Addressing global climate change requires clean energy technologies that are cost- and performance competitive with fossil fuels without subsidies. Characterized by carbon prices, subsidies, and mandates, the dominant clean energy policy approaches in the United States and internationally are not likely to meet this goal. Only a cohesive and aggressive innovation strategy can produce the needed and rapid development of aordable clean energy options the entire world wants to purchase. This report discusses the dominant climate policy paradigm and why its supporters largely ignore innovation. It then argues for strategic investment and policy reforms focused on energy innovation. In particular, the report makes the following strategic investment and policy recommendations to reform the U.S. energy innovation ecosystem:
- Increase support for early-stage research by tripling appropriations for energy-related programs and divisions at the National Science Foundation (NSF) to $1 billion annually.
- Increase the Advanced Research Projects Agency-Energy’s (ARPA-E’s) budget to $1 billion annually.
- Double the budget for the Department of Energy (DOE) Energy Innovation Hubs.
- Increase funding for the DOE’s Office of Energy Efficiency and Renewable Energy (EERE) to at least $2.5 billion per year.
- Expand the research and development (R&D) tax credit from 14 percent to 30 percent to spur private sector R&D investment.
- Pass the American INNOVATES Act of 2015, introduced by Senators Coons and Rubio, to enhance the “innovation enterprise” of the National Labs.
- Phase out existing energy production tax credits, and institute a new permanent, technology neutral tax incentive to support emerging clean energy technologies from demonstration through early commercial scale-up, upon which the credit sunsets for that technology.
- Raise royalty rates on onshore leases as well as increase fees on unproductive acres for both onshore and offhore leases to raise at least $1 billion per year to fund a dedicated Energy Innovation Trust Fund dedicated fund to support clean energy research and development.
- Institute a $15 per ton carbon tax on upstream, combustible, non-feedstock fuel sources; direct 85 percent of revenues to pay for lowering the effective U.S. corporate tax rate; and allocate the other 15 percent to an Energy Innovation Trust Fund.