[These comments were submitted by Tim Warfield, executive director of the National Association for State Community Services Programs, in the form of a letter to President Obama]

Dear Mr. President:

When you make your policy recommendations to Congress next month, we strongly urge you to put forward those policies that will have the greatest impact on low-income communities.

We represent state administrators of the Community Services Block Grant (CSBG) and the Weatherization Assistance Program (WAP). The mission of NASCSP is to empower low income families to attain self-sufficiency in its broadest context, and our network successfully combines Federal, State and local investment and involvement to deliver measurable results for low-income Americans in distressed communities across the nation.

We believe the following measures, if enacted this fall, will mitigate the effects of the recession on low-income communities:

• 1) Appropriate $3 billion to put Americans back to work rebuilding our infrastructure and creating a modern, energy-saving electric grid. NASCSP members have the network already in place to train low-income Americans with the skills necessary to move into these new jobs quickly.

• 2) Appropriate at least $800 million to expand the Community Services Block Grant, our national anti-poverty strategy. CSBG, a state administered block grant, provides the foundation for 1,060 local agencies, primarily Community Action Agencies (CAAs), in all 50 States, the District of Columbia, and Puerto Rico. In the last year, the CSBG helped more than 20 million Americans achieve economic security. It is the only federal program exclusively focused on reducing poverty and its program design empowers the States to address effectively the root causes of poverty on a local level.

• 3) Appropriate at least $750 million for the Weatherization Assistance Program. WAP is the nation’s largest residential energy efficiency program. It reduces the energy costs of low-income families–particularly targeting the elderly, the disabled, and families with children–by an average of 35%, while creating good jobs, investing in local businesses, and advancing technology. The WAP network is fully operational after expanding greatly under ARRA. Moreover, WAP is an ARRA success story: the program is on track to surpass your production target of 650,000 weatherized homes and has created more than 14,450 jobs this spring, more than all but seven other ARRA programs. WAP largely created jobs in areas with the highest unemployment–places that will be unable to sustain efficiency efforts without continued federal support.

• 4) Appropriate $2 billion for a national initiative to train unemployed individuals in the construction trades and clean energy technology, and to facilitate the purchase of foreclosed homes. The twin objectives of these linked initiatives are to provide jobs rehabilitating homes to make them more energy efficient and healthy and to provide affordable rental housing for low-income Americans who cannot afford the dream of home ownership. The program can be implemented as a public-private partnership with Community Action Agencies, which are experienced in property management, training, and housing rehabilitation.

• 5) Appropriate Low-Income Home Energy Assistance funding at the FY 2010 level of $5.1 billion.LIHEAP assists low-income households, targeting those that pay a disproportionately high percentage of their income on home energy, using money that would be better spent on food, shelter, and medicine. We are concerned about your recent comment that the States have not been able to spend their full LIHEAP allocation. This is simply not true. They have used the remaining FY 2011 funds to pay for emergency reconnection and cooling this summer for households that cannot afford to pay their utility bills. They expect to serve a record number of households this year, nearly nine million. We believe that demand for service will not decrease during the 2011-2012 heating season and that the need remains great.

If July’s jobs numbers show us anything, the need to remove obstacles so businesses can put people back to work is of the utmost urgency for our economy – stop federal regulatory overreach, allow capitalism to work in a responsible manner, and the jobs will come, including green ones.

In January, President Obama issued an Executive Order directing agencies to write their regulations to impose the least burden with consideration for the cumulative costs of those regulations. If put into practice, this would be one of the most beneficial actions the government could take – point EPA and businesses in the right direction, and then get out of the way.

One way the forest products industry contributes to the “green” industry movement is in its use of bio-based fuels. Two-thirds of the energy consumed by pulp and paper mills is produced on site using this carbon-neutral biomass, which reduces the amount of fossil-fuel-based energy consumed by these facilities. In his May 4 Washington Post letter to the editor, United Steelworkers President Leo Gerard stated, “Biomass energy is green energy. When the fuel base is managed properly, unlike fossil fuel, biofuel is carbon-neutral. Pulp and paper mills not only use biomass as fuel, it is their main raw material to make products that keep carbon out of the atmosphere for months, years or, in some cases, generations.” This focus on carbon sequestration is often overlooked as a benefit to using forest products; however it is important to understand the benefits that biofuels present, especially when juxtaposed with the use of non-renewable fossil fuels.

In addition to paper and paper-based products, the manufacture of wood products for building construction and other uses is a green choice because of the renewable and energy efficient nature of the raw materials. Wood products sequester carbon long after the harvest, and in life-cycle assessments, wood is superior to both steel and concrete when it comes to energy efficiency, greenhouse gas emissions, and air and water quality.

The forest products industry also promotes green jobs through forestry and recycling.

Working forests, which supply the feed stock for paper and paper-based products, are vital to carbon sequestration. If those working forests are no longer needed because mills are shut down from high regulatory compliance costs, families that rely on that land for income will convert it to other uses, including selling the land for development. If the land is developed rather than used for growing forests, and those trees are not replaced, we reduce our net carbon storage capacity.

Paper recycling is perhaps the most obvious example of the paper industry’s contribution to “green culture.” In 2010, paper recovered for recycling reached a record 63.5 percent of paper consumed. By recovering this fiber for reuse, we divert unnecessary waste from landfills, help reduce greenhouse gas emissions, and extend the fiber supply. In fact, it is so beneficial, that we have committed to exceeding a 70-percent recovery rate by 2020 as part of our commitment to Better Practices Better Planet 2020.

Regardless of which products you choose, the goal of the forest products industry – particularly AF&PA members – is to operate in a sustainable manner that protects the environment and allows for the continuing growth of our resources. The industry provides lifeblood jobs in rural communities across the country. The answer to growing green jobs is to provide affordable and achievable regulatory standards for these businesses to meet, allowing for growth – both environmental and economical.

The current economic mess is mainly a result of government meddling, using the budget, regulations, and the tax code to push an agenda that Washington deems best. The notion that politicians can “green” the economy is, to quote Hemingway, a triumph of hope over experience.

Just this month, The New York Times reported:

In the Bay Area as in much of the country, the green economy is not proving to be the job-creation engine that many politicians envisioned. President Obama once pledged to create five million green jobs over 10 years. Gov. Jerry Brown promised 500,000 clean-technology jobs statewide by the end of the decade. But the results so far suggest such numbers are a pipe dream.

Environmental values embedded in our society produce continuous improvements in air and water quality, resource conservation, waste handling, and technology. In terms of energy per dollar of GDP or carbon per dollar, our economy is becoming increasingly less energy and carbon intensive. In fact, as Jesse Ausubel of Rockefeller University has demonstrated “the United States has averaged about one percent less energy to produce a good or service each year since about 1800.”

Moreover, Ausubel has attributed this phenomenon not to government intervention but to the fact that “the natural evolution of the energy system is away from carbon.” Technology, innovation, and market forces have been the drivers. And they will continue to be if the government lets them function.

The lesson here is that government should not pick winners for future energy sources; rather, it should provide clear and consistent rules for competition and an environment that encourages private investment.

In a recent evaluation of federal subsidies for energy producers, the U.S. Energy Information Administration (EIA) found that federal energy subsidies grew by more than $19 billion from 2007 to 2010—from $17.9 to $37.1 billion.

Accounting for $9 billion of that total jump, renewable energy enjoyed the biggest increase. Subsidies for these fuels (wind, solar, biofuels, etc.) now total $14.7 billion. And taxpayers may be wondering how much bang they’re getting for their bucks. A 2008 EIA report helped answer that question—demonstrating that while all sources averaged $1.65 subsidy per megawatt hour, wind and solar received about $24 per megawatt hour.

Experience in the Euro-zone has clearly demonstrated that making “green jobs” a primary national objective has done more harm than good. Energy prices, especially electricity have soared, economic growth, except for Germany, has been stagnant, and unemployment has been worse than ours. These results are not surprising.

A study published by Juan Carlos University in Spain concluded that for every green job created 2.2 would be lost. Commenting on the study, Institute for Energy Research (IER) president Thomas J. Pyle said:

As this study makes clear, Spain has spent billions in taxpayer resources to subsidize renewable energy programs in an effort to jumpstart its ailing economy – and what they’ve gotten in return are fewer jobs, skyrocketing debt and some of the highest and most regressive energy prices in the developed world. Now, as U.S. policy-makers prepare to embark Americans upon a similar course, this report offers our first realistic glimpse into what we should expect in return for that unprecedented sacrifice of public resources and personal autonomy.

Other studies have reached similar conclusions. For example, in a study entitled “7 Myths About Green Jobs” PERC concluded:

To attempt to transform modern society on the scale proposed by the green jobs literature is an effort of staggering complexity and scale. To do so based on the wishful thinking and economics embodied in the green jobs literature would be the height of irresponsibility. There is no doubt that significant opportunities abound to develop new energy sources, new industries, and new jobs. A market-based discovery process will do a far better job of developing those energy sources, industries, and jobs than can a series of mandates based on flawed data. The policy debate should be open so we can dispel the myths and focus on facts and analysis.

We are on the verge of a double dip recession and a total loss of confidence in government to set a sound and successful economic policy. There are a series of steps the government can take to reverse the current state of economic affairs. These include setting a course that brings federal spending back to the historical level of 18% of GDP, laying out a clear path to entitlement reform, simplifying the tax code, removing impediments to private investment and job creation, with reforming the regulatory system, and imposing a moratorium on new regulations except in cases of a clear and present danger.

