Looking past the possibility of any legally-binding global emission target (and U.S. involvement in any treaty), the international climate negotiations opening today in Durban, South Africa are missing the point – the only way the world is going to drastically reduce carbon emissions is through innovation.
Yet, Durban is set to be weighed down by discussions of caps, targets, and subsidies even though their impact will be severely limited. It’s time for an international policy reset. Let’s stop pretending we can solve climate change with unenforceable pledges to use fossil fuels a little less or subsidize our way to a global clean energy future and prioritize strengthening the global clean energy innovation ecosystem.
How do we do this? First, we need to be honest about the limitations of what’s being discussed at Durban.
1. Carbon reduction targets and caps – such as an extension of the Kyoto Protocol – do apply pressure on governments to take policy action, but by itself is insufficient to radically reduce carbon emissions. Caps rely almost exclusively on prices to induce change (caps raise the price of carbon emissions). And it’s clear that price hikes induce some behavior change (e.g., driving smaller cars, insulating buildings, etc.), but they don’t magically lead to the creation of new generations of affordable non-fossil alternatives. Much more policy action is needed.
2. Subsidizing existing clean energy – a possible carve-out of the proposed Green Climate Fund – would simply subsidize high cost technologies. But these technologies won’t get us the emission cuts needed. Next-generation technologies in energy storage, biofuels, nuclear, CCS, solar, and so on are drastically needed. Like ARPA-E Director Arun Majumdar states, we need to innovate and create new clean energy technologies to solve our climate and energy challenges. The Green Climate Fund is set to ignore this reality and double-down on existing technologies that rich countries can only afford through subsidies and poor countries will only want with significant and long-term unsustainable support.
Second, the international climate negotiations must drastically rethink its policy approaches and make innovation – thus developing these next-generation technologies – central to its goals.
With this in mind, I propose a new approach. Let’s start an international reset by creating government clean energy RD&D (research, development, and demonstration) investment intensity targets that countries can sign up for in lieu of agreeing to cap carbon emissions.
According to the International Energy Agency (IEA), we need to globally investment $40 – $90 billion per year to stimulate the development of affordable clean technologies. Using IEA and Belfer Center data, global clean energy RD&D investments optimistically total over $16 billion in 2008, the last year of relatively good data. Thus the world is underfunding the foundation of clean energy innovation by $25 to $75 billion per year. Assuming, as IEA does, that governments must pick up the tab of at least half of that amount, the world’s leaders must boost RD&D investments by up to $38 billion.
To fill this gap, countries should be offered a choice: they can agree to carbon target reductions, or instead they can agree to meet gradually increasing government clean energy RD&D intensity targets. A clean energy RD&D intensity target of 0.065%, for example, would boost global investments by $19 billion (to $35.5 billion globally, assuming 2008 data). Countries like India, Finland and Hungry would already meet this goal while the U.S. would have to increase investments by almost $6 billion compared to 2008 funding levels. Of course, higher targets can be set depending on how much further clean technologies must develop to become affordable and globally viable.
The benefits of this alternative approach are clear. From a climate perspective, significantly boosting global investment in clean energy innovation would be a huge victory in providing viable clean substitutes to dirty energy that directly reduces emissions. And if there are ever international carbon targets, increased RD&D investments would make hitting, thus negotiating, those targets easier for all countries. Ultimately the only way to meet global carbon emission targets is for economic actors to want to reduce emissions voluntarily because cleaner technology makes it economically advantageous to do so.
But a significant selling point would be how more investment boosts a country’s international competitiveness. Unlike carbon caps (or taxes) which hurt a nation’s global economic competitiveness (since it raises the prices of its exports), clean energy innovation can help a nation’s competiveness. It would be up to each country to decide which technology categories to invest in as well as what stage of innovation (i.e. basic battery science vs. applied solar research vs. CCS demonstration) it wants. So, these investments could leverage existing competitive advantages (such as U.S. universities or Brazilian agriculture) or spur countries to develop new ones. This would also to boost exports as technologies develop further.
Ultimately, resetting international climate negotiations to include innovation would be a win-win for individual economies and, of course, preserving the global climate. Let’s get countries as committed to the clean energy innovation race in Durban as they are to making earnest but ultimately futile pledges to cut emissions through emission targets.