GLOBE-Net, April 19, 2012 - In the absence of
significant and timely energy policy reform, the recent boom in US
clean tech sectors could falter. This is the principal conclusion
of a new report from the Brookings Institute that examines
faltering federal government support for clean energy
Mark Muro, one of the principal authors of the paper, Beyond Boom & Bust, is a senior
fellow and policy director at the Metropolitan Policy Program at
He argues that driven by private innovation and entrepreneurship
as well as critical public sector support in the form of tax
credits, grants, and loan guarantees, several clean energy
technology (or "clean tech") segments have grown robustly in recent
years while making progress on cost and performance.
Despite this recent success, however, nearly all clean tech
segments in the United States remain reliant on production and
deployment subsidies and other supportive policies to gain an
expanding foothold in today's energy markets. Now, many of these
subsidies and policies are poised to expire-with substantial
implications for the clean tech industry.
The report takes stock of the coming changes to federal clean
tech subsidies and programs and examines their likely impact on key
clean tech market segments. It also seeks to chart a course of
policy reform that can advance the US clean tech industry beyond
today's cycle of boom and bust.
As this analysis illustrates, an era of heightened clean energy
spending supported by the American Recovery and Reinvestment Act of
2009 (ARRA) is now coming to an end, coinciding with the expiration
of several additional time-delimited tax credits and programs. As a
result, key portions of the clean tech industry can now anticipate
substantially reduced federal support.
At the same time, market subsidies are being cut in several
European markets, reducing export opportunities for US clean tech
manufacturers and leading to oversupply and declining margins, even
as pressure mounts from both low-cost natural gas at home and
foreign clean tech manufacturers abroad.
US clean tech sectors therefore face a combination of new
challenges. Without timely and targeted policy reform, several
sectors are likely to experience more bankruptcies, consolidations,
and market contraction ahead.
Yet the demise of the current clean tech subsidy system need not
be disastrous, the report suggests. In fact, it may provide an
opportunity for needed reform and further industry growth, albeit
one that must be carefully approached by both policy makers and
Many of today's existing subsidies and clean energy programs,
after all, are poorly optimized, characterized by a boom and bust
cycle of aid and withdrawal, or in need of thorough revision thanks
to either recent progress in the price and performance of
subsidized technologies or the mounting fiscal burden imposed by
The end of the present policy regime therefore offers the
opportunity to implement smart reforms that not only avoid a
potential "clean tech crash" but also accelerate technological
progress and more effectively utilize taxpayer resources.
Well-designed policies that successfully drive innovation and
industry maturation could provide US clean energy sectors a more
stable framework within which to advance towards both subsidy
independence and long-term international competitiveness.
Key Recommendations for a New Era of Clean Energy
As to how, specifically, the nation might move toward a new era
of clean energy policy, the report concludes that the United States
should now build on its historic strengths as a leader in
innovation, entrepreneurship, and advanced manufacturing by
accelerating the development, adoption, and improvement of
cost-effective clean energy technologies.
It argues that policy makers and business leaders alike should
pursue reform on two fronts that will put clean tech on a path to
subsidy independence and secure US leadership in clean energy
In terms of reforming energy deployment subsidies and policies,
the report recommends a suite of measures designed to reward
technology improvement and cost declines. In particular, clean
tech deployment policies should create market opportunities for
advanced clean energy technologies while fostering competition
between technology firms. They should also create market incentives
and structures that demand and reward continual improvement in
technology performance and cost.
Deployment incentives should be structured to create market
opportunities for energy technologies at different levels of
maturity, including new market entrants, to ensure that each has a
chance to mature while allowing technologies of similar maturity
levels to compete amongst themselves.
Most importantly deployment policies must not operate in
perpetuity, but rather should be terminated if technology segments
either fail to improve in price and performance or become
competitive without subsidy. Incentives should decline as
technologies improve in price and performance to both conserve
limited taxpayer and consumer resources and provide clear
incentives for continued technology improvement.
While deployment incentives should be temporary, they must still
provide sufficient certainty to support key business decisions by
private firms and investors. That is, incentives should be designed
to avoid creating unnecessarily high transaction costs while
opening up clean tech investment to broader private capital
Finally, the report concludes that many of today's clean tech
deployment subsidies and policies should be reformed with these
criteria in mind. Examples of possible policies that could meet
these criteria include competitive deployment incentives,
steadily-improving performance-based standards, "top-runner"
standards or incentives, demanding government procurement
opportunities, and reverse auction programs.
If structured to adhere to these criteria, the report's authors
conclude a new era of clean tech deployment policies would neither
select "winners and losers"a priori, nor create permanently
Rather, these policies would provide opportunity for all
emerging clean energy technologies to demonstrate progress in price
and performance, foster competitive markets within a diverse energy
portfolio, and put clean tech segments on track to full subsidy
The call for responsible incentives for clean energy technology
deployment, and for the elimination of subidies to conventional
fossil fuels is a key recommendation of the recently published
West Coast Clean Economy report
prepared by GLOBE Advisors, in partnership with the Center for
The full Brookings report is available for