Renewed economic growth and the investment that goes along with it will spur the new technologies that will take us further down the road of a lower carbon economy.

What are Washington's biggest obstacles in moving the country toward a green economy?

Answer:

Washington is. The political elite as a whole is dysfunctional even if there are some very good people working hard to improve things. In this political environment, especially heading toward what could be the most contentious, emotional-laden, and, frankly, least thoughtful election cycle in a very long time it is quite doubtful that much will be done to help develop green energy. With the Tea Party and other groups within the political elite who think green energy is some sort of plot on the part of the dreaded scientists, academics and other assorted people who rely on the dreaded data and evidence then don’t expect much. They know how to throw the wrenches into the political works. So be it. The Chinese, the Indians, even the economically challenged Europeans are way ahead of us on these changes. Qatar and UAE are miles and miles ahead of us on these issues in many ways even though they are hydrocarbon states. At least their leadership have visions on these issues and act on them.

What policies (such as tax incentives for electric vehicles or the creation of a clean-energy development bank) would help create jobs while also increasing clean-energy usage?

Answer:

Forget the idea of a clean energy development bank. It will likely turn into a trough for the politically connected who are often not the best to have new energy systems move forward in the better ways. Tax incentives might work for the short run, but in the long run the technologies and their applications need to prosper on their own. Nevertheless, the chance that tax breaks will be passed any time soon is very low. We need to look at the political and economic situations as they are. Then we can think about options.

Is it possible for Washington to create green jobs in the current budget-cutting environment?

Answer:

Not in any effective and long run manner. Many of our states and localities have a better chance of getting something done.

Or should the federal government step aside and let the free market determine the future of clean-energy jobs?

Answer:

The free market does not exist. You mean the private sector with all of its rules, regulations, laws and so forth. The greatest hope for a better energy future is the private sector. The Chinese and others could be driving their energy change, albeit even there in a marginal way compared to coal and oil use, because they have the government funds and the political will to make it happen. We have neither. If anything Washington is in the way by not creating some sense of policy stability on many fronts: in finance, in taxation, on the debt issues, on government budget cuts, and just about everything else that could affect the decisions to go forward with a green energy investment. Also, most green energy companies should not rely on the Department of Commerce and State to help them develop overseas markets. They are extremely understaffed for this and extremely overworked on other issues. They will also see cuts in their budgets. Helping companies develop export markets may be the best way Washington could help them survive and prosper. But, as with many other issues in this city: I am not going to hold my breath to see it happen.

It’s time to take off the kids’ gloves in the energy debate.

For the last five years, clean-tech advocates have extolled the potential benefits of a clean energy economy. You know the drill: millions of new jobs; freedom from oil; better technologies and cleaner air.

Where have we gotten in terms of policy outcomes? Besides ARRA’s clean energy investments and higher fuel mileage standards, practically nowhere, and the clean energy industry is poised for a crash, as my colleagues argued on this forum.

Meanwhile, on the political front, we are witnessing one of the harshest backlashes against the role of government and public investment in U.S. history. The Tea Party has successfully hijacked the national agenda to focus on deficit reduction at all costs, even with unemployment above 9%. Science and technology budgets are under attack across the board, with the recent House Appropriations bill slashing budgets for energy innovation, NIST, NASA, and the Office of Science and Technology Policy, which was cut by over 55 percent. What will emerge from the Joint Committee on Deficit Reduction – or what the outcome will be if it fails to reach a deal – is highly uncertain, but it could result in even more draconian cuts to energy and technology budgets.

The bottom line: clean energy and innovation advocates across the board are losing. Badly. No matter how grand the benefits of a sensible economic policy proposal might be – whether in clean energy or other sectors – extolling these benefits is hardly a winning approach in today’s political environment.

Hence the need to take off the kids’ gloves and develop a new political strategy.

As I just argued at Breakthrough Journal, if advanced energy advocates want to help salvage the United States from a decade or more of political dysfunction and economic malaise, they need to present a stark choice to the public in the years ahead: elect “leaders” who refuse to govern and would tear the country down -- thus empowering China to dominate the 21st century -- or choose a vision and agenda to rebuild the economy and reclaim American strength for decades to come.

Despite the current dysfunction, exceptionalism still runs deep within the American psyche, as it has since the founding and throughout Civil War and Great Depression. As national pollster Stan Greenberg has said, “People think the country is in trouble and that countries like China have a strategy for success and we don’t. They will follow someone who convinces them that they have a plan to make America great again. That is what they want to hear. It cuts across Republicans and Democrats.”

Earlier this year, a Gallup poll found that 52% of the public would name China as the world’s “leading economic power,” the highest percentage favoring another country in Gallup polling history. In contrast, only 7% named Japan, and just 3% the European Union. Meanwhile, the IMF recently projected that China’s GDP will surpass the U.S. by 2016, measured by purchasing power parity — a vastly over-optimistic prediction, but shocking nonetheless.

This isn’t rocket science. Voting to cut vital technology and infrastructure budgets – especially in the strategic advanced energy industry – should be equated with supporting Chinese economic dominance, plain and simple. Even Ronald Reagan recognized the importance of these budgets and once declared: "I've urged Congress to devote more money to research... It is an indispensable investment in America's future... Some say that we can't afford it, that we're too strapped for cash. Well, leadership means making hard choices, even in an election year."

The television ads practically write themselves.

This isn’t to imply that no groups have ratcheted up the competitive analysis on China; my colleagues and I did so in 2009 with “Rising Tigers, Sleeping Giant,” as did the Pew Foundation and other groups. But there is still no concerted political and policy strategy to put this analysis to good use.

Of course, the neoliberals and cosmopolitans will balk and urge against such competitive and hard-hitting tactics – never mind the fact that China is using such measures against the U.S. on a daily basis, not only rhetorically, but with a wide variety of protectionist economic policies. In contrast, this isn’t about U.S. protectionism, but spirited competition to get our house in order and embark on a nation-building project here at home.

Those who are still committed to American leadership — Democrats and moderate Republicans alike — must recognize that “the vision thing” hasn’t worked to advance clean energy and other strategic industries. The public needs to understand the full stakes for the United States and the world if we fail to reinvest in the foundations of our economic dynamism. And what’s at stake is nothing less than the American era and international order as we know it.

Washington can play a key role in stimulating America’s clean-energy economy. In this time of fiscal austerity, supporting energy efficiency is among the best, least expensive and quickest ways to encourage greener and more robust economic development. It’s a proven way to help America save energy and money while creating jobs.

A number of federal initiatives that make smart, targeted investments can spur innovation and job growth in the clean energy sector. The Energy Savings and Industrial Competitiveness Act of 2011 (S.1000), sponsored by Senators Jeanne Shaheen (D-N.H.) and Rob Portman (R-Ohio), is a good example. The Shaheen-Portman bill appropriately gives energy efficiency a prominent place on the nation’s energy policy agenda.

S. 1000 includes a series of measures that save energy and reduce costs. For example, its provisions would help drive energy efficiency gains in buildings and manufacturing, thereby creating green jobs and environmental benefits.

Buildings consume 40 percent of all energy used in the United States. The Shaheen-Portman bill sets a goal of zero net energy in new buildings by 2030. The ACC has long supported updating building energy codes because they help investors overcome market barriers while reducing energy costs for businesses.

S.1000 would also establish a $700 million loan program through 2021 to encourage manufacturers to adopt commercially available energy-efficient technologies and processes not yet widely implemented. This would enable American manufacturers to improve equipment and reduce energy costs, which would help make them more competitive in the global economy.

Chemical makers and many other manufacturers use natural gas to create two forms of energy—steam and electricity—for industrial facilities. Known as “combined heat and power” (CHP), this kind of energy is generated close to where it is needed, so little is lost in transmission. CHP can produce energy twice as efficiently as older coal burning electric utilities.

Expansion of CHP is supported broadly by business, labor and environmental groups and could provide 20 percent of U.S. energy generating capacity by 2030. We support policies to encourage investment in this more efficient generation of industrial energy.

Chemical manufacturers supply a wide range of materials, products and technologies that enable appliances to be more energy efficient. Improved appliance energy conservation standards, such as those in the Implementation of National Consensus Appliance Agreements Act of 2011 (S.398), could cut consumers’ home energy costs by $43 billion through 2030, according to the American Council for an Energy-Efficient Economy. Existing federal appliance standards have already saved taxpayers more than $300 billion and reduced energy use by 3.6 percent annually.

The Senate Committee on Energy and Natural Resources, led by Chairman Jeff Bingaman (D-NM), has proposed creating a Clean Energy Deployment Administration (CEDA) within the U.S. Department of Energy (DOE) that would help finance clean energy projects. CEDA would provide loans, loan guarantees, and other financial incentives to mitigate investor risk. The proposal would encourage the development of new clean energy technologies and help move innovations out of the lab and into the marketplace.

To drive economic growth and meet our nation’s environmental goals, America needs a comprehensive energy policy that promotes energy efficiency in the industrial, commercial and residential sectors. This includes the adoption of strong energy efficiency building codes and more efficient generation of industrial energy.

Improving energy efficiency is simply a smart way to do business. The private sector leads the way when it comes to innovation and new clean-energy technologies. But Washington can and should be part of the supporting cast.

