Prizes for Progress with a Caveat: DOE Offers $3 Million Incentive

Posted on February 15, 2018 by Irma S. Russell

The U.S. Department of Energy (DOE) recently announced a $3 million prize competition for solar energy manufacturing innovations.  The American Made Solar Prize, seeks to encourage innovation in solar manufacturing in the private sector.  Given the urgency of the threat of climate disruption, incentives for a green energy industry are definitely a good thing.  

In 2017 the U.S. Global Change Research Program Climate Science Special Report reported key findings, including stronger evidence of “rapid, human-caused warming of the global atmosphere and ocean,” and observable changes in the planet have made the scientific consensus about climate disruption clear as glaciers shrink, oceans and rivers warm, and coast lines recede.  A draft report by agencies such as NASA and the National Oceanic and Atmospheric Administration released late last year states that the world “has warmed by about 1.6 degrees Fahrenheit over the past 150 years and that human activity is the primary cause for that warming.”   It seems clear that rewards for innovation to combat climate disruption are worth the effort and worth the money if they produce progress in sustainable energy.  Despite such promise, however, DOE and community oversight groups should use caution in this new prize enterprise. 

Entrepreneurs have a played a dramatic role in historic energy discoveries of the past.  For example, the discovery and development of fossil fuel was driven by the private energy sector.  A recent example is the rocket launch by Elon Musk in February or 2018.  Likewise, DOE’s laboratories, university researchers and other energy researchers have a proven track record of progress in energy research.  Moreover, private investment seems posed to spur renewable energy technologies.  Venture capital investments needed to take ideas and turn them into marketplace reality seem likely to support private innovations, particularly when those innovations have the endorsement of the DOE. These factors suggest optimism about the result of this prize and others like it. 

So what’s the caution and why?  In an article forthcoming in the UMKC Law Review Green Economy Symposium later this spring, I survey current-day green economy sector jobs and other efforts to build markets to help encourage sustainable practices.  The article describes natural incentives to promote an all-hands-on-deck approach to addressing climate disruption and argues for the use of ex post rewards for innovations, like the award now offered by DOE.  Caution: it won’t work toward environmentally positive outcomes if, rather than creating incentives for real innovation, it is an excuse for a give-away. 

However, Concerns that ex ante rewards may confer unfair benefits to inventors turns a blind eye to the risks accompanying the failure to attract innovations to solve the global climate problem and other environmental problems.  Government support should encourage the progress that a modern-day Edison, Tesla or Jonas Salk might make with true break-through advances.  In such cases, governments should mobilize to support inventions even when the government did not foresee such developments.

The possibility that the reward program will advance new and robust solar energy manufacturing innovations makes it worth pursuing.  The risk, however, that the program will fail to advance the science of solar energy is real. It is again that some wasted funding is likely.  And distinguishing between an incentive for innovation and a reward for being part of the energy structure can be difficult.   For example, last year Secretary of Energy Rick Perry announced payments to nuclear and coal companies for their status as sources of power based on the rationale that such payments serve as insurance against a compromise of the energy grid in the future.  The plan did not include payments to renewable energy companies, however, causing some to speculate that the payments had a political purpose rather than the stated purpose of insuring an uninterrupted energy supply. 

The answer to whether the DOE program is worth pursuing hinges not on the ultimate result but on the good faith nature of the incentive and the effectiveness of the efforts of those monitoring the implementation of the reward.    The use of government incentives, including prizes, presents a potentially fertile avenue for progress.  While risks exist, the possibility of progress is alluring.  So long as the rewards serve to stimulate new ideas rather than simply rewarding existing players to continue business as usual, the expenditures are justifiable and, ultimately, justified because of the possibility of new.   Discovering innovation that moves the country toward a carbon-neutral economy is a goal worth funding – even when the success of such research is not assured.  In fact, this is the nature of research itself.  


Posted on July 21, 2016 by John Dernbach

On December 12, 2015, in Paris, France, the parties to the U.N. Framework Convention on Climate Change—a total of 196 countries—unanimously agreed to a goal of net zero greenhouse gas emissions by the second half of this century.  For the United States, the technical and logistical challenge of achieving the goal of the Paris Agreement (as it is called) is enormous, but so is the legal challenge.

The U.S. short-term emissions reduction objective, stated in a submission made in the run-up to the Paris conference, is “to achieve an economy-wide target of reducing its greenhouse gas emissions by 26%–28% below its 2005 level in 2025.”  This objective, the U.S. says, “is consistent with a straight line emission reduction pathway from 2020 to deep, economy-wide emission reductions of 80% or more by 2050.”   Achieving the short-term goal depends on the outcome of the presidential election as well as litigation involving the Clean Power Plan.  And there was, until recently, no roadmap for deep U.S. reductions by 2050. 

The absence of long-term analysis, in the U.S. and other countries, is being filled by the Deep Decarbonization Pathways Project, which is led by the Sustainable Development Solutions Network and the Institute for Sustainable Development and International Relations.  It is based on the work of research teams in 16 countries that are responsible for 74 percent of the world’s greenhouse gas emissions--Australia, Brazil, Canada, China, France, Germany India, Indonesia, Italy, Japan, Mexico, Russia, South Africa, South Korea, the United Kingdom, and the United States.  DDPP says in a report synthesizing the findings of the project to date that most of these countries “had never developed pathways consistent with a global 2°C limit, nor were they actively considering this question.”   (The purpose of the Climate Change Convention is to keep the increase in global temperatures from human-caused greenhouse gas emissions below a “dangerous” level.  That level is widely regarded as 2°C, or 3.6 °F, above pre-industrial levels, although the Paris Agreement seeks to keep the increase “well below” that level.  The temperature increase to date is already about 0.9 °C above 1880 levels, when temperatures were first recorded.)

