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Averting the clean-tech bust

Not only was it foreseeable, many foresaw it and actively talked about it. But now the boom in stimulus spending in the United States has come to an end, and it coincides with a brutal fiscal hangover, bitter election-year partisanship and the looming lapse of subsidies for clean-energy deployment. The result is a collapse in federal support for clean-energy technologies at a time when the industry is struggling in the face of cheap natural gas and tough competition from China.

The first cliff came this year when the bulk of the stimulus spending expired, but a new analysis suggests that the decline in federal support is much broader and will continue over the next few years unless a divided Congress unites to create a new path forward (see graphic). Dubbed “Beyond the Boom and Bust” and authored by scholars at the Brookings Institution and the World Resources Institute, both in Washington DC, and the Breakthrough Institute in Oakland, California, the report lays things out programme-by-programme while attempting to identify an alternate path forward. The goal is to reform subsidies to reward innovation while doubling (or tripling) down on initiatives in energy research, development and demonstration (RD&D).

“Our notion is to mend these programmes rather than ending them,” says Mark Muro of the Brookings Institution.

The bulk of the cuts come in the form of deployment subsidies such as tax credits, direct payments and loan guarantees. Among the big-ticket items now on the Capitol Hill agenda are a pair of tax credits for wind development that expire at the end of this year, but the report outlines a host of others that are poised to follow. By the end of 2014, if things proceed as scheduled, the United States’ clean-technology policy system will be “largely dismantled”, according to the report.  Instead, the authors argue that subsidies should be made contingent on technological improvements and cost reductions and then decline as technologies become more competitive.

Longer-term investments in science have also taken a hit. The analysis suggests that funding for RD&D dropped by 38%, from US$6.1 billion 2009 to $3.8 billion in 2012. This is despite the fact that the administration of Barack Obama has staved off even steeper cuts sought by many conservative Republicans. Moreover, the trend stands in stark contrast to numerous recommendations that energy research be scaled up to around $15 billion a year, as proposed by Obama back in 2009 (see earlier coverage here and here). “Beyond Boom and Bust” underscores that goal while calling for a coordinated energy RD&D programme that advances public–private partnerships as well as new research models, such as the Advanced Research Protects Agency-Energy and Energy Innovation Hubs at the US Department of Energy.

Political rhetoric to the contrary, Muro says it’s hard to believe that the United States is going to simply turn its back on the clean-energy industry. But that doesn’t mean reform will come easily, he adds. “The question is how much appetite there is going to be for a serious discussion about improving the nature of these programmes.”

Graphic source: “Beyond Boom and Bust”


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