(These comments were submitted by Rebecca O. Bagley, President and CEO of NorTech)

Throughout the country and the world people are clamoring for cleaner energy, cleaner economies, cleaner jobs… and more. In response governments, researchers and companies are competing with increasing ferocity to get out in front of that curve and capture their piece of what promises to be a huge pie.

So what is the upside potential of the clean economy? Ultimately no one knows for certain, but advances are being made every day that are giving us a peek at what is behind the green curtain of the clean economy.

We’ve already seen some encouraging first steps. The Brookings Institute’s recent evaluation of the clean economy found that “26 percent of clean economy jobs are in manufacturing.” Coming from Northeast Ohio with its long and successful history of manufacturing, we find this good news.

We also thought that this would be a good place to start. With Ohio ranked sixth in the nation in the overall size of our clean economy and Northeast Ohio home to “several hundred clean economy companies,” we narrowed our focus on Northeast Ohio and found that we had a formidable base in advanced energy. With this core level of activity, we made the strategic decision to focus on growing this segment of our clean economy.

We began by gathering more than 30 representatives from the region’s advanced-energy companies and research organizations. The goal was to create a detailed vision and action plan to achieve growth by focusing on Northeast Ohio’s core assets, markets, strengths and competitive advantage. The result was our Advanced Energy Roadmap, partly funded by the Economic Development Administration of the Department of Commerce, which was highlighted in the Brookings report and recognized by the White House.

This roadmap outlined a process by which companies can gain access to capital, expand the current supply chain and drive overall cluster growth. In addition to being a “bottom-up” strategy that is grounded on the realities of our region, there is significant evidence to suggest that the number of jobs “clustered” clean economy regions grew significantly faster than non-clustered regions.

By leveraging our existing strong manufacturing sector, we also can help companies transition into new, emerging markets that will spur innovation and further drive growth in the clean energy economy.

Is it worth it? Our Advanced Energy Roadmap has identified $30 billion in market opportunities and as many as 5,000 potential new jobs for Northeast Ohio over the next seven years.

Just like all politics are local, our national economy is based on a network of smaller, local, regional economies. To be truly effective, federal and state governments need to support bottoms-up strategies that better enable regions to be successful which, in turn, will drive the national economy. Programs such as the EDA’s “i6 green” initiative is just such an effort.

It’s this kind of collaborative and cooperative approach – between the public and private sectors – that will help accelerate our national economy – green, clean or otherwise.

If Washington wants to enable the growth of American’s clean energy economy, it must think globally and act regionally. The global energy industry is in the midst of a multi-decade transformation into a collection of clean energy sectors. The US is lagging China and number of overseas competitors in public and private investments as well as the speed of innovation scale-up an adoption. However, the US won’t be a global leader in clean energy by employing China’s strategy. We need to recognize the unique strengths and assets of our distributed, private sector, innovation and entrepreneurial economy, while also recognizing that the US has a collection of regional and state energy markets that are highly regulated. The challenge at hand in the US is to speed energy innovations and enable the deployment of those innovations in a way that unleashed private sector entrepreneurship and regional economic growth. Both pieces require an active federal government as a partner to the private sector and regions, enabling a flexible, regionally-based innovation and market strategy.

Fostering Regional Innovation

As Mark Muro suggests in his comments, regional innovation clusters – defined as geographic concentrations of interconnected companies, entrepreneurs, investors, researchers and other institutions in a particular field – are central to the innovation process. We’ve long known that clusters can leverage proximity to suppliers, specialized information, human capital, public institutions, and more to create significant comparative advantages. Mark’s recent research at Brookings demonstrates that the “cluster premium” is robust within the clean economy, with clustered establishments growing 1.4% faster than isolated ones.

While clustering is already providing important benefits in the clean economy, more needs to be done to strengthen cleantech innovation networks and address gaps in the innovation pipeline. Particular attention should be paid to gaps in the spinout, seed, or translational development phase, at which newly formed ventures often struggle to attract capital, expertise, and customer validation. There are a number of models for federal support to regional public-private partnership in this area (both existing and proposed) including EDA’s i6 Green Challenge, which Mark mentions. We at the New England Clean Energy Council have proposed a Clean Energy Innovation Consortia model that would accelerate research and commercialization efforts, drawing on regional partners from both the private and public sectors. The key is to leverage the power of clusters that can connect innovators with regional early adoption markets and business partners, strengthening existing networks and bringing together existing institutions to help technologies bridge the early-stage valley of death. These regional public-private initiatives don’t require a large federal bureaucracy. But they do need flexible, modest federal matching funds to accelerate regional innovation markets and initiatives.

A Robust Role For Government

There is much more that the federal government can do to accelerate the clean economy beyond supporting regional cluster development. It’s critically important for the federal government to fund basic and applied research, which has not been adequately funded by the private sector because no firm can capture all the gains of such research. The federal government should also foster demand for clean energy both through expanded government procurement and market standards that can create demand for clean energy innovation. Congress can also address the gap for scale-up financing through the creation of “green bank” mechanisms along the lines of the CEDA proposal, or through a repatriation tax cut linked to cleantech investments.

In all of these efforts, Washington should consider itself an enabler of and a partner to bottom-up innovation and entrepreneurship driven by the private sector. Josh Freed hits the nail on the head in pointing out that “the electricity sector is one of the most highly regulated and balkanized segments of the economy.” Energy markets are indeed regional, and many regulatory intricacies will need to be sorted out within and between the states. But federal involvement remains crucial. The US cannot compete against China by mirroring its centralized model. Our strength is in our unrivaled innovation assets and distributed model of economic growth. Yet, clean energy is too young, too capital intensive, too regulated, and too competitive to be left wholly to the private sector. Conversely, a purely federally driven clean energy innovation effort would encumber the innovation and entrepreneurial spirit, insights and capabilities across the country, slowing down the dynamic growth and evolution of the US as a leader in emerging clean energy industries.

The federal government can accelerate clean energy market building across the regions by partnering on regional public-private partnerships and co-funding innovative initiatives. Just as the Obama administration has pushed progress in education through a “Race to the Top”, Washington should set the goals for transforming our energy systems and reward regions that innovate and rise to the challenge. If D.C. wants to realize the economic promise of a clean energy economy, it must think globally and act regionally.

(These comments were submitted by Matt Hourihan, Clean Energy Policy Analyst at the Information Technology and Innovation Foundation)

Job growth in clean energy is a tricky subject. As Brookings found, green sector employment has increased substantially in recent years, and this trend is to be applauded. But a key economic challenge is to make sure that we aren’t just swapping green jobs for fossil energy jobs, and are actually achieving net job growth. And an important way to do that is to look beyond the US market.

Think of it this way: over the past 40 years, energy expenditures have tended to account for less than 10 percent of GDP, only rising above that threshold in the crisis-riddled 1970s. There is little reason to expect energy consumption to account for an increasing share of the economy; in fact, we want the opposite to happen, through lower energy costs and ever-declining energy intensity. But if we’re using less energy, and paying less for it, then relying on domestic consumption for green job growth will have its limits.

So while the domestic market is important, we also need to place major emphasis on foreign energy trade. As Josh Freed points out, the global clean energy market will likely be worth trillions in the decades ahead, in large part due to increased energy use in the developing world. If we’re serious about achieving net employment growth in the green economy, making sure we are the world’s supplier of clean energy is essential.

From a trade perspective, getting off foreign oil is perhaps the smartest thing we can do. It would essentially cut our trade deficit in half and bring energy jobs home. It’s physically impossible to fully replace foreign oil with domestic drilling, or to insulate domestic consumers from global price spikes. Liquid-based fuels from coal are not sustainable in the long run. The eventual answer might be advanced biofuels grown by American farmers, or electric vehicles running on clean American electricity, or hydrogen fuel cells, or a mix of these – we need to drive hard at all solutions with promise, to make them competitive with petroleum. Unfortunately, innovation requires public investment, as my colleague Matthew Stepp argued below. It always has. Congress may be uninterested in making these investments now, but they’ll have to eventually if we’re to break the tether of fuel imports.

But creating viable alternatives is but one piece of the green jobs puzzle. We can’t export it if we can’t build it; yet American manufacturing has declined for decades, and suffers from ongoing underinvestment. Senator Wyden’s office found last year that the US is already running a $4 billion trade deficit in clean technologies, mostly driven by wind and solar. We need a broad-based strategy to build the domestic clean energy supply chain, improve access to capital, incent training, and boost competitiveness. If Congress can’t put in place measures to advance domestic manufacturing and the jobs that come with it, then the states should.

Along with these efforts must come greater promotion of US exports, through international agreements, trade missions, greater access to export financing, and other means. But even if we fully ramp up domestic manufacturing and export support, American firms face unfair trade barriers around the world. Trade partners can impose tariffs on clean energy products, require domestic sourcing for new power plants, erect purposefully onerous technical standards, or engage in outright intellectual property theft. Such practices are outside the spirit of existing trade agreements, and should be aggressively prosecuted by US trade representatives through the WTO. Doing so would no doubt benefit US firms and the jobs they can create. There may be little federal appetite to invest in innovation and competitiveness at the moment, but knocking down trade barriers requires no new revenues, and thus is a logical near-term step.

One of the key obstacles to renewable energy deployment is the old-fashioned way renewable energy projects are financed. Where financing for other capital-intensive industries has evolved from private bank lending to public markets for debt and equity, renewable energy finance remains mired in an early stage of development, relying on private sources of capital. Public markets would provide more capital and at lower rates than private sources. Renewable energy will never get to large-scale deployment without development of public market instruments.

