ITIF Proposes Grand Energy Compromise

June 26, 2013

WASHINGTON (June 26, 2013) - The United States faces two seemingly contradictory energy challenges. To develop the low cost, high-performance technologies necessary to reduce carbon emissions the federal government must invest significantly more in clean energy innovation. At the same time new drilling technologies are allowing more domestic oil and natural gas production than ever before, and reducing incentives for game changing investments in clean energy. 

A new report by the Information Technology and Innovation Foundation (ITIF) argues that Congress can reconcile these challenges by generating additional revenue from oil and gas drilling through the opening of new federal lands for exploration in exchange for depositing these revenues into a new dedicated trust fund to support next-generation energy research and development. Drilling for Innovation: Funding Clean Energy R&D with Oil and Gas Revenue calls for increasing drilling fees on federal leases and directing the new revenues to support critical energy innovation programs such as the Advanced Research Projects Agency-Energy (ARPA-E). ITIF's analysis indicates the effort could generate over $1 billion in new revenue annually for energy innovation programs.

"Redirecting revenues from drilling to invest in the future of clean energy offers a bipartisan solution to expanding the nation's energy supply while also creating a long-term solution to global warming," notes Megan Nicholson, an ITIF Policy Analyst and principal author of the report. "This solution acknowledges the nation's current dependence on fossil fuel energy but uses it to provide dedicated funding to energy innovation, ensuring that cheap, high-quality clean energy alternatives can be developed as quickly as possible."

Current clean energy alternatives do not meet the cost or performance of existing fossil fuel technologies, drastically reducing their ability to enter the market at the levels necessary to reduce greenhouse gas emissions. Significant investments in energy R&D are required to create next-generation innovations that can compete on performance and price. Unfortunately, as ITIF has previously argued, the U.S. energy innovation ecosystem is underfunded and prioritizes incentives to deploy existing substandard technologies over research and development and demonstration of breakthrough technologies. ARPA-E, the Department of Energy's breakthrough clean energy research program, is already funded at less than one third of its recommended budget of $1 billion per year and faces further proposed cuts by Congressional appropriators.

"Through the creation of a dedicated funding stream we can reduce the uncertainty that has been inherent in energy innovation appropriations, while providing the necessary fiscal support for critical programs that offer the best opportunities for encouraging innovative breakthroughs in clean energy technology," Nicholson adds.

Read the Report



The Information Technology and Innovation Foundation (ITIF) is a non-profit, non-partisan think tank whose mission is to formulate and promote public policies to advance technological innovation and productivity internationally, in Washington, and in the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues. Learn more at