In a new article for Foreign Affairs, “Globalizing the Energy Revolution: How to Really Win the Clean-Energy Race” (subscript. req’d), Michael Levi and colleagues at the Council on Foreign Relations argue that the world is “woefully underspending on clean-energy innovation” and needs to pursue a new international strategy:

 

“Clean energy is almost always more expensive than energy from fossil fuels, and often by a big margin… Yet the world is woefully underspending on clean-energy innovation… the IEA estimated that the world would need to spend an average of $51-$100 billion each year to support the research, development, and demonstration of clean-energy technologies. Current public spending is a mere $10 billion annually… The shortfall is staggering.”

What should be done? First, the developed world needs to ramp up its efforts. “Major scientific advances are still most likely to occur in the developed world, alongside much of the work necessary to commercialize clean-energy technologies and the capital required to support those efforts,” they write. U.S. strategy should include two basic element: first, incentives to create a larger domestic market to drive both deployment and indirect innovation; and second, direct government support for clean energy innovation through research, development, and demonstration.

However, in order to “globalize the energy revolution,” the authors argue for a better international approach. First, the world needs to create a more “open innovation system,” primarily through open investment and trade policies, and avoid protectionist measures that discourage innovation (we recently made a similar argument here):

“Technology advances most rapidly when researchers, firms, and governments build on one another’s successes. When clean-energy investment is seen as a zero-sum game aimed primarily at boosting national competitiveness, however, states often erect barriers. They pursue trade and industrial policies that deter foreigners from participating in the clean-energy sectors of their economies, rather than adopting approaches that accelerate cross-border cooperation. This slows down the very innovation that they are trying to promote at home and simultaneously stifles innovation abroad.”

Unfortunately, “green protectionism” is on the rise. Although countries like Brazil and India have relatively open approaches, the Chinese government supports aggressive protectionism. For example, according to the authors, forced technology transfer from foreign firms has caused an “unprecedented backlash from foreign companies that do business in China… A hostile environment also makes it politically difficult for Washington to support policies that actively accelerate the spread of clean-energy technology to China.” The U.S. should push strongly for free clean energy trade but without sparking backlash in developing countries that reduces domestic support for clean energy. (Two recent NYT articles discussed these issues in the wind industry, “To Conquer Wind Power, China Writes the Rules” and “China’s Push Into Wind Worries U.S. Industry.”)

Second, beyond creating a more open global innovation system, the U.S. government must actively support advanced energy technology development and diffusion abroad. The authors propose several ideas, including cross-border demonstration and commercialization projects; stronger export promotion through the U.S. Export-Import Bank and the Overseas Private Investment Corporation; greater support for joint R&D programs like the U.S.-China Clean Energy Research Center; and more. These efforts would involve substantial public investment, however as the authors note, this approach could be much more politically appealing than proposed alternatives through the UNFCCC:

“Many of these initiatives–particularly those that focus on the more commercial end of the innovation spectrum–could cost a considerable amount. But they would have their benefits–not only in terms of cutting global oil consumption and reducing greenhouse gas emissions but also in helping U.S. clean-energy innovators and companies. And when it comes to climate change, they might present a more attractive alternative to the other options, which tend to involve financial support for clean-energy deployment in the developing world with few strings attached. Money that boosts U.S. clean-energy companies while helping the big emerging economies adopt advanced technologies is likely to be much easier to sell politically than funds that are not tethered explicitly to U.S. economic goals.”

The authors conclude by warning that without such a concerted and enlightened international strategy, all parties will lose:

“The alternative is not a world in which the United States dominates the clean-energy field… It is more likely to be one in which the cost of clean energy does not drop as quickly as needed, particularly in the developing world, and in which massive markets for clean-energy technologies do not materialize. In that case, the United States and the world will both lose.”

Overall, these ideas are a welcome contribution to the unfolding debate. In the aftermath of cap and trade and binding global emissions agreements, it is clear that the United States and the world must pursue a new strategy for clean energy innovation, which is necessary to drive down to price of clean technologies and enable their affordable deployment (see “Energy Innovation 2010: A New Beginning for U.S. Energy Policy“). This begins with a new U.S. domestic strategy, which must be extended abroad through a new international technology framework. Concerns about economic competitiveness in the clean energy race provide a strong motivational factor for domestic policies, but we must guard against protectionism that discourages innovation while actively promoting advanced technology abroad.

By Teryn Norris and Kevin Hsu