It is ironic that at a time when investors face a choice between investing in volatile stock markets or very low interest rate bonds, individuals cannot invest in a publicly traded stock made up of renewable energy projects that have stable, long-term attractive returns from projects begging for financing. A typical solar project, with proven technology and a 15-20 year purchase contract with an investment grade utility for the power, will yield at least 8 percent to an equity investor over its life. Projects for commercial and industrial projects offer even higher yields, but languish because obstacles prevent money from flowing from those investors that would be interested in these attractive yields.

So why aren’t there public markets that would help finance renewable energy? A lack of financially attractive returns is not one of the reasons.

There are two major reasons:

1. Tax equity partners finance a large portion of renewable energy projects, which under current legislation, needs to be obtained privately. While the U.S. supports renewable energy projects in the form of tax credits, because projects have interest expense and depreciation, there is little taxable income at the project level. As a consequence, project developers need to find tax equity partners that will help finance the project in exchange for tax benefits and a fixed rate of return. In contrast to other sectors, such as pipelines, where these tax benefits can be used by public investors in the form of publicly traded Master Limited Partnerships, renewable energy projects are not eligible for MLP treatment. Not only is tax equity expensive and not widely available, tax equity partners get their returns from the first several years of cash flow from the project. It is difficult, then, to create a currently yielding investment for public equity investors when there are no cash flows. So the current sources of equity are private.

2. There are no standardized contracts. Every project has many contracts—from the power purchase agreement, to one governing the relationship between tax and non-tax equity partners, to loan agreements. While contracts from one project to another are very similar, each project is documented on a bespoke basis. Without standardized contracts, project debt cannot be aggregated into large pools of public debt that could attract investor interest. So the current sources of long-term project debt are banks—who because they are funded by short-term deposits—are generally reluctant to be long-term lenders instead of pension funds and insurance companies who would wish to invest in long-term bonds to match their long-term liabilities if they had the opportunity. And without an efficient source of public equity, there are no natural incentives for equity providers to help standardize contracts to help establish a bond market.

Because the financial infrastructure for financing of renewable energy projects is stuck in an out of date world of private sources of equity, tax equity and bank debt for proven technology, it is hard to know how much failure in financing innovative technology is due to innovative technology and how much is due to the general immaturity of financing. Credit markets evolved from bank debt to the investment grade debt market; once investors got comfortable with the functioning of the market, some investors wanted higher yields, and hence the high-yield market developed. And from the high-yield market came the emerging market debt market. We will likely find the same process will occur if we could create public financing markets for proven renewable energy technology: Some investors will likely want higher yields from providing financing for innovative technology.

But without the advent of public markets, we will continue to struggle to attract the large quantity and low cost of financing the renewable energy sector needs for deployment.

Creating public markets will lower the cost of renewable energy and put people to work immediately.

Decarbonizing our nation’s energy sector is a classic case of opportunity presented as a challenge. Federal leadership, largely missing to this point, is needed to unlock the potential for the economic growth and job creation inherent in moving to a new energy economy. Here are six ways Washington can do its part to green America’s economy.

1) Cap greenhouse gas emissions. The single most important measure Washington can take to green the economy is to cap allowable greenhouse gas emissions. As I’ve argued (here and here), a market regime can be structured with a muted impact consumer costs as the cap tightens. If a sectoral phase-in is necessary, start with the utility sector, then move to transportation, buildings and the rest of the economy. With no federal guidance on GHG emissions, billion-dollar decisions all down the line – about power plant investment, generation fuels, the value of energy efficiency and smart grid – are being made with faulty information.

2) Maintain EPA authority under the Clean Air Act for criteria pollutants. Congress must let EPA do its job. Yes, the collected new EPA regulations are daunting, but states are showing they can be implemented at an acceptable cost. Last year Colorado, with greater than 55% reliance on coal generation, implemented the Clean Air Clean Jobs Act. This new law puts the state’s investor-owned utilities on track to comply with all reasonably foreseeable EPA air quality regulations. Enforcing the federal Clean Air Act will accelerate the shift from coal to gas, renewables and efficiency, stimulating investment and creating clean energy jobs. The path to compliance will vary by state and regions. Of course, the optimal path forward for a state would be much clearer if Washington had an actual climate and energy policy.

3) Pump more money into R&D on carbon capture and storage. We won’t settle the debate of whether America can eventually abandon fossil fuels, at least not on a timeframe that matters. Personally, I think it’s likely that coal and natural gas will be with us for a long time. Even if the US could find a fossil-free path, it’s doubtful China and India can. To meet world GHG reduction goals, we must figure out how to capture and store carbon dioxide economically. Increasing today’s relatively paltry spending on CCS, through existing channels like our national energy labs and EPRI, will be stimulative on its own. And we should seriously appraise the potential to conduct joint research and development on CCS with China.

4) Quit jerking around support for clean energy. Tax incentives for renewables, mainly solar and wind, must be stable to have the desired effect. Tax programs should not come and go like the Cheshire Cat.

5) Adopt a national Clean Energy Standard. Under a national CES, “clean” will be defined by greenhouse gas emissions. That means a national CES is a workaround, a substitute for an actual carbon cap in the utility sector. A national CES may be doable by Congress, whereas a carbon cap may have to wait on the politics. A CES should include the usual suspects: wind, solar, geothermal and energy efficiency; but also new hydro, new nuclear, coal with CCS, and natural gas (at half-credit).

6) Reward early adoption by states. Today’s clean energy story in the US is a tale of two cities. Some states have moved aggressively, adopting their own climate action plans and strong clean energy policies. Other states are seemingly stuck in the 1980s. Washington’s inaction compounds this problem. Congress should make it clear that there is no advantage in hanging back: that early action by states will be recognized and rewarded in future emissions legislation.

The world is in transition and is offering possibly the biggest economic opportunity of the 21^st century. The question is: Can we grab it? I believe we can, but we need to be both smart and strategic about it. Let me explain this through a macro-picture and some global trends.

First, the long-term trend shows that the global economy[1] will undergo steady growth and, on average, people’s income levels and buying power will rise around the world. This prosperity is the good news. History tells us, however, that consequently in many countries, energy use per person is likely to rise as well[2], especially for developing economies. Access to affordable energy supply as well as their environmental impact poses many risks. Second, the world population is also growing from 6.5 billion people today to almost double by the end of the century, mostly in developing economies. This dual growth of population and the economy suggests that the total world energy demand will very likely increase steadily.

Where will this energy come from? In the transportation sector, the largest oil consumers are USA, China, Japan and India. They also happen to be nations that are the largest oil importers. Hence, access to and purchase of transportation fuel pose the dual and common risks of national security and trade deficits. Much of the world is looking for alternatives that reduce their dependence on foreign oil. For the electricity sector, coal is by far the largest source of energy and, fortunately, some of the largest reserves of coal are found in the USA, China, Russia and India. However, traditional large-scale utilization of coal leads to harmful environmental impact, both locally and globally, which many countries are keen to overcome. Fortunately, the US has found massive reserves of natural gas, but other nations have not. In short, many nations are faced with the daunting challenge of how to sustain long-term economic and population growth. Business-as-usual seems to be unsustainable because of a combination of national, economic and environmental security risks. The world is in transition and is looking for leadership.

This transition offers the opportunity for the US to innovate, manufacture and sell those clean and affordable energy technologies that will allow sustainable growth not just in the US, but around the world. A few examples include clean electricity sources such as solar, wind and nuclear as well as alternative renewable fuels and electrification of transportation. Others include low-cost and energy-efficient water purification and waste utilization. Innovations are needed to reduce the cost of these clean technologies to levels that make them competitive with traditional approaches so that they could be sold profitably without subsidies worldwide. Manufacturing and scaling of these technologies in the US and selling them globally will lead to our economic prosperity via creating millions of high-paying jobs. But there is an on-going global competition - other nations are also positioning to avail themselves of this opportunity. Speed is of essence because we are in a Sputnik-like moment and our children’s future is at risk. Quoting Rev. Martin Luther King, we need to have the “fierce urgency of now.”

The US has by far the best science and engineering based innovation infrastructure and ecosystem in the world– that is our core competency. We have the ability to grab this opportunity and we are certainly doing so – I am fortunate enough to encounter many of these innovations at ARPA-E[3]. However, in the last two decades, we as a nation seem to have taken our eye off the ball in terms of manufacturing and scaling clean energy technologies, which is where a large fraction of the jobs are created. These manufacturing jobs have a multiplying effect, i.e. they create other jobs along the supply chain, and positively impact the whole economy. Furthermore, the feedback loop between manufacturing and R&D is critical to create a cycle of technological innovations. Without manufacturing, we run the risk of breaking this cycle and hurting our core competency of innovation.

Other nations have learnt this and are cherry picking our innovations and attracting them overseas to manufacture and scale. We as a nation need to revert this trend. But there is no silver bullet – we need a multi-pronged approach. First, we need to support R&D for innovations of clean and affordable energy technologies, and in particular those that are scalable by low-cost manufacturing. The government’s role is to fund the science and technology that is too risky for the private sector, with the goal of catalyzing the private sector. While this is necessary, it is not sufficient. Second, we need to create demand for these clean energy innovations here in the US – for example, via a mileage standard for automobiles or a clean energy standard for electricity generation that the President has proposed. This US demand will lead to local deployment and related jobs. It will also lead to some local manufacturing but not all, because part of the demand could be met by imported goods. Again, demand creation is necessary but not sufficient. Third, we must also capitalize on our technological innovations by building first-of-a-kind and commercial manufacturing plants here in the US to also meet the global demand, not just the US one. How do we achieve this?

