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Linking Energy Production to Energy Innovation

“With pencils being sharpened on a debt deal,” Politico reports (subscription article), “all eyes are on the gas tax as a possible savior for transportation spending. But another option that may cause lawmakers less heartburn is being obscured by the gas tax dust: linking energy production with infrastructure spending…includ[ing] instituting a fee on oil production, or expanding oil and natural gas drilling availability.” Without a doubt, leveraging expanded energy production for revenue is a welcome idea. But linking this revenue to transportation infrastructure spending is misguided because it breaks a very useful policy connection: consumption and infrastructure use.

The thinking goes that new fees on oil and natural gas extraction are more politically feasible than a gas tax, as the cost to consumers would be relatively hidden. While industry would ultimately try to pass costs on to consumers, as the Politico article put it, “the pain of a new fee “upstream” has the advantage of not being immediately obvious to an electorate jittery about the economy — certainly nothing as in your face as a tax increase at the pump.” The problem is that tying energy production to transportation infrastructure-spending

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The Misguided Neoclassical Economic Thinking Behind a Carbon Tax

This week, the American Enterprise Institute (AEI), the Brookings Institution, the International Monetary Fund, and Resources for the Future co-hosted a daylong conference on designing a U.S. carbon tax. The event came on the heels of closed-door discussions of the topic at AEI and “a cascade of carbon-tax advocacy in recent days from the chattering classes and a slate of academic work over the summer,” as The Wall Street Journal noted, lending credence to the newspaper’s article title: “Carbon Tax Idea Gains Wonkish Energy.” Nevertheless, talk of a U.S. carbon tax – while a positive step forward – is not enough to address climate change if such a tax is not structured to support innovation. Ultimately, much of the enthusiasm over the idea of a carbon tax can be attributed to the misconception that it is a sort of climate change-silver bullet, as driven by neoclassical economics thinking.

According to the neoclassical economics doctrine, as detailed in the ITIF paper Economic Doctrines and Approaches to Climate Change Policy, the economy is a “large market of goods and services that is generally in equilibrium and usually best left to

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Better Clean Energy Choices for America

Cross-posted from The Washington Post.

Extreme weather has become the new normal. Despite another year of unprecedented drought in Midwestern states, historic wildfires and devastating storms such as Hurricane Sandy, there hasn’t been a groundswell of support for climate-change policy from Middle Americans. The problem is not that Middle America is indifferent to the well-being of the planet or more frequent natural disasters; the problem is that most climate and environmental advocates are indifferent to the needs of Middle America.

Many environmentalists argue that the best way to address climate change is for Americans to change their lifestyles and make sacrifices for the good of the planet. Americans are told they must consume less, waste less and spend more to buy clean energy. While David Brooks’s “Bourgeois Bohemians” may be able to retrofit their homes with solar panels and drive Chevy Volts, most of us can’t.

The recession has Americans prioritizing the economy over the environment. Gallup noted in March that since 2009 Americans have favored economic growth over environmental protection, after nearly 30 years of public opinion showing the opposite.

Yet the same month, a

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CalBattery Breakthrough a Product of the National Innovation Ecosystem

California Lithium Battery Inc. (CalBattery) – a start-up established in 2011 – has announced the development of a potential battery breakthrough that could significantly increase energy density and reduce costs. As the battery industry continues to struggle with performance and cost issues, especially when it comes to electric vehicles, technology breakthroughs are central to creating a competitive industry. While the CalBattery news is potentially important, however, the overlooked story here is how the company is a successful product of government investments in clean energy innovation. CalBattery’s breakthrough is a composite anode material for lithium-ion batteries (LIBs) – one of the three main components of battery technology along with the cathode and electrolyte. The anode is the material in which an electric current flows into the battery. For most advanced batteries used in the market, graphite is typically used because it is lightweight and has a relatively high energy density. In comparison, silicon offers a much higher energy density potential, but is typically not stable enough for commercial use – after a few charges the silicon cracks and the battery is inoperable.

To solve this issue, CalBattery’s technology embeds nano-silicon on

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China Doubles Down on Green Mercantilism, Purchases LDK Solar

LDK Solar, the world’s second-largest solar wafer maker, is now a Chinese state-owned enterprise. ITIF previously noted that the company had $80 million in debt paid back by Xinyu, a city in the eastern Jiangxi province which is also home to LDK’s main headquarters. But LDK Solar reached a new milestone last week with the news that it is selling a 20 percent stake in the company to the state-run Hen Rui Xin Energy for roughly $23 million. While the United States has raised tariffs on Chinese solar imports this year in an effort to discourage the country’s green mercantilism, the LDK Solar move suggests that China is doubling down on such policies.

The Xinyu-debt repayment and Hen Rui Xin Energy-equity acquisition are two recent instances in a string of notable government actions to shore up the struggling LDK Solar. Two months before the Xinyu announcement, MorningWhistle reported that the Jiangxi provincial government “pressur[ed] state-owned banks into approving a loan package worth 2 billion yuan” (more than $320 million USD) for the company, interest rate unknown. And just three days after the announcement of the Hen Rui Xin Energy news,

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Can Rare Earth Replacements Spur A Supply Chain Revolution?

