Conference: Washington Summit on
Climate Stabilization

A Moral and Profitable Path to
Climate Stabilization

A Role for the Government - State Initiatives

Introduction | Corporate Involvement
International Efforts | Conclusion and Notes

But despite the rapidly increasing investment in renewable energies, the pace of the transformation from nonrenewable energy to alternative power is sluggish, given the likely time urgency for a global de-carbonization. This sluggishness arises from the fact that “it is still cheaper to shovel more coal into an existing power plant than to build a new wind farm.”19 The price of alternative energy must still decrease further, and this can only be done through financial investment. In addition, consumer acceptance of alternative energy technologies is a vital component of the transition to clean energy.2 While companies with large market shares like Wal-Mart and Home Depot are trying to make customers accept environmentally friendly products, the complete acceptance of alternative energy is not apparent yet.

The problem is that while many influential companies seem to be dedicated to reducing carbon emissions, there is only so much that one company or one group of companies can do on their own. As Theodore Roosevelt IV of the Pew Center on Global Climate Change explains, there is a limit “to how far even the bravest corporate leader can go voluntarily,” and he points out that “no major environmental problem has ever been solved in this country by voluntarism alone.”3 Government involvement is essential, particularly in opening paths to clean energy entrants to the marketplace.

Actions by the federal and state governments have affected in the past—and will continue to affect in the future—the degree of penetration that renewable energy has into American society. One study found that government subsidies of fossil fuels worldwide amount to over $131 billion each year, which is “a substantial barrier that less-favorable energy sources, such as renewable resources, have to overcome.”2 These subsidies artificially lower the costs of nonrenewable power, thus making clean energy alternatives comparably more expensive and less desirable to use. If government subsidies of fossil fuels were removed, the price of nonrenewable energy would rise, and this would encourage more people and companies to switch to renewable sources of power.

Subsidies on fossil fuels hinder the adoption of clean energy, but subsidies and tax incentives on wind, solar and hydrogen power accelerate the transition to alternative fuels. Studies have found that tax credits on both wind and solar power significantly hastened the development of these technologies and increased their degree of market penetration in the past.2 These past tax incentives were effective, but more are necessary, especially for hydrogen power. Hydrogen will be unable to compete with conventional fossil fuels “in the absence of a specific role for government,”2 and therefore it is vitally important that the federal and state governments provide incentives for investors to finance this technology.

Reducing fossil fuel subsidies and increasing tax credits for alternative energy will serve to eliminate many of the economic barriers to entry that new, green technologies face. So far, however, the federal government has been reluctant to do this. In some cases, emerging clean energy technologies may require a regulatory approval process at both the federal and state level and this makes the high transaction costs a bar to competitiveness. Generally emerging technologies such as wind, solar, biomass, tidal and wave energy are much smaller scale than conventional power plants. Generally these projects should not be exempt from environmental scrutiny, but the requirements should be carefully tailored to ensure that they are not a club to maintain the status quo.

Unfortunately, economic barriers are not the only impediment to establishing alternative energy sources. Physical and technological difficulties also prevent renewable technologies from taking hold. Many new technologies, especially hydrogen power, face a “chicken-and-egg” problem, whereby they need a substantial infrastructure in place before the energy can become feasible and economical. Encouragingly, state governments are taking the initiative to remove the technological and regulatory barriers that stand in the way of widespread renewable power use. Not only are states creating legal limits on carbon emissions, they are also helping to create alternative energy infrastructure so that new technologies can flourish. Many states hope that their actions will be a model for the federal government to follow.

State Initiatives

State and local governments are taking it upon themselves to promote cleaner technologies and stricter environmental standards in their areas. Gina McCarthy, Connecticut’s commissioner of the Department of Environmental Protection explains “if we can’t get the federal government to act, then we have to take action in any way we can.”20

The New England states are taking the initiative and making collective agreements to reduce their carbon emissions. They have already vowed to reduce carbon dioxide emissions 10% by 2010, and have formed the Regional Greenhouse Gas Initiative (RGGI).21 Established in 2005, this organization of eleven Northeastern and Mid-Atlantic states is developing cap-and-trade programs with emissions trading systems in order to reduce emissions in the region.22