We need to create new private-public financing schemes that will provide the long-term signal and the cost-effective capital for this infrastructure to be built. To incentivize manufacturing and perhaps bring back some from overseas, we also need to carefully look at our tax policies. The states could create local ecosystems for technological innovation and manufacturing, which is what the US has done very effectively in the past for automobiles, airplanes, semiconductors, etc. Finally, the US higher educational system is by far the best in the world and has attracted global talent to the US. We need to continue supporting this core value, while also paying close attention to our broader education system at all levels, and ensure that it is the best in the world. This is critical for educating a new generation of workers for high-value manufacturing and deployment jobs.

In summary, let us take the lead from the President to out-innovate, out-build and out-educate the rest of the world. That is the best course of action for our nation to create a secure future for our children.

[1] Quantified by GDP per capita

[2] Energy efficiency is key to keeping this growth to low levels and perhaps even flatten or lower it in the extreme

[3] The ARPA-E technologies are showcased at the Energy Innovation Summit. The next one will be held February 2012. More information about the technologies and the Summit are available at: http://arpa-e.energy.gov/

Government involvement in the energy arena is inherent – and can have both positive and negative consequences for investors. Just two or three years ago, policymakers were driven by concerns about greenhouse gas emissions and resource scarcity. Today, the debate has shifted, and there appears to be little impetus toward crafting a national energy strategy.

A lack of political consensus at the federal level has driven the central role to the states, as we’ve observed with renewable portfolio standards, unconventional gas regulations, electric vehicle deployment and grid upgrades. But to achieve scale and overall effect, we need federal action. An effective national energy policy would drive job creation and draw predictably profitable private investment into the right technologies and projects.

A national clean energy standard (CES), already widely discussed in Congress, would ensure continued U.S. technology leadership and boost U.S. job creation and exports by creating a robust domestic market for American clean energy technologies. A CES would allow utilities, power generators and state and local regulatory authorities to choose the best technologies to meet their local circumstances, while minimizing the cost to consumers.

A CES that includes aggressive near-term targets and strong long-term goals would create an attractive environment for clean and innovative energy technologies and a powerful incentive for investments. This could spark a wave of technology deployment, create new jobs, reduce our dependence on foreign energy resources and modernize America’s power generation sector.

As the recent Brookings Institution study demonstrates, clean energy innovation is already leading the revitalization of U.S. manufacturing and creating export opportunities for U.S. companies. GE is a big part of that story, having nearly tripled exports over the last 10 years, from $7 billion in 2000 to nearly $20 billion today. Much of that export growth is a result of advanced energy technology innovation.

The potential job creation opportunities in America’s energy future are vast. The United States has the world’s largest installed base of energy infrastructure, and it is ripe for modernization. Accelerated deployment of advanced clean energy technologies can deliver substantial benefits for both consumers and industrial users and create jobs, but investors cannot commit when the policy outlook is uncertain.

(These comments were co-authored by Jesse Jenkins and Alex Trembath, a new Policy Associate at the Breakthrough Institute’s Energy and Climate Program).

Before discussing the best way to green the economy, it’s important to note that the U.S. economy has been greening steadily over the past three years. Buoyed by the policies established and extended by the American Recovery and Reinvestment Act (ARRA), the largest federal investment in clean tech in American history, the clean energy industry has experienced precipitous growth, as documented by Mark Muro and colleagues at the Brookings Metro program in their recent "Sizing the Clean Economy" report.

Unfortunately, the path of progress may be coming to an end. Our research shows that over 70% of the federal policies and funding support for clean energy that has catalyzed the recent growth of the industry is expected to lapse in the next three years, or has already expired. And make no mistake—clean energy is an industry dependent on government subsidy: tax credits, depreciation and other subsidies compose one third or more of the total after-tax value of most solar, wind or other renewable energy projects, for example. So while ARRA provided a “down payment” on a green economy, as these public investments fade away, we are now more likely to witness a clean tech crash than a clean tech revolution.

As the current programs supporting clean energy, like the Production Tax Credit (PTC) and Section 1603 Treasury Grants, approach their expiration, there are a number of steps the federal government can and must take to avert an impending industry crash.

The first would be to get serious about the long-term energy innovation challenge. Until clean energy becomes cheap and cost competitive without subsidy, the pace of clean energy growth will remain constrained and the markets will face continual risk of industry busts if subsidy and policy support changes. We must treat energy innovation with the same priority we afford other national innovation quests, such as the Apollo or Manhattan Projects or the quest to cure cancer. We must invest far more -- eventually on the order of $15 billion annually -- and far more wisely -- restructuring America's energy innovation system and supporting effective new policy models such as the Advanced Research Projects Agency-Energy (ARPA-E), Energy Frontier Research Centers (EFRCs), and new public-private regional innovation consortia.

Second, Congress can establish a Clean Energy Deployment Administration (CEDA). CEDA would act as a public investment bank whose mission is to help leverage private-sector investment to bring emerging, innovative clean technologies to commercial maturity. CEDA would bridge the commercialization “Valley of Death” and provide a viable and predictable development path for technologies from the laboratory to grid-scale deployment. The Congressional Budget Office calculates that the agency would cost just $1.1 billion over the next four years. While leveraging billions more in private sector investment, the public bank would return profits from investments and financial products to the fund, making CEDA self-sustaining over time.

Another needed policy change is to reform the current clean energy deployment subsidy regime for maturing energy technologies, which today is comprised of a hodgepodge of tax credits like the PTC and the Investment Tax Credit, depreciation benefits and grants that primarily incentivize firms to deploy more of the same, current-generation technology. Instead, we need a smarter new deployment mechanism that is disciplined and designed to drive technology innovation to decrease the unsubsidized cost of clean energy so that it can be competitive without perpetual subsidy. Such a policy could augment a national renewable or clean energy standard (RES/CES) with a set of technology tiers based on technology maturity, which would provide the incentive for utilities to adopt and deploy clean energy technologies across a range of maturities, and demand continual cost reductions from technology firms over time. One way to augment this smart deployment policy would be with a small price on carbon, wires fee on electricity, or oil import fee, which instead of returning a dividend to consumers would generate dedicated revenues for a federal energy R&D fund to help support the continual innovation needed to get clean tech costs down to parity with fossil competitors.

The fate of many ARRA policies remains uncertain, and the unpredictable political machinations of the “supercongress” and ongoing deficit debate in Washington bring yet more volatility to the clean tech policy debate. Nobody expects a second down payment on the green economy on the scale of the last several years. But as current subsidy support runs out, Washington must support the industry by investing more and differently in clean energy innovation to maintain America’s position in the global clean tech race and avoid an ongoing cycle of clean tech boom-and-bust in the future.

In the space of "clean tech" and "clean energy" there are the moon shots and riskier investments that typically dominate the conversations in this space that have potentially larger but unproven future rewards. What to do until those clean energy and clean tech ventures pan out and begin delivering the kind of change they have promised?

We need a smarter approach than just throwing money after the next big thing.

Clean tech and clean energy policy should also mean doing the incremental things that deliver proven results now. One of the best examples is applying new clean technology diesel emissions control and engine strategies to older existing engines, vehicles and equipment.

It's affordable, proven, cost effective technology that would help boost manufacturing and service industry sectors in the building and installing and servicing these clean emissions control and engine technologies and devices on vehicles, buses, marine vessels and locomotive and construction equipment being used right now in every state and almost every local community. It's proven "clean technology -- delivering $13 in environmental and public health benefits for every $1 invested, recognized by the NAS as one of the most valuable environmental proigrams. Not only that but the federal investment dollars have brought private and state and local matching funds and more to the table in a way that leveraged the federal investment.

Environmental and public health groups support it, industry supports it and Congress believes in it -- reauthorizing DERA last fall for another 5 years.

Unfortunately, the Obama Administration proposed terminating the DERA program in the FY 2012 budget.

That's not a way to grow a clean tech economy, by slashing proven programs that are highly leveraged that deliver important and proven societal benefits in the near term, and create demand for clean technlogies like emissions control devices and engine upgrades.

More than ever in this economic climate, our policies should take a balanced view in decisions and priorities for funding clean energy and clean tech programs and they should do it beyond the technology du jour. Continuing to fund proven programs that could widely deploy clean technologies seems like it would make a lot of sense. But unfortunately these Administration actions resemble a penny-wise and pound foolish approach at policymaking.

We need to invest in the moon shots of tomorrow, but also keep nudging those technologies and sectors where we know we can get big benefits for small investments today.

The energy debate in Washington appears to be at a stalemate, at least until the November 2012 elections, and that is a downright shame. As this nation struggles to pull itself out of the economic doldrums, a focus on a clean energy agenda could be one answer to putting Americans back to work.

In 2007, when I took office as Governor of Colorado, we made building a New Energy Economy in our state a cornerstone of my Administration’s efforts. Over a four year period, I signed 57 separate pieces of legislation that were part of our clean energy agenda. As a result, we developed one of the most aggressive Renewable Energy Standards in the country (30% RES for the Investor Owned Utilities by 2020) and legislated a variety of other measures involving net metering, transmission, and clean energy financing, to name just a few. In my last year in office, we wrote, passed and signed a measure that required our major investor-owned utility to transition nearly a thousand megawatts of coal-fired power to natural gas generation by the end of 2017.

