Eileen Claussen

Deploying Our Clean Energy Future

As for the future, your task is not to foresee, but to enable it.

— Antoine de Saint-Exupery

The United States and the rest of the world face a momentous choice. It is a choice
that will determine the nature of our economies and our climate for generations
to come. One option is to continue down our current energy path—relying to a
substantial degree on fuels and technologies that will result in ever-increasing lev-
els of atmospheric greenhouse gases (GHGs). The other option is to chart a new
path—a path by which we protect the climate and rebuild our economies by devel-
oping and deploying clean energy technologies.

The choice is obvious: we must pursue a clean energy future.
The consensus among scientists who study the issue is that if we hope to avoid
the worst effects of climate change, emissions of carbon dioxide and other GHGs
must be reduced worldwide by 50 percent to 85 percent from 2000 levels by 2050.
In order to do this, we must start now, and we must be aggressive.

Transitioning to a low-carbon economy in the time frame required will not be
easy. If we remain on our current path without significant changes to the way we
generate and use energy, global energy-related carbon dioxide emissions are pro-
jected to increase 39 percent by 2030. Over the next two decades, U.S. emissions,
which currently account for about 20 percent of the world’s total, will continue to
grow. Meanwhile, emissions from developing countries are projected to increase by
40 percent. So, how do we create the impetus for broad, across-the-board emis-
sions cuts while still meeting our goals for development and economic growth?

Eileen Claussen is the President of the Pew Center on Global Climate Change and
Strategies for the Global Environment. Claussen formerly served as Assistant Secretary
of State for Oceans and International Environmental and Scientific Affairs. Prior to
joining the Department of State, Ms. Claussen was for three years the Special Assistant
to the President and Senior Director for Global Environmental Affairs at the National
Security Council. She has also served as Chairman of the United Nations Multilateral
Montreal Protocol Fund and as Director of Atmospheric Programs at the U.S.
Environmental Protection Agency.

© 2009 Eileen Claussen
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Eileen Claussen

Here is what we know. First, and most immediate, we know that a collection of
market-ready technologies already exists that, accompanied by innovative policies,
can start us down a more climate-friendly path and play a substantial role in
reducing emissions. Second, we know that we need a low-carbon economy by mid-
century. Third, we know that we cannot and will not achieve a low-carbon econ-
omy if we continue on a
“business-as-usual” tra-
jectory.

We need policies that trigger
investment and propel new
technologies into the marketplace.
This means putting a price on
carbon, such as through a cap-
and-trade system, and
implementing complementary
policies that create incentives to
develop and use new technologies.

Our challenge over
the next decade is to chart
a new path that leads to
action on this issue across
all sectors of the econo-
my, from electricity and
transportation to agricul-
ture, manufacturing, and
buildings. We need poli-
cies that trigger invest-
ment and propel new
technologies
the
marketplace. This means
putting a price on car-
bon, such as through a
cap-and-trade system, and implementing complementary policies that create
incentives to develop and use new technologies. The need for technological inno-
vation is non-negotiable. To succeed, we need to take strong action that moves us
away from the dirty fuels of the past and toward clean, safe energy sources to power
our future.

into

THE NEED FOR POLICY CERTAINTY

Since the energy crisis of the late 1970s, the federal government has promoted
clean energy alternatives in fits and starts. This inconsistency has kept many inno-
vative companies from placing big bets on an uncertain clean energy future. Today,
amid tough economic times, concerns about foreign energy supplies, and growing
risks of climate change, businesses are looking to Washington to deliver long-term
regulatory certainty in climate change and energy policy.

In testimony during the first House Energy and Commerce Committee hear-
ing on climate change this year, CEOs of a dozen large industrial companies were
unanimous in making the case that regulatory certainty is critical to unleashing
substantial investment dollars. The CEOs said they will invest billions of dollars in
the research, development, and deployment of new clean energy technologies—
creating jobs and helping to rebuild the economy in the process—once they have
clarity on the regulatory rules of the road.

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Deploying Our Clean Energy Future

“I believe that this may be the single greatest opportunity to reinvent American
industry, putting us on a more sustainable path forward,” said DuPont Chairman
Charles Holliday, Jr., regarding legislation on climate change and clean energy that
passed the U.S. House in June. “A federal climate program has the potential to cre-
ate real economic growth through innovation.”