Commenting on the creation of RGGI, the New England Climate Coalition expressed hope that it will “become a model for similar programs in other states.”21 It added, “Action at the state level also adds to the growing pressure on federal lawmakers to move more quickly toward a national solution.”21

Some states are even creating coalitions with international leaders to address the climate challenge. Very recently, Governor Schwarzenegger also signed a climate agreement with British Prime Minister Tony Blair. This pact recognizes the need for “urgent action” in reducing greenhouse gas emissions, and stipulates that the United Kingdom and California will work together to address climate change.47 Under the agreement, the two will share experiences, find new solutions and even look into a possible emissions-trading system.47

Texas too is pushing forward in the reduction of carbon emissions. It is actively promoting the development and use of renewable energy technologies, and is becoming a leader in the production of wind power. As of the beginning of 2006, Texas was the second largest generator of wind power in the United States,23 but by the end of the year it is expected to surpass California and become the largest producer in the country.24

States are also making strides in transforming the transportation sector by encouraging and investing in hydrogen powered vehicles. Florida, New York,25 Nevada and Washington, D.C.26 are working on demonstration projects of this new technology. But no state has gone further than California to incorporate hydrogen fuel cell technology into the transportation sector.

The Case of California: California has always been a trendsetter for the United States and world, and its role in renewable energy production is no exception. With an economy larger than most national economies,27 California is the United States’ largest consumer of gasoline.26 It has also taken the largest steps to incorporate hydrogen-powered transportation into the economy.

Only six months after taking office, California Governor Arnold Schwarzenegger established the “Hydrogen Highway Project,”26 a program to develop the infrastructure for a hydrogen-powered transportation sector. This program intends to install roughly 100 hydrogen-fueling stations along the California interstate highway system and develop a fleet of 2000 fuel cell vehicles by 2010.28 In addition, a “significant and increasing” percentage” of hydrogen will be produced using renewable energy as the Project continues.26

The development of a hydrogen-fueled transportation sector has long been plagued by a “chicken and egg” problem; auto manufacturers are reluctant to produce fuel cell vehicles without sufficient refueling infrastructure in place, while hydrogen power suppliers will not establish fueling stations without a proliferation of fuel-cell vehicles to use their fuel. “To get this to work,” says Bob Wilkinson of the University of California at Santa Barbara, “both the hydrogen infrastructure and the technology that uses it need to be developed in parallel.”26

In establishing the Hydrogen Highway initiative, California has taken the first steps to develop both aspects simultaneously. Public/private partnerships, such as the California Fuel Cell Partnership, currently provide input about both vehicle and infrastructure development to the Hydrogen Highway Project.29 Partnership members include many major domestic and international auto manufacturers, energy and oil companies, and energy and environmental agencies.29 Such partnerships will be providing the majority of the initial investment in the Highway Project, which could cost up to $200 million.26 This is an encouraging but modest start on the investments ultimately necessary for a transformation to clean hydrogen.

The collaboration between the automotive industry, energy suppliers and government agencies has already borne fruit. Currently there are 22 hydrogen fueling stations in operation and 143 fuel cell vehicles in California.28 The encouraging results of this cooperation illustrate that business and environmental goals can be fulfilled simultaneously. Schwarzenegger explained that the Hydrogen Highway Project would “show the world that economic growth and the environment can coexist.”28

Although it has already made great strides, the California Hydrogen Highway has a long way to go. Some auto manufacturers hope to have hydrogen vehicles ready for widespread commercial use within the next decade,28 but the price of fuel may limit the use of hydrogen vehicles. Suppliers are ultimately trying to make hydrogen competitive with the price of gasoline,28 but because it is still an experimental technology, it is unsure if this will happen.28 Ultimately an important concern will be ensuring that most of the hydrogen is produced from some non-carbon based energy source otherwise greenhouse mitigation benefits will be modest at best.

Nonetheless, California’s leadership, in developing the infrastructure for a hydrogen economy, is helping to lower the barriers to entry for this alternative energy. The state’s intelligent policy choice to promote cleaner technology will hasten the transition to renewable power, and is an example that other states—and the federal government—should follow. As one can’t have a clear crystal ball on a vehicular clean energy future other paths such as plug-in hybrids and biofuels in flexcar vehicles are also worth exploration.

Next: International Efforts
        Conclusion and Notes