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New CAP report outlines Low-Carbon Innovation Strategy

“You wouldn’t think of going out on the football field without a plan, right? The same goes for manufacturing in America” explained House Democratic Whip Rep. Steny Hoyer at a Center for American Progress Action Fund event yesterday. The event, also featuring Assistant to the President for Manufacturing Policy, Ron Bloom and President of United Streetcar, Chandra Brown, focused on American manufacturing and the need for a low-carbon industrial renewal strategy.

The speakers agreed with Rep. Hoyer that manufacturing is essential to the American economy, that manufacturing and innovation are intertwined, and that the United States needs a solid long term game-plan to keep manufacturing clean and in America. The discussion echoed the main points of a CAP Paper “Low Carbon Innovation: A Uniquely American Strategy for Industrial Renewal” that was released at the event. Below is a summary of the paper. You can also access the full report here, and the introduction and summary here.

Innovating for a Low Carbon Future

Our nation’s innovation and competitive drive in the 20th century powered the U.S. economy to global leadership, helped win two World Wars and one Cold War, created unprecedented and broad-based economic prosperity, and established the technology that enabled the conquest of the moon and today’s Information Age.  Today, this same engine of innovation is in serious jeopardy as we look across the competitive landscape of the 21st century.

There are a number of reasons for this.  First, in recent years the manufacturing sector, which for decades supplied millions of Americans with stable, well-paying jobs and sustained our country’s ability to innovate has shrunk. U.S. companies found many reasons to shift manufacturing overseas. This not only costs jobs but also, as the Harvard Business Review points out, it costs our economy’s ability to make high-tech products and invent new ones.

Compounding this threat to American competitiveness in coming years are the increasing risks that U.S. businesses will face from global warming. The consequences of global climate change will deliver real, and potentially very large, economic costs.  America also suffers from a confused planning environment for infrastructure and economic decision making, which makes it difficult to move forward on any comprehensive plan to bolster sustainable economic growth. Congressional inaction on climate legislation and policies to deploy clean and efficient energy technologies here at home are creating deep uncertainties for business planning.  Meanwhile, our competitors in other nations, are already retooling their industries and infrastructure for a clean energy future.

The U.S. needs clear long-term climate and clean energy policies, and a supporting low-carbon economic growth strategy to overcome the challenges above.  Accordingly, in a paper entitled “Low-carbon Innovation: A Uniquely American Strategy for Industrial Renewal,” the Center for American Progress is proposing a low-carbon economic growth strategy to keep America the innovative industrial leader of the world.   The strategy builds on our existing regional ecosystem of economic development policies and it aligns policies across different branches of government.  The purpose is to put forth smart incentives that engage private capital markets in deploying essential low-carbon technologies and reinvigorating investment in cutting-edge infrastructure.

The U.S. economy is an “innovation-driven” economy, according to the World Economic Forum. The United States became a global economic leader by building a diverse economy driven by a continuous innovation business model—one that values inventing, manufacturing, and continually reengineering value-added products and sophisticated technologies. Innovation is our area of expertise and it is at the center of our low-carbon industrial strategy.

Building innovation networks that are greater than the sum of their parts

In the paper we’ve identified five types of market actors whose participation is essential for low-carbon industrial renewal, and identified key policies for each to spur the innovation.  These include:

Coordinating policymakers and regulators

Policymakers, regulators, and program officers in federal and state agencies play an important role in  every stage of innovation and industrial development, whether by siting new transmission infrastructure,  permitting a new wind farm, providing programmatic support to help finance an advanced manufacturing facility, or coordinating public R&D research funds. Policymakers, regulators, and  government agencies can directly facilitate the growth of low-carbon markets and industries by aligning all efforts to build strong market demand, by influencing government procurement practices, and by offering clear frameworks for business planning within their rulemaking and legislating.

Empowering clean energy researchers

From advanced electric vehicle batteries to super-cheap solar panels to the manufacturing processes that produce them, research conducted in government, university, and corporate labs is critical to advancing innovation and the growth of low-carbon industries. Public policies provide important support for scientists and engineers as they work to create low-carbon solutions to industrial challenges, and ensure their discoveries can move quickly into the market.

Mobilizing clean energy manufacturers

Manufacturers who develop the supply chains, production processes, and marketing strategies to scale up the supply of American clean energy products, equipment, and technology play an important role in innovation and form the basis of industrial growth. Public policies play a critical role in helping America’s existing industrial base navigate the transition to a clean energy economy, supporting worker training and retooling manufacturing for low-carbon technologies.

Incentivizing clean energy investors

The task of innovating and scaling up a new technological foundation for U.S. industry based on clean energy requires harnessing flows of private capital. Clean energy and energy efficiency standards can send powerful signals to investors on the permanence of clean energy markets, while targeted financing assistance programs can help mitigate risks and unlock private capital for clean energy. These policies can leverage private capital more effectively within stalled capital markets and can improve incentives for private investment in clean energy research, commercialization, and deployment.

Engaging clean energy consumers

The consumers of clean energy products and technology provide the critical domestic market demand that makes industrial growth and innovation possible. Without consumers to purchase and use zero-emission vehicles, building owners and construction firms to use energy-efficient building materials, or utilities to invest in and operate renewable-energy-generating technologies, there is no revenue stream for the manufacturers of those goods, no reason for investors to provide capital, and no market application for clean energy research. Consumer-driven demand—from families to businesses to utility companies— is what makes clean energy innovation and industrial transformation possible.

Public policies can increase demand for clean energy goods and services by establishing meaningful incentives for utilities, building owners, and consumers to invest in clean energy technologies instead of fossil-fuel energy generation. Indeed, policy is essential to dramatically increase the predictability, transparency, and long-term certainty of clean energy markets to reach economies of scale and bring down cost.

The bottom line is that when these five groups work together by exchanging information, money, and risk, the network they form is more innovative than the sum of its parts. Together they can accomplish what none of them can do alone. With this understanding, we’ve organized our discussion of specific policies through the lens of how to engage each of these constituencies and encourage the formation of an informal national clean energy innovation network. In the paper we further lay out the principles for how policy can align the interests of each of these industrial and economic actors around shared efforts to drive low-carbon innovation in America’s economy.

Access the full report here.

Access the executive summary here.

Bracken Hendricks is a Senior Fellow at the Center for American Progress. Sean Pool is an Assistant Editor with the Center’s Science Progress project. Lisbeth Kaufman is a Special Assistant at the Center. This post first appeared on Science Progress.

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