DDPP has conducted a technical analysis and policy analysis of pathways to deep decarbonization for the United States.  These reports, prepared by E3 (an energy consulting firm), the Lawrence Berkeley National Laboratory, and the Pacific Northwest National Laboratory, appear to be the most detailed studies of how to achieve deep reductions in U.S. greenhouse gas emissions by 2050.  

Perhaps the DDPP’s most important finding “is that it is technically feasible for the U.S. to reduce [carbon dioxide] emissions from fossil fuel combustion” by 85% from 1990 levels by 2050, which is “an order of magnitude decrease in per capita emissions compared to 2010.”  If the U.S. did that, it could reduce its overall greenhouse gas emissions by 80% below 1990 levels by 2050.  

Enormous changes would be required in the U.S. energy system to make those reductions happen.  Because it is difficult to decarbonize gasoline and liquid fuels, the researchers said, meeting the 2050 objective would require almost complete decarbonization of electricity and, among other things, switching a “large share” of end uses that require gasoline and liquid fuels over to electricity (such as electric cars).  It would also be necessary to produce fuel from electricity itself, they said, citing the production of hydrogen from hydrolysis as an example. 

Decarbonizing electricity and producing fuel from electricity itself would double electricity generation but reduce its carbon intensity to 3% to 10% of current levels, requiring a vast increase in either renewable energy (as much as “2,500 gigawatts (GW) of wind and solar generation (30 times present capacity))” or carbon capture and sequestration.  The average fuel economy for light duty vehicles such as cars would need to be over 100 miles per gallon, and these vehicles would need to be fueled almost entirely by electricity and hydrogen.  

The challenge of translating these technical and policy pathways into a workable legal framework is considerable.  Assuming, for example, that the U.S. can achieve 54.5 miles per gallon as a fleet-wide average for new vehicles by 2025, as the current Corporate Average Fuel Economy standard requires, how does the U.S. achieve a fleet-wide average of more than 100 miles per gallon for all vehicles by 2050? As DDPP explains, “[t]his would require the deployment of roughly 300 million alternative fuel vehicles by 2050.”  A similar conundrum exists in reliance on renewable energy sources: what legal changes are needed to guide the development of the grid so that it can continue to be reliable while it accommodates a vast increase in intermittent electricity sources such as solar and wind energy?

Michael Gerrard, who directs the Sabin Center for Climate Change Law at Columbia Law School, and I have begun work on an edited volume that will identify and analyze a wide variety of legal pathways to decarbonization in the United States, based on these reports.  We have assembled an excellent team of legal scholars and practitioners and are aiming for publication in 2017.  We hope to inspire similar efforts in other countries.  

An essential part of the decarbonization challenge is proposing, analyzing, and comparing various legal decarbonization pathways in each individual country, including the U.S.  In the face of a daunting challenge, there exists a real possibility that lawyers can help improve human quality of life throughout the world by facilitating the creation of a legal framework that accommodates zero-carbon development.

The Trains Don’t Wait... GHG Permits Leaving the Station

Posted on March 24, 2014 by Catherine R. McCabe

While the world waits for the Supreme Court to decide whether EPA can regulate greenhouse gas (GHG) emissions from stationary sources under the Clean Air Act, EPA and state permitting authorities have moved ahead to issue GHG permits. Some of those permits are encountering legal challenges. The Sierra Club and citizen activists are challenging permits issued by EPA Regions as insufficiently stringent, and urging EPA to use its Prevention of Significant Deterioration (PSD) permitting authority to require greater use of solar energy and carbon capture and sequestration (CCS) at new facilities.

So far, EPA’s Environmental Appeals Board has rejected two citizen challenges to GHG PSD permits issued by EPA Regions. On March 14, 2014, the Board denied the Sierra Club’s petition for review of a GHG permit issued by Region 6 for a new natural gas-fired power plant in Harlingen, Texas. In re La Paloma Energy Center, LLC. (Those of you who follow events in Texas will recall that EPA is currently running the GHG permitting program in that state, but has proposed to approve the state’s application to assume responsibility for that program.) The Board rejected Sierra Club’s arguments that the permit’s GHG emission limits were not stringent enough to meet BACT standards and that Region 6 should have required La Paloma to consider adding a solar energy component to its power plant. The Board cautioned, however, that there is no “automatic BACT off-ramp” for solar energy alternatives, and emphasized that permitting authorities must consider suggestions for adding solar energy components at new facilities on a case-specific basis.

In 2012 the Board rejected similar arguments by citizen activists who urged Region 9 to use its PSD permitting authority to require a new hybrid (gas-solar) power plant in California to reduce GHG emissions by increasing its planned solar generation capacity. In re City of Palmdale. The proposed plant was to be fueled primarily by natural gas, with a modest (10%) solar power component to satisfy California renewable energy requirements. The decisions in both City of Palmdale and La Paloma relied heavily on the Regions’ findings that there was insufficient space at the project sites to accommodate the solar power generation capacity that the petitioners were advocating. 

The Palmdale decision also upheld Region 9’s rejection of CCS as a BACT requirement for that facility based on cost considerations. The estimated annual cost of CCS would have been twice the project cost (annualized over 20 years) in that case. Sierra Club has renewed the debate over the affordability of CCS in a new PSD permit appeal that is currently pending before the Board. In re ExxonMobil Chemical Company Baytown Olefins Plant. Region 6 rejected the CCS option in this case based on a finding that the cost would be disproportionately high. Stay tuned for a Board decision in the next few months . . . 

*Any views expressed herein are the views of the author and do not necessarily reflect the views of the U.S. Environmental Protection Agency or the United States.