"The Obama administration's new carbon rules are perhaps a useful start but much more will eventually be needed to tilt the playing field in favor of lower carbon energy we'll eventually need," said Lee Branstetter, a professor of economics and public policy at Carnegie Mellon University and a former senior economist for international trade and investment at the Council of Economic Advisers.
Branstetter offered a kind of closing argument to the two-day conference on "China, the West, and the Alternative Energy Innovation Challenge" at the Peterson Institute for International Economics, urging these four necessities to decarbonize the world economy:
1. More federal funding for alternative-energy technologies.
Branstetter called the federal investment in basic science—which largely occurs through the Department of Energy—"the most productive investment any nation has ever made." But sequester cuts to the federal budget have begun to undermine federally-funded research and development, he said, and two other potential sources of funding—Silicon Valley venture capital and Chinese innovation—have failed to materialize at a level sufficient to make alternative energy competitive in the marketplace. "Free markets are amazing things," Branstetter said. "I believe in them and support them, but they don't' fund basic science. That's what the federal R&D budget is for. We will not get the innovations we need without a deeper and broader science base."
2. A Price On Carbon.
"We need public policies to raise the price of sticking with fossil-fuel technologies. You could tax carbon emissions, you could require emitters to buy permits to cover their emissions. Right now there's a substantial group in Congress that is opposed to either approach, so the Obama Administration has done what it can through the imposition of the Clean Power Plan and associated regulations. I think this will probably help tilt the playing field a bit, but much more is going to be needed. Without policies to shift demand to much more expensive alternative energy, we run the risk of subsidizing the development of alternatives that no one will have the incentive to buy."
3. Global Free Trade:
Researchers from the Peterson Institute estimate that 41 trade complaints have inhibited about $32 billion in trade of clean-tech goods. More than 90 percent of those complaints were brought by the U.S. or European Union. While the West cannot and should not always turn the other cheek, Branstetter said, "it's also important to appreciate the reality that the best way to develop these alternative energy industries at a global level, to make them competitive with conventional industry, is probably going to require the construction of a global division of labor and a global supply chain."
4. China:
The Chinese government and Chinese companies have been accused of violating WTO trade rules, sponsoring cyber-espionage, and stealing trade secrets, which has led to some of the trade complaints described above. But China is vital to any effort to halt climate change for at least two reasons: it's the world's largest emitter of greenhouse gases and it's a great place to manufacture stuff, including alternative energy hardware. "The quickest way to deployment of the next generation of alternative energy is likely to consist of western innovations being to a great extent produced in China and possibly deployed in China. Whether we like it or not we're going to have to find a way to work together."
For an example, a presenter told the conference earlier that China can build Westinghouse nuclear reactors designed in Pittsburgh at one-half to one-third the cost of construction in the United States.
