America Risks Missing Out in Clean Technology

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The money is expected to go primarily into research on low-carbon power, and is in addition to the $177 billion in stimulus funds China has already invested in clean technology, including rail and public transit. South Korea recently announced it will invest $46 billion over five years in clean-technology sectors—more than 1% of the nation's gross domestic product—with the explicit goal of increasing Korean companies' share of the global clean-tech export market by 8 percentage points. This "Green New Deal" will focus on solar, LED lighting, nuclear, and hybrid-car technologies. Japan will provide $33 billion in targeted deployment incentives for a number of clean-energy technologies, including solar, hybrid-electric vehicles, and energy-efficiency technologies, and plans to deploy an additional $30 billion over the next five years to implement technological roadmaps that focus on achieving price and performance improvements in a suite of low-carbon technologies.

While some U.S. firms will benefit from this upsurge in Asian spending, overwhelmingly the jobs, tax revenues, and other benefits will accrue to Asia's clean-tech tigers. Large, direct, and sustained public investments in research and development, clean-energy manufacturing capacity, the deployment of clean-energy technologies, and the establishment of enabling infrastructure will allow these Asian nations to capture economies of scale, learning-by-doing, and innovation advantages ahead of the U.S., where public investments are smaller, less direct, and less targeted.

Current U.S. energy and climate policies focus on stimulating domestic demand primarily through indirect demand-side incentives and regulations. Should these policies succeed in creating demand without providing robust support for U.S. clean-energy technology manufacturing and innovation, the U.S. will rely on foreign manufactured clean-technology products to supply the lion's share of demand. This would jeopardize America's economic recovery and its long-term competitiveness while making it even more difficult to reduce the massive trade deficit.

inadequate legislation

Proposed U.S. climate and energy legislation, as currently formulated, unfortunately won't close the clean-tech investment gap. For instance, the American Clean Energy & Security Act, passed by the U.S. House of Representatives in 2009, includes too few proactive policy initiatives and allocates relatively little funding to support R&D, commercialization and production of clean-energy technologies. It would be better, both for the economy and the environment, to set a lower "price" on carbon but devote a larger share to green innovation.

If the U.S. hopes to compete for new clean-energy industries, it must close the widening gap between public investments and provide more robust support for U.S. clean-tech research and innovation, manufacturing, and domestic market demand. Small, indirect, and uncoordinated incentives won't be enough to out-do China, Japan, and South Korea. To achieve economic leadership in the global clean-energy industry and gain the jobs associated with them, U.S. energy policy must include large, direct, and coordinated investments in clean-technology R&D, manufacturing, deployment, and infrastructure.

Rob Atkinson is Founder and President of The Information Technology and Innovation Foundation, a Washington, DC-based think tank. He is also author of The Past and Future of America's Economy: Long Waves of Innovation that Drive Cycles of Growth. His focus is on IT and innovation and policy to support them.

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