Our efforts over that four year period helped us do several things:

· First, we have diversified the state’s energy portfolio to include a much greater mix of cleaner, domestically produced energy.

· Second, because our energy portfolio, moving forward, involves greater utilization of clean energy resources, we provided our state with a roadmap for addressing the environmental challenges we face concerning greenhouse gases, and other hazardous emissions. We are one of the first states in the country that can reliably predict compliance with the EPA’s Air Quality Standards before the end of the decade.

· Third, we have seen SIGNIFICANT job creation as a result of the clean energy policies we pursued. Big employers like Vestas Wind Systems, SMA (German solar inverter manufacturer) and Conoco Phillips (Global Laboratory for Renewable and Alternative Research) have made Colorado their home. But so have medium-sized and small businesses that saw the promise of our clean energy agenda providing some level of market certainty for the sector. In Colorado, the clean tech sector is the ONLY sector that actually grew during the Great Recession.

· Finally, we were able to accomplish all of this while ensuring that the impact to ratepayers is minimal. For example, we will accomplish the 30% RES with a 2% rate cap for consumers.

What can Washington do? To begin, the federal government can learn from the states. Look to states around the country with successes similar to Colorado, and decide which components of a clean energy agenda work at a national scale. In particular, Washington should consider the benefits of a low carbon energy standard, one that makes room for natural gas to be part of a clean energy portfolio. They should understand that what investors want most is something Washington is best able to provide – market certainty in the clean tech sector. The most direct way to create that certainty would be to put a price on carbon emissions.

Washington must not back off our commitment to clean energy research and development, at our national laboratories, or in our institutions of higher education. Washington should look at the various state programs that provide financing mechanisms for clean energy companies, including the energy efficiency sector, and decide how to best complement those efforts. Finally, Washington should study the ongoing efforts in states, and ensure that, whatever they do, they do no harm. There are a variety of ways that Washington could act that would represent a step backward for states that have been focused on building a clean energy agenda for some time. Those states should be rewarded, not undermined, for their early efforts.

We have a huge challenge before us in decarbonizing the US economy. But, as we know in Colorado, this challenge is also an opportunity: greening the economy can be the engine of economic development and job creation. Some states are moving ahead, but Washington is missing in action. It’s time to get going.

America has already begun a transition to a clean and green economy, and it can continue, and improve the overall economic outlook, by keeping focused on making our economy more energy efficient, improving renewable energy, and eliminating outdated giveaways to dated fossil fuel technologies.

The clean energy sector is creating jobs at a rapid clip – a report from the Solar Energy Industries Foundation shows nearly 100,000 jobs in just solar energy alone in the US, with 25-50 thousand more possible in the next year. Wind energy is also making gains, and helping to replace outdated power plants, many of which are well past their expected operational lifetimes. And energy savings programs can put Americans to work today installing the best energy option out there for our wallets and our wild places – after all, saving energy saves land.

Transitioning to clean and renewable energy sources isn’t just good for the environment, it’s good for people as well. The American Lung Association notes that improved ozone and mercury restrictions on power plant emissions will prevent 17,000 premature deaths each year – switching to windmills and solar panels for our energy production avoids these pollutants altogether.

Another way to green the economy is to really put time and energy into adapting our communities and natural resources to the unavoidable effects of climate change. Switching to truly renewable energy like solar and wind will help stop climate change in the future, but we still have centuries of emissions to deal with now – and dealing with them can help kick-start the economy.

Restoring natural areas like forests, streams, and wetlands can put Americans back to work now—creating an estimated 40 jobs per $1 million invested; more than double the estimated potential jobs created by the coal, oil, and nuclear power industries combined.

We can improve the economy, the environment, and the health of Americans across the nation by “greening” our economy. Eliminating wasteful subsidies and giveaways to the fossil fuel industry is the critical first step toward a sustainable energy future—the next step is to put these funds to work driving energy efficiency, renewable energy, and climate adaptation programs.

In a recent Foreign Affairspiece, University of California, San Diego Professor David Victor and Tana Energy Capital’s Founder Kassia Yanosek warns of a coming crisis in the clean energy industry. The culprit and one of our biggest obstacles to creating a green economy: the boom-and-bust cycle of short-sighted energy policies that prop up mature, lowest-common denominator technologies, but do little to support clean energy innovation.

To be specific, in many cases, our current policy approach is misguided and counterproductive. The reason is simple: the policies assume we have all the clean energy technologies we need. But this is far from true. Mature vehicle batteries, solar panels, wind turbines, and big-box nuclear energy cost more than their fossil fuel alternatives, say nothing of often being less reliable. So the policy response has been for government to subsidize the cost difference, but at the least the current budget austerity debate shows this to be economically unsustainable as many incentives come to an end or are eliminated. And at worse the boom-and-bust cycle of policy intervention has drawn private sector investment into quick and easy clean energy projects that provide a short-term profit during boom periods, but little long-term competitiveness without subsidies, thus making clean energy growth – and the hundreds of thousand green jobs that came with it - tenuous at best.

And we’ve seen this movie play out before in the early 1980’s and President Reagan’s near elimination of federal renewable energy policy. So at the end of the day if policymakers want to halt the nascent green economy from falling off a cliff they need to make two key decisions. First, policymakers at both the state and federal level should reorient the goal of their energy policies to making the unsubsidized cost of clean technologies cheaper than fossil fuels. Second, policymakers should make green innovation the core driver of energy policy decisions.

But how does this play out in policymaking? A good first step is to do what Mark Muro, and many leading energy thinkers, describes below – the federal government should take their increasingly scarce resources and invest it in the public-private energy innovation ecosystem. This means having a more nuanced and rational budget cutting debate in Congress that transfers spending on counterproductive programs to high-impact, innovative programs which would reverse cuts and boost budgets to programs like ARPA-E and the Innovation Hubs.

If this isn’t possible – and there is little indication that it is – it’s worth taking a deep look at the current energy innovation ecosystem and target ways that institutions can be reformed to maximize their innovative capacity. For instance, DOE should apply elements of the effective ARPA model more broadly, as a high-level White House panel on science and technology has recommended. Policymakers should also reform our energy incentive system to reward performance improvements and cost reductions rather than quantity of production which locks in ineffective energy sources like ethanol (counter to Tom Buis below) and inefficient solar cells.

And even then, greater attention to state energy policies is absolutely necessary. Like Lew Milford argues below, in absence of federal energy policies, states could represent our last chance at spurring green energy innovation and building a robust green economy. But states should take great care to not make the same mistakes federal clean energy policy has made by supporting mature, limited clean technologies and instead ensure that their energy policies spur innovation and drive real cost reductions.

So the answer to whether it’s possible for Washington to support the green economy is yes and in fact it must if we are to benefit from clean energy. It’s just a matter of learning from our past mistakes, getting our goals right and targeting policies at spurring energy innovation.

As is the case with every major energy resource we utilize in the U.S., a smart and stable policy framework plays an integral role in expanding the production and use of clean renewable energy.

By every objective measure, the solar Investment Tax Credit (ITC) has been an amazing success. Since the ITC was signed into law just five years ago, the solar industry has grown faster than any other source of energy and now supports over 100,000 jobs in the U.S. In the last 18 months, the solar industry has built over 60 new factories in the U.S. and created new career opportunities for electricians, plumbers, constructions workers and hundreds of others professions. And for good reason, in 2010 the solar industry was the fastest growing industry in the U.S. Stable policy has not only created much needed jobs during this tough economy, but we have also seen the installed cost of a photovoltaic system drop by 30 percent over this time period. This well-reasoned policy has spurred technological innovation, enhanced the viability and deployment of solar and drastically reduced the cost of solar technologies for consumers. This is in the best interest of the taxpayers and is wholly consistent with a well-reasoned national energy strategy that enhances America’s competitiveness in the global marketplace for energy technology.

The sluggish economy and volatility in capital markets, among other things, have severely restricted access to the private sector capital that is typically used to finance renewable energy projects. The Section 1603 Treasury Program, which was enacted in 2009 and subsequently extended last year, provides needed marketplace liquidity by allowing taxpayers to receive a direct federal grant in lieu of taking the ITC that they were otherwise allowed to claim. This improved the liquidity and efficiency of the underlying ITC and allowed clean energy projects to be developed despite the negative state of the economy. According to the Bipartisan Policy Center, the 1603 program is twice as efficient as tax incentives alone in deploying renewable energy technology at minimal cost to the American tax payer.

Unfortunately, the Section 1603 Treasury Program is set to expire at the end of the year. If this happens, it will significantly restrict access to capital for promising renewable energy projects and reverse the positive economic trend of the solar industry. To continue reaping the substantial job creation, economic and energy security benefits associated with a robust domestic solar industry, Congress should extend the Section 1603 Treasury program.

It is also worthwhile to note the success of the Department of Energy’s (DOE) Loan Guarantee Program. This initiative leverages 13 dollars in private investment for every taxpayer dollar that is used to underwrite loans to support a host of renewable energy projects, including solar. This program is vital for promising utility-scale solar projects that are utilizing a host of cutting-edge technologies to harness the sun’s abundant power.

