Can Be Easily Overstated,' adds liberal blogger Matt Yglesias. Right now there's plenty of technology Americans could be using to increase energy efficiency, and they aren't using it. Furthermore, he continues, "I think the political viability of this is a mirage. ... Conservatives will complain that this is socialism and planning and "picking winners." Perhaps more troubling to him is the way it could be misused even if it were implemented:
Suppose congress creates some large pot of gold for clean energy research and I'm an incumbent first with some relevant knowledge of the energy industry. What's easier to do--actual R&D to create breakthrough technologies, or lobbying to get congress to classify something I can already do as worthy of subsidy. Think about the glorious history of ethanol.

Update: The Economist's Ryan Avent explores the debate and concludes: "I think there's room for government spending on clean energy research. At the same time, research spending in the absence of a carbon price is likely to be much less effective than research spending in the presence of one."

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