Jim Rogers, president and CEO of Duke Energy, the nation’s third-largest coal-
burning utility, said, “Long-lasting climate change legislation must be based on
three equal tenets—protecting the environment, the economy, and consumers.
The sooner Congress acts on climate change to provide the regulatory clarity busi-
ness and industry needs to move ahead with major capital projects, the more rapid
our economic recovery will be.”

Examples of past policy efforts offer good guidelines for providing this regula-
tory clarity. A 2003 Pew Center report looked at historical U.S. technology and
innovation policies to see what lessons could be learned for addressing climate
change. One of the key insights was that past government policies that go beyond
R&D—to promote downstream adoption of technologies and learning by doing—
have greatly influenced technological change.

For decades, the market for clean energy alternatives has lacked sufficient
demand to promote the wide-scale supply and use of technologies required to
reduce GHG emissions to the level that scientific findings demand. An economy-
wide price signal on GHG emissions and consistent and substantial public invest-
ment in clean energy are key ingredients to ramping up these technologies.
Policymakers face the challenge of employing a suite of innovative policy tools to
craft an environmentally strong, cost-effective regulatory environment to induce
significant private sector commitments in a low-carbon future.

INNOVATIVE POLICY SOLUTIONS

Just as there is no single technological solution to reduce GHGs, there is no one
policy “silver bullet” for transitioning to a clean energy economy. Both strong
inducements for technology development and deployment and strong emission
reduction requirements are needed. In January 2009, the Pew Center joined with
the other members of the U.S. Climate Action Partnership (USCAP) in endorsing
a detailed framework for legislation to address climate change. As noteworthy as
the contents of the framework were the constituencies that put it forward: a coali-
tion of leading businesses and non-governmental organizations.

A decade ago, it would have been unimaginable for companies ranging from
Alcoa and John Deere to Dow Chemical to agree on an agenda advocating federal
action to achieve dramatic reductions in U.S. emissions. But the USCAP Blueprint
for Legislative Action is part and parcel of a campaign that has engaged CEOs and
other leaders of Fortune 500 businesses to become active and very visible support-
ers of climate solutions. Their plea for strong action and regulatory certainty on
this issue has found a receptive audience in Washington and has provided a vital
push for Congress.

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Eileen Claussen

The USCAP Blueprint calls for a federal cap-and-trade program that sets tar-
gets for GHG emissions and allows companies the flexibility to trade emission
credits to achieve their targets.
In addition, USCAP advocates complementary
policies for many other efforts: technology research, development, and deploy-
ment; carbon capture and storage technology deployment; lower-carbon trans-
portation technologies and systems; and improved energy efficiency in buildings,
industry, and appliances. These
including subsidies
policies,
like tax credits or performance
standards to speed deploy-
ment, can reduce the cost of
low-carbon technologies and
thereby accelerate the spread of
emission reductions. The two
approaches—the policy pull of
cap-and-trade combined with
the policy push for clean ener-
gy
technologies—are more
powerful in tandem than either
one can be alone.

For three decades, efforts to
advance clean energy solutions
have fizzled under ineffective,
inconsistent policymaking.
Now, the risks from climate
change and the benefits of a
new energy transformation
make significant action an
urgent imperative.

Federal policies limited to
financial support for new ener-
gy advances have largely failed
to produce meaningful results.
the Synthetic
For example,
Fuels Corporation created under President Carter was quashed within six years by
the Reagan Administration, which viewed it as unnecessary interference in the free
market. The Synfuels Corp. was established to help create a market for domestical-
ly produced synthetic oil or gas made from coal, and from less conventional
sources such as tar sands and oil shale, as an alternative to imported fuels.
Designed to provide substantial subsidies to the private sector for commercial-
scale projects, the initiative fell far short of its production goals.

More recently, the FutureGen project for carbon capture and storage was a
major technology initiative under the George W. Bush Administration. FutureGen
was set up as a public-private partnership to construct a near-zero emissions coal-
fueled power plant. Later suspended under President Bush, FutureGen has been
revived by the Obama Administration; a decision on whether to build the plant is
expected to come in 2010. Whatever FutureGen’s outcome, the years of delay in
constructing a full-scale CCS demonstration plant underscore the shortcomings of
a technology-only policy approach. Without support for technology R&D and a
clear price signal on carbon, development and deployment of major new energy
technologies is largely inconsistent and ineffective.