Guest posted by Adam James, Special Assistant for Energy Policy at the Center for American Progress. The piece is being cross-posted from Science Progress, and can be found here, and is part of a series called “UpStart,” which focuses on innovative companies in the clean energy economy.

This column in the past has focused largely on market barriers and consumer engagement with clean energy, but less on the supply chain portion of  companies’ business models. Along with supplying end-products, the clean energy economy will be populated by many companies who are purely in the business of supplying the materials used in clean technologies. It is important for U.S. competitiveness and industry to ensure that these new companies are fostered right here at home.

A Common Thread: Rare Earth Metals

Rare earth metals are naturally occurring minerals whose properties make them uniquely suited to certain clean technologies, particularly electric vehicles and wind turbines. The components in these clean technologies — including magnets, superconducting wire, batteries, and motors — are made possible through the unique properties these rare earth metals provide.

So what’s the issue? It isn’t that rare earth

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Third Debate: Basic Research Not Enough to Spur Energy Innovation

Last night marked the third and final presidential debate of the 2012 election, and was the first time since 1984 that climate change went unmentioned by the presidential candidates in any of the debates. (“Obviously there are only so many [topics] you can get to,” debate moderator Bob Schieffer noted afterwards. “I had questions about climate change to talk about.”) The election has generally been devoid of serious discussion of climate change and energy innovation, and candidates and moderators alike avoided both the issues in the first and second presidential debates of this cycle as well. Beyond recalling the same rhetoric about energy security used in the last two debates, however, this discussion did highlight the candidates’ positions on federally-funded basic research.

The president observed that “if we’re not making investments in education and basic research, which is not something that the private sector is doing at a sufficient pace right now and has never done, then we will lose the [lead] in things like clean energy technology.” He was right to make the link between smart government investment and technology development, but wrong to focus on basic research.

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Second Debate: Another Night Sans Energy Innovation and Climate Change

Last night, President Obama and Governor Romney met for the second of three presidential debates that included a strong focus on energy and the economy. The problem is that the two biggest issues driving both topics – spurring clean energy innovation and addressing climate change – were no-shows. Instead, the debate was focused on how the candidates can significantly lower gasoline prices (they can’t) and who supports coal, natural gas, and oil more.

Without sounding like embittered policy wonks, this is troubling. A policy debate on energy and the economy that ignores innovation and climate change just isn’t a serious or rational debate.

This is best summed up by the debate moderator, Candy Crowley, who noted on CNN that she refrained from calling on one participant who had prepared a question on climate change: “Climate change, I had that question. All you climate change people. We just – you know, again, we knew that the economy was still the main thing, so you knew you kind of wanted to go with the economy.” Except climate change and the economy are not mutually exclusive! In fact, addressing climate change

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A123, Solyndra, and EV Battery Innovation

Battery maker A123 Systems Inc. recently filed for bankruptcy protection, making it the latest in a series of clean energy companies to falter. Without a doubt, this unfortunate development is set to become the next political football in much the same way Solyndra has dominated the energy policy debate. But let’s be clear, A123 is not Solyndra. Solyndra’s downfall was falling silicon prices and rampant Chinese green mercantilism erasing any competitive edge its technology had in the market. On the other hand, A123 has had to deal with an acute business problem: no one is buying electric cars yet so the demand for its batteries remains low. But what really sets A123 apart from Solyndra is that A123 still developed genuinely innovative technology. In fact, Johnson Controls – the U.S. company that is purchasing A123’s key assets – will continue manufacturing during the bankruptcy process and A123’s innovative battery is still set to power the all-electric Chevrolet Spark. As ITIF Senior Analyst Matthew Stepp is quoted as saying in the Detroit Free Press, “This isn’t going to be the last we hear of A123’s battery technology. This is just

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Shifting Gears: A Growing Debate on How to Electrify U.S. Transportation

Last week, ITIF released Shifting Gears: Transcending Conventional Economic Doctrines to Develop Better Electric Vehicle Batteries, which explores the challenges confronting today’s electric vehicle (EV) industry and presents an “innovation economics” strategy for overcoming them. It has added to a growing debate on the short-comings of today’s EV policy approach and better ways energy policy can support electrifying U.S. transportation. Politico correctly summarized the core issue: better EV batteries are “the unseen force behind electric vehicle sales,” but “neither higher taxes nor domestic and international subsidies have spurred enough [technology] momentum.” Referring to Shifting Gears, Politico states that “The only answer is a robust R&D strategy to develop much better and cheaper batteries to dramatically lower the cost and increase the performance of EVs.” As ITIF Senior Analyst Matthew Stepp put it in a Bloomberg Businessweek article that highlights the report, “Government investment in high-risk, high-reward technologies is critical.”

Business Insider’s Alex Davies concurs, pointing out that while the conventional policy approach has been to either subsidize EV purchases or impose taxes to increase the price of gas cars, the report “lay[s] out a

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