Governing Confusion: How Statutes, Fiscal Policy, and Regulations Impede Clean Energy Technologies

Abstract

INTRODUCTION The United States shares with many other countries the goal of the United Nations Framework Convention on Climate Change achieve ... stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. (l) The critical role of new technologies in achieving this goal is underscored by the fact that most anthropogenic greenhouse gases (GHGs) emitted over the next century will come from equipment and infrastructure that has not yet been built. As a result, new technologies and fuels have the potential to transform the nation's energy system while meeting climate change as well as energy security and other goals. Many believe that advancing clean energy technologies (2) could allow both climate stabilization and economic development. (3) Further, if many technologies are successfully developed in parallel with early action to promote deployment, the cost of stabilization could be significantly reduced. The assumed availability of future technologies is a strong driver of stabilization costs in most climate change models. (4) Edmonds et al. studied stabilization of atmospheric C[O.sub.2] concentration at 550 parts per million by volume (ppmv) and showed that the accelerated pace of technology improvements and deployment could produce a reduction in costs of a factor of 2.5 in 2100 relative to a baseline incorporating the business as usual rate of technical change. (5) Given the need for large-scale GHG emission reductions, the challenge is to move toward actions that go beyond technology research and development to strategies that target the rapid and large-scale absorption of GHG-reducing technologies into the economy. Most technological innovations do not survive the transition from invention to marketplace success. While they may be technically feasible, various obstacles prevent them from gaining market share. In addition, best practices representing already proven cost-effective approaches to GHG mitigation are significantly under-utilized. The longevity of much of the energy infrastructure from power plants to the building stock prolongs the operation of obsolete technologies and other impediments cause suboptimal choices to be made when technologies do finally turn over. While there are many barriers to the commercialization and deployment of clean energy technologies, those that are imposed by legislatures and regulators are particularly of interest as they operate at cross-purposes with government-stated intentions of GHG reductions. This article focuses on the legal barriers to the deployment of clean energy technologies that come from fiscal policy, regulation, and statutes. For each policy realm--fiscal, regulatory, and statutory--distortionary policies are discussed. In some cases, these policies are unfavorable because they place clean energy technologies at a disadvantage, sometimes by favoring competing technologies. In other cases, they are ineffective because their intended outcome is undermined by policy design flaws, loopholes, and burdensome procedures that circumvent the policy goal. Still in other instances, policies are uncertain because of state and local variability, fluctuating short-term policies, and extended debates about alternative future policy scenarios that can forestall commitments to clean energy or accelerate investments in carbon-intensive energy options. In the aggregate, these barriers act to confuse investors, consumers, inventors, and producers in their decisions relative to clean energy technologies. This assessment of distortionary policies relies on a review of the literature on barriers to clean energy technologies and twenty-seven expert interviews. These interviews with experts from government, national laboratories, industry, universities, and consulting firms provided an up-to-date overview of market and technology conditions and associated barriers, along with substantial detail on the nature of the market imperfections as well as illustrative deployment failures and successes. …