When it comes to creating jobs and new opportunities for states and communities hit hard by the recession, solar is a great investment. Continuation of these cost-effective incentives will allow the nation to reap the significant benefits associated with a robust U.S. solar industry.

How—not whether—Washington can create clean energy jobs, is exactly the right question for this moment. Not only is this possible even in today’s era of budget-cutting, it’s an absolute necessity. That’s because there is a global race to seize the $2.3 trillion clean energy market. That’s 16% of U.S. GDP. For the winner, it means new companies, new jobs and economic growth at a time this country desperately needs it. But we can’t win this race, or get our economy out of this recession, by standing still.

Let’s start with a basic reality: there is no free market in energy. In the United States, the electricity sector is one of the most highly regulated and balkanized segments of the economy. Oil is not too far behind. Federal, state and local governments already play major roles in how or whether companies invest in new technologies, pass the cost of construction of new facilities onto ratepayers, decide what fuel sources to use or even where and how much it will cost to drill oil and gas wells. The absence of clear federal energy policy, state policies focused on very limited outcomes and regulatory inflexibility have created multiple drags on innovation and clean energy jobs here at home. As we’ve seen in Germany, China, the United Kingdom and Brazil, where governments have put smart policies in place to help the private sector, jobs have followed.

Even without a free market, it is still up to the private sector to create new clean energy jobs. But Washington can help. It can create a Clean Energy Bank, seeded with a one-time public investment, to help unleash far greater amounts of private capital for promising clean energy technologies. It can continue smart investments in emerging technologies through programs like ARPA-E and Sunshot. These Department of Energy programs are providing early resources to companies that might become the Apple or Cisco of clean energy with a little public support that brings in a lot more private investment. It can help the military with its goal of deploying clean energy by providing sufficient funding and removing regulatory roadblocks. This is something the Pentagon is already starting, as the Army showed last week in making its procurement process more open to clean energy companies.

The United States will not lead the clean energy race without overcoming our biggest obstacle. That’s policy makers in Washington who seemingly have lost faith in the American model of economic success. Yes, we are going to have to make very tough choices to cut the budget. But we should not ignore a 150 year record of public and private sector partnership to invest in and scale up new technologies until they are ready to succeed – or fail – on their own. This model brought us the intercontinental railroad, commercial aviation, civilian nuclear energy, the Information Technology boom and biotechnology. It’s the equivalent of investing in a college education to make more money over the lifetime of one’s career. We will not create jobs, or eliminate the budget deficit, without it.

Having a healthy economy requires a commitment to exploiting U.S. leadership in industrial biotechnology to convert our nation’s agricultural productivity and resources into higher value products, such as biobased products, renewable chemicals, and biofuels. Industrial biotechnology is the bridge between agriculture and industry that enables a robust, sustainable bioeconomy and it is the key to creating good jobs in research, development, manufacturing, agriculture and forestry.

A report produced by the Biotechnology Industry Organization shows that the advanced biofuels industry could generate more than 800,000 net new jobs by 2022 by meeting the goals of the Renewable Fuel Standard. This is consistent with the USDA’s projection of jobs and economic growth from production of new bioenergy crops for the RFS. A new report forthcoming from Iowa State University shows that the biobased product industry currently employs about 100,000 people. This is double the number of employees for the industry just two years ago, when BIO estimated 40,000 workers.

BIO has developed a set of proposals to maximize the job creation and economic revitalization potential of industrial biotechnology and biorefinery commercialization, including:

• Reauthorize and Enhance the Biomass Crop Assistance Program (BCAP)
  BCAP is the key program helping farmers to grow new energy crops for advanced biofuels and biobased products. Beyond reauthorizing the program, Congress can enhance it by ensuring it is directed primarily to production of next generation crops for biofuels and bioenergy.
• Reauthorize the Energy Title in the upcoming Farm Bill.
• Make Renewable Chemicals Eligible for Renewable Energy Programs
  Many of the programs in the 2008 Farm Bill’s Title IX renewable energy programs are not available to renewable chemicals and biobased products. Expanding the eligibility of renewable chemicals and biobased products to participate in renewable energy programs would enable additional job creation.
• Reform Tax Code for Advanced Biofuels
  Current tax law does not provide long-term stability for advanced biofuels. Policymakers can amend the current tax code to extend the Cellulosic Biofuel Production Tax Credit through 2016 and add eligibility for algae biofuels and to allow advanced biofuel producers to elect an optional investment tax credit.
• Tax Credit for Qualifying Renewable Chemicals
  Renewable chemicals and biobased polymers can also reduce reliance on foreign oil, create green U.S. jobs, increase energy security, and reduce greenhouse gas emissions.
• Strategic Biorefinery Initiative
  The Department of Defense can help accelerate production and deployment of these advanced biofuels through a Strategic Biorefinery Deployment Program to finance construction of first-of-a-kind biorefineries. Authority to enter into long-term agreements for purchasing advanced biofuels would enhance such a program.
• Industrial Bioprocess R&D Program
  Establishing an Industrial Bioprocess Research and Development program through the Department of Energy would fund projects in industrial biotechnology for renewable chemicals, biobased products, and renewable specialty chemicals.

The bioeconomy will continue to emerge as markets recognize opportunities for sustainable biobased production. The U.S. government can hurry this future by providing incentives to shift rapidly from our over-reliance on imported oil to creation of a biomass value chain.

The recent debt ceiling deal announced this week means two things for clean energy. One, forget Washington as a source of significant new funding and programs for a long time. Two, look once again to the states to keep momentum on clean energy alive.

The first point is fairly indisputable. Virtually every energy commentator has lamented how future, severe cuts to energy and environmental programs are an inevitable result of this new deal. Billions of dollars will come out of most clean energy and environmental programs for the next ten years, probably permanently below last year’s continuing resolution budget levels. DOE and Interior and EPA will see big hits to their programs. Unrealistic dreams of a new carbon tax are finally being put to rest. The cuts could well come to various renewable incentive and tax credit programs.

The second point of returning to the states is the only realistic answer. As Washington conducts a slash and burn campaign to gut clean energy and environmental programs the states are acting more responsibly. Just as they did under some rough times in Washington from 2000 to 2008, the states once again are stepping up their clean energy game.

Connecticut is the first state in the country, under Governor Malloy, to create a new green infrastructure bank, something that Washington has been unable to do. In Virginia, Republican Governor Bob McDonnell recently signed several initiatives into law: one would create a Clean Energy Manufacturing Incentive Grant Program; another raises the net metering limit for homeowners; and two others create a means for voluntary contributions on electric bills to a fund that will use proceeds to fund solar systems at residences, businesses, and nonprofits.

At the same time, Oregon and Massachusetts have created innovative new solar support programs (“Solarize Campaign”) that support communities and neighborhoods to use their collective purchasing power to help residents overcome the financial and logistical hurdles of going solar. The State of New Jersey is using its renewable portfolio program to support offshore wind and offering tax credits to build the associated supply chain to create local jobs and lower transmission investment costs.

Sure, some states are cutting back, or raiding some of their clean energy funds. But that is the rare exception. For the most part, we see steady state funding, and a renewed emphasis on the economic development benefits of clean energy programs, along with a raft of new economic development programs across the country. States are creating clean energy incubators, workforce training programs, technology innovation efforts and looking to major new projects like offshore wind to boost local manufacturing and employment.

So what gives with this schizophrenic state versus Beltway shift? It’s on old story. In Washington, the lowest common denominator policy prevails. The fossil fuel industry has enormous concentrated power to influence key lawmakers to do nothing on clean energy. It only takes a few no votes to kill federal legislation.

In the states, Governors of both parties tend to do what works, what creates jobs and brings in new industries. And for them, clean energy is the new nonpartisan economic driver. It is much harder for opponents to stop the spread of experimentation in 50 states.

This is clear from a recent study by the Brookings Institution that showed how renewable energy is one of the fastest growing industry sectors in the last ten years. It is perhaps the one bright spot in this bleak economy.

Governors get that story, and focus laser like on jobs. Unfortunately, some of our Washington politicians are now solely enamored of debt reduction and have forgotten the 16 million unemployed.

But the states have not. That is good news for clean energy. Now if only Washington understood how to work more with the states and ride that clean energy wave that is breaking outside the Beltway.

With a selective short memory and fleeting yet expensive financial incentives in light of serious debt problems, Washington simply isn't capable of "greening" America's economy. This is compounded by the fact that the "green" label has been hijacked by radical environmentalists blind to the basic tenets of economics. The free-market will best improve the environmental aspects of our economy if Washington stops picking winners and losers then changing their preference a few years later.

President Obama's new fuel economy standards; albeit admirable in their intentions, exemplify this problem. President Obama is gambling on consumers to radically change their buying preferences and start buying smaller, electric vehicles despite studies showing that these same electric vehicles, drawing their power primarily from coal and natural gas-fired power plants, exhibit emissions on-par with traditional vehicles. Prior to Washington's current preference, they attempted to switch cars entirely to biofuels (while limiting the definition of an "acceptable" biofuel based on its feedstock) and before that, hydrogen fuel cell vehicles. No wonder the President included a relatively-unpublicized safety valve stopping these standards in case consumers don't change their purchasing preferences.