The businesses that are part of USCAP believe very strongly in the potential for

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Deploying Our Clean Energy Future

strong policy to spur new investment in the climate-friendly technologies we need.
Consider this comment from Tim Fitzpatrick, vice president for marketing and
communications with FPL Group, the parent company of Florida Power and
Light, which has become a leading generator of carbon-free electricity worldwide:

America’s energy economy has already suffered from a lack of business
certainty—simply witness the annual ritual over whether tax credits in
support of wind energy will be renewed. Over the years, numerous wind
projects have been put on hold while Washington dithers over whether to
renew this vital support mechanism. . . . The lesson for U.S. policymak-
ers is clear: Put a predictable price on carbon so that U.S. companies can
invest with confidence.

Another perspective comes from George Nolen, president and CEO of Siemens
Corporation, the U.S. subsidiary of Siemens AG:

Businesses need to plan. The absence of a price signal for carbon in the
U.S. stifles planning and creates a competitive barrier to investment in
technology.

For three decades, efforts to advance clean energy solutions have fizzled under
ineffective, inconsistent policymaking. Now, the risks from climate change and the
benefits of a new energy transformation make significant action an urgent imper-
ative.

NO SILVER BULLET: THE TECHNOLOGIES WE NEED

Transforming the world’s fossil fuel based energy system to one centered on low-
carbon alternatives is an unprecedented undertaking. The fact is that no single
technological silver bullet will be sufficient. The ultimate success of a climate
change strategy—at both national and international levels—will hinge on the
innovation and commercialization over time of a broad spectrum of technologies
that can compete in a carbon-constrained world. That includes changes in how we
produce electricity, how we get from one place to another, how we farm and man-
age our forests, how we manufacture products, and even how we build and oper-
ate our buildings.

A quick sector-by-sector overview illustrates the collection of market-ready
technologies that, accompanied by innovative policies, can start the United States
down a cost-effective, low-carbon path.
• In electricity, we need to improve efficiency while shifting the supply mix to

lower-carbon energy sources, such as renewable and nuclear power and
advancing carbon capture and storage to reduce emissions from coal combus-
tion.

• In the transportation sector, we must focus first on using oil more

efficiently,while making the transition away from petroleum-based fuels to run-
ning cars and trucks on electricity, next-generation biofuels, and hydrogen.

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Eileen Claussen

• In the building sector, which accounts for nearly 40 percent of U.S. energy con-
sumption, more efficient building designs and equipment can deliver enor-
mous energy savings without sacrificing comfort or quality of life.

• And, in manufacturing, we need to take a hard look at changing inputs,

redesigning production processes, reworking the product mix, and, wherever
possible, reusing and recycling products so they don’t have to be produced
again.

The low-carbon technologies available now, if deployed at a more rapid rate,
would significantly reduce GHG emissions. But these technologies will not be
enough. New breakthrough technologies will be essential for the world to meet its
immense appetite for energy without endangering the global climate.

We have seen a certain amount of progress in all of these areas, but it’s been
largely hit-or-miss. Consider carbon capture and storage. Despite extensive plan-
ning, the United States has spent nearly a decade talking about but not building a
commercial-scale demonstration plant with CCS. We need to provide producers
with the incentives to build cleaner-burning plants as soon as possible—to bring
down the costs of capturing carbon from conventional plants and to prove to pol-
icymakers, investors, and the public that large-scale CCS is an effective, safe tech-
nology.

Simply waiting around for these technologies to make their way from the lab-
oratory into mainstream use is not an option. We don’t have the luxury to sit and
watch this process evolve ever so slowly, as if we’re watching American Idol week
after week to see who wins in the end. We need to speed the process along.
Without picking winners, we need to enact policies that provide incentives to help
commercialize new, viable technologies.

