February 15, 2008

What Congress can learn from Google

By Michael Shellenberger and Ted Nordhaus

“Renewable Energy Cheaper than Coal”

There is a better way. Instead of making clean energy relatively cheaper, a new, post-Kyoto agreement should focus on making clean energy absolutely cheaper. The right model comes not from past efforts dealing with pollution problems but rather from investments in technology innovation and infrastructure. Silicon Valley, we often forget, was largely built on U.S. government contracts. In the 1950s, the Pentagon guaranteed the market for computer microchips, driving the cost of a single microchip down from $1,000 to $20 in less than a decade. Before that the Pentagon subsidized radio. And the Internet’s precursor was invented in a Defense Department lab.

Perhaps because they know this history, some Silicon Valley executives and investors seem to understand the energy challenge better than policymakers. In November, Google announced a “Renewable Energy Cheaper than Coal” initiative to invest hundreds of millions of dollars in wind and solar power. But achieving this objective requires a global investment in the hundreds of billions, not millions. What would happen if Europe and the U.S. guaranteed the market for silicon solar panels—as we did with silicon microchips? We know that for every doubling of production of solar panels, price drops 20%. Experts say it would cost $50 billion to $200 billion to make solar power as cheap as coal power.

Solar and wind are just part of the solution. What’s needed is a portfolio of investments made by the world’s wealthiest countries. The U.S., Europe, Canada, Australia, and Japan should create a 10-year, $1 trillion energy fund to invest in a range of technologies—including geothermal, efficiency, carbon capture and storage, nuclear, low- to zero-emissions technologies, and other advanced energy technologies—many of which (like solar) would be manufactured in China. The prospect of substantial new investment might persuade China to adopt some emissions limits or even a carbon tax.

Raising the money

Whether through auctioning permits or taxing carbon dioxide directly, federal carbon regulation can potentially generate tens of billions of dollars annually for clean-energy investments. These investments should include dramatic increases in funding for basic research in the energy sciences, a 10-year commitment to buy down the price of solar technology and battery and other energy storage technologies, and a commitment to build a smarter and more efficient electricity grid.

Just before the Bali climate change conference last December, more than three dozen Nobel laureates and energy scientists sent an open letter to presidential candidates and members of Congress calling for a minimum of $30 billion per year. Just as past public investment in railroads, highways, microchips, the Internet, computer science, and the medical biosciences triggered billions in private investment, and paid for themselves many times over, so will new investments in energy. One econometric analysis found that a $300 billion investment would pay for itself in 10 years through energy savings, economic growth, job creation, and profit taking.

It’s time for a new energy strategy that aligns economic and ecological interests and appeals to the aspirations of both developed and developing nations.

—Ted Nordhaus and Michael Shellenberger are co-authors of Break Through: From the Death of Environmentalism to the Politics of Possibility, and founders of the Breakthrough Institute.