Report: Cap-and-Trade Regime Far More Effective than U.S. Clean Tech Policy

Most industrial countries have increased their promotion of clean tech in recent years. That’s according to the Brookings Institute.

That includes the U.S., which increased subsidies from $17.9 billion in 2007 to $37.2 billion in 2010 as a result of the Energy Improvement and Extension Act and the American Recovery and Reinvestment Act of 2009.

Public investments like these, which are targeted at specific industries, arguably constitute an industrial policy, Brookings says. As a result, these payments should be analyzed.

Proponents point to market failures that need correction. Brookings proposes a tax or a cap-and-trade regime that would put an appropriate price on carbon and other greenhouse gases instead of the status quo. It says this approach would help level the playing field for green energy because it would require emitters to pay prices that reflect the costs their emissions impose on society. The emitters, in turn, would have incentives to invest in equipment and new production techniques, use alternative fuels, and seek other methods to reduce emissions, Brookings says. And America’s innovators would channel their efforts into clean energy development.

According to Brookings, a second set of reasons for sustaining clean-energy subsidies is about shifting the market toward U.S. interests. Accordingly, investments in clean tech would increase U.S. firms’ market share of the industry and help U.S. companies win a larger portion of global business.

The Brookings paper also reviews the history of industrial and energy technology policy, examines the environmental and energy- independence rationales, analyzes claims about the potential role for government backing of clean energy to ensure U.S. competitiveness and save or create jobs and explores the administrative and political challenges of implementing an efficient clean-energy research and development portfolio.

To read the full Brookings Institute paper cited in this story, click here

Tags: Policy

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