THE BENEFITS OF CLEAN ENERGY TECHNOLOGY

Developing and deploying these new technologies will have benefits beyond reduc-
ing GHG emissions. President Obama has stated very strongly that tackling ener-
gy and climate change will not only get the United States firmly on a path to eco-
nomic recovery, but also will provide a new foundation for strong, sustainable eco-
nomic growth. The economic stimulus package the president signed in February
2009 included more than $80 billion in new spending and incentives for every- thing from smart-grid technologies to renewable energy development to energy efficiency improvements and mass transit. Of course the White House is not alone in highlighting the multiple benefits associated with the development and deployment of clean energy technologies. Mayor John Fetterman of Braddock, Pennsylvania set out to debunk the notion that reducing U.S. emissions through a national cap-and-trade program would cause industrial communities like his to lose jobs. “People here desperately want to work, and a cap on carbon pollution will generate jobs in industries like steel,” he wrote this year in The Dallas Morning News, noting that it takes 250 tons of steel to make a wind turbine. 46 innovations / fall 2009 Downloaded from http://direct.mit.edu/itgg/article-pdf/4/4/41/705396/itgg.2009.4.4.41.pdf by guest on 07 September 2023 Deploying Our Clean Energy Future The U.S. manufacturing sector would greatly welcome a shot in the arm. Its struggles began well before the recession hit, and the new products and processes needed to build the clean energy economy and address climate change will be a boon to many American workers. Representing 850,000 manufacturing workers, United Steelworkers President Leo Gerard believes that “addressing climate change and ensuring the strength of our nation’s manufacturing sector can be compatible goals.” Many governors—both Democrats and Republicans—also recognize the great potential that energy technologies can play in turning around their states’ economies. In May, a bipartisan coalition of 27 governors signed an agreement supporting federal energy and climate change legislation that will help create clean energy jobs and industries and accelerate technology deployment. And nearly two- thirds of U.S. mayors believe that addressing climate change with technological innovation represents an “enormous” economic opportunity, according to a 2009 U.S. Conference of Mayors survey of 140 mayors from 40 states. These calls for action to spur the deployment of new, low-carbon energy tech- nologies are backed by a wide-ranging cast of clean energy economy boosters from New York Times columnist Thomas Friedman to businessman T. Boone Pickens. Supporting these views are growing signs of the economic opportunities that await leaders of a new energy future. For instance, in a recent 10-year period, U.S. clean energy jobs grew nearly 2.5 times as fast as jobs overall. This growth rate, documented in a state-by-state analy- sis of clean energy jobs between 1998 and 2007 published this year by The Pew Charitable Trusts, demonstrates that good opportunities exist to spur new jobs, businesses, and investments in clean energy if supported by the right policies. Over the 10 years studied, clean energy jobs grew at a national rate of 9.1 percent com- pared to the 3.7 percent growth rate in traditional jobs. Several other recent studies cite substantial job growth opportunities in clean energy. For instance, the 2008 Green Jobs Report for the U.S. Conference of Mayors found that increasing renewable energy use and implementing efficiency measures could generate 4.2 million U.S. jobs by 2038 and account for 10 percent of total new job growth over that period. Private investors are well aware of this growth potential. In 2008, $5.9 billion in private investment—15 percent of global venture
capital investments—went to U.S. businesses in the clean energy economy. But this
amount pales in comparison to the cost of transforming to a low-carbon energy
system. The International Energy Agency estimates this transition will cost $45
trillion globally between now and 2050. Major investments to drive the develop-
ment and commercialization of new energy technologies largely hinge on imple-
menting appropriate policies.

The opening letter to the Deutsche Bank Group report Investing in Climate
Change 2009 captured this critical need. Kevin Parker, global head of asset manage-
ment for the group, wrote:

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Eileen Claussen

The aim must be to create a clear long-term regulatory regime that deter-
mines a market-driven cost of carbon while at the same time encourag-
ing the development of alternatives. If governments recognize the neces-
sity of creating the right regulatory environment, investors will recognize
the opportunity and step in.

A growing number of parties—from senators and CEOs, to governors and venture
capitalists—understand what’s at stake. They believe in the power of current and
emerging technologies to reduce GHG emissions in the United States and around
the world. At the same time, however, they understand that these technologies will
not be deployed in the marketplace at the scale and in the time frame needed to
address climate change without an explicit and unprecedented set of policies from
government.

A new path is needed to reduce emissions and advance clean technologies
across the economy. It requires a carbon price signal to help level the playing field
for clean energy technologies combined with substantial, consistent public invest-
ments to propel critical solutions from the laboratory to the marketplace. The pull
of an emissions price tag in tandem with the push from technology policies pro-
vide a solid framework for engineering a low-carbon transformation—without
dampening the competitive ingenuity that is a key driver of the world’s most inno-
vative economy.

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