Remember when "clean coal" meant less particulate matter? In the past 30 years, coal-fired power plants have reduced their emissions by nearly 70% while increasing efficiency by a similar proportion. Yet soot and smog with their direct, tangible health effects don't sell to the public and progressive special interests nearly as well as putting arbitrary limits on carbon dioxide emissions - despite EPA's own admission that these limits would not keep us under the threshold generally agreed upon by Al Gore and his cronies. In fact, we've already passed 350 parts per million of carbon dioxide, the "tipping point" often cited in major news sources and the UN IPCC, and we still haven't observed tropospheric temperature increases since 1998.

During the economic crisis and debt-limit debate, we heard many voices say that the free-market and capitalism failed. Washington's history of subtle intervention, from forcing banks to offer subprime mortgages to triple incentives for corn-based ethanol, caused that failure and contributed to increased government spending. The Pew Center on Climate says that the $90 billion in Recovery Act spending for investments, incentives and loan authority in clean energy created or saved 168,711 jobs. That's over $533,000 spent per clean energy job. Are we any greener or healthier? No.

It's time to stop letting the government pick and choose winning technologies and it's time to stop radical environmentalists from dictating energy policy. It's time to stop spending taxpayer money on the energy fad of the moment. It's time to support a true, all-of-the-above energy policy. When we do, we'll see an economic rebound - and we'll see tangible environmental benefits as efficiency goes up and true next-generation energy and control technologies emerge.

These days it seems there are few issues that Members of Congress can agree upon. But, if there is one thing that Democrats and Republicans must come together on after they reconvene after Labor Day, it is a strategy to create American jobs in order to get this country back on track.

Ethanol, made right here in our backyards, has provided an unparalleled, value-added opportunity for agriculture and America. It has generated good paying jobs, spurred economic activity and strengthened rural communities.

At roughly ten percent of the fuels market in 2010, the ethanol industry contributed $53.6 billion to the nation’s economy, generated $8.6 billion in federal tax revenues and supported more than 400,000 direct and indirect jobs that can’t be outsourced.

And the industry can create even more economic opportunities in America with greater access to the market.

For instance, if every vehicle in the U.S. were Flex Fuel, and nearly every fueling station had Flex Fuel pumps, then Americans would have a genuine choice in the marketplace – a choice that includes a fuel other than gasoline refined from foreign oil.

Every year we pay $300 billion annually as a nation to foreign countries for oil. Increasing access to higher level blends of ethanol will reduce the role that foreign oil plays in our economy and keep more dollars in the U.S. economy, creating U.S. jobs.

By opening up the market to more ethanol, we could see the private capital investment move into next generation ethanol, generating new high-paying jobs, increased market opportunities for farmers, additional household income and tax revenues.

As more and more rural communities suffer "outmigration" as young people leave their hometowns and move to the cities to put their college degrees to work, today's ethanol plants are high-tech employers that need educated, trained and innovative workers. Those positions mean that young workers can find jobs closer to home.

The administration has already shown their support; the USDA has committed to installing 10,000 Flex Fuel pumps over the next five years.

This investment in homegrown, renewable energy will put Americans back to work and put our nation back on track. American ethanol is a critical tool for stimulating our clean energy economy.

Connecticut recently adopted comprehensive clean energy legislation that puts the state in a position of national leadership. This breakthrough legislation, adopted on a bi-partisan basis, offers a new market-oriented approach to expanded energy efficiency and renewable power – while reducing bills for Connecticut ratepayers.

The early reviews are in, and the private sector is responding enthusiastically to the incentives put in place:

" I'm looking at adding six or eight people …” said Bill Stillinger, whose company (PV Squared) designs and installs solar panels in homes and commercial buildings... The new legislation in this state is brilliant — it surpasses anything the other states are doing," Stillinger said.

-Hartford Courant, August 4, 2011

"One aspect of the [Connecticut] program is particularly noteworthy – and praiseworthy – because it makes Connecticut the first East Coast, RPS-based state to join what we hope will be a growing trend in solar and Distributed Generation incentive delivery: a prescription that RPS-compliance entities meet their obligations through a competitive solicitation for long-term REC contracts... Connecticut – like a few states out West, but none other so far in the East – has taken an approach that gives it the best of both worlds... It’s all of the benefits of competition, with none of the uncertainty – and therefore inefficiency – of a more traditional, less prescriptive RPS procurement system... We hope we’re seeing a trend, an evolutionary step in how Distributed Generation incentives are delivered."

-Dan Berwick, Borrego Solar, New England Clean Energy Council Blog, July 11, 2011

With strong leadership from Governor Dannel P. Malloy – who was just named chairman of the Natural Resources Committee of the National Governors Association – Connecticut’s new energy program is poised to provide a model for the nation, demonstrating that clean energy, improved environmental results, and economic growth go hand-in-hand. Connecticut’s programs for Zero-Emissions Renewable Energy Credits (Z-RECs) and Low-Emissions Renewable Energy Credits (L-RECs) gets the state out of the business of “picking winners” and provides a level playing field designed to encourage innovation across a wide range of potential alternative energy technologies.

The new Connecticut approach recognizes that we are in an era of constrained government resources, and that the key to success is finance with the private sector playing a leading role. It targets limited government funds to leverage private capital and engage the business community’s entrepreneurial spirit across a spectrum of energy efficiency, renewable power, and clean fuels/vehicles opportunities.

A new “Green Bank” lies at the heart of Connecticut’s clean energy drive. The concept of a Clean Energy Finance and Investment Authority has been discussed for years in federal policy circles—but, as with so many breakthrough ideas, it took a state willing to step ahead of the pack to get from theory to practice. The Connecticut Green Bank will provide a portfolio of funding mechanisms—direct support, long-term power contract guarantees, reduced cost of capital, ratepayer funding—designed to attract and leverage private capital and investments across a spectrum of clean energy projects.

Connecticut’s recently created Department of Energy and Environmental Protection (DEEP) has begun to spell out in detail the incentives created by the array of new clean energy programs. These incentives cover clean energy, R&D, and production. This breadth of focus means the clean energy program will have the added benefit of creating jobs for Connecticut residents, especially for those in the construction trades and other fields that have been hard hit by the economic downturn. While Washington is seemingly unable to deliver results on clean energy legislation, and other states are walking back their commitments to the sector, Connecticut has taken the lead.

My advice for anyone ready to make an investment in clean energy: Think Connecticut.

Click here to see the landmark energy legislation approved by the Connecticut General Assembly in 2011

http://www.cga.ct.gov/2011/ACT/PA/2011PA-00080-R00SB-01243-PA.htm

The conventional wisdom is that to get the economy going, we have to make the deficit worse. Fortunately, that’s not true. Unfortunately, there is a significant faction in American politics that would like to pretend it is true, because for them, having government get the economy going is worse than a second Recession – because a successful government incubated recovery would make it clear why we need a strong, active federal government to have a growing, competitive American economy.

So what can be done to create orders, innovation and jobs without making the deficit worse?

1) Buy smart. The federal government is the biggest purchaser of almost all industrial goods and many consumer products including gasoline. It should provide robust markets for innovators, in the energy space and elsewhere. It should substitute American made electricity and efficiency for Saudi pumped oil in its vehicle fleet. Uncle Sam could stop wasting taxpayer dollars heating the outdoors, instead patronizing American manufacturers of high performance windows, insulation, and putting American construction workers back on the job cutting federal utility bills while creating American jobs. We’re going to spend this money anyway – but we should spend it smart over a ten year time horizon, instead of just doing what is cheapest this month.

2) Grab bargains. Right now any infrastructure project in our economy – repairing a decaying bridge, replacing a 100 year old sewer, modernizing a utility power plant – can be done with lower cost materials, wages and cheaper borrowing. So anything we need to do in the next decade we should do now – costs and deficit will be lower, because we can do the job cheap while the economy is lagging. The federal transportation program, for example, should be structured so that we accelerate construction projects we will need to do anyway, and enjoy their tax and economic benefits later on when a stronger economy will drive up costs. Right now is a good time to make sure that dirty power plants get the upgrades they need – because demand for power is lower than it will be in a few years.

3) Reward private sector investors and innovators. Right now dirty energy incumbents keep clean energy innovators from getting the markets they deserve. In most states, companies that want to produce clean, solar power and sell their surplus to their neighbors can’t do so – the utilities don’t want competition. Monopoly utilities instead dispatch dirty and expensive coal electrons from plants they own, instead of purchasing cheaper power from independent producers. Oil distributors control the fuel network for our cars – so fuels like ethanol or natural gas that are cheaper than oil can’t get to customers would might like to save the money. States and cities wanted to allow their residents to cut their utility bills by investing in new furnaces, better windows, better insulation, and pay for it on their property tax bill through bonds – exactly the kind of buy now, pay later plan today’s economy cries for. But banks didn’t want competition, and shut down the residential portion of these PACE programs.

4) Reform taxes to reward innovation and job creation, instead of subsidizing outmoded and often foreign energy sources. Some of the tax subsidies that the Tea Party leadership in Congress has defended are actually subsidies to the Venezuelan, Nigerian and Saudi governments – why would we want to reward oil companies for increasing our imported tax bill and exporting more jobs overseas? Why not take the billions of dollars in coal and oil giveaways and steer them instead to companies that create clean energy jobs? What about taxing oil imports instead of American jobs? We don’t have to increase taxes overall if we are just smarter about where we levy them.

(These comments were submitted by Brian Sager, founder of Nanosolar, manufacturer of solar panels and cells.)

The path forward for commercialization of a new clean technology is often a tale of two colliding risk cultures. Early in the research and development cycle of a new and promising technology, product development is often fueled by highly effective R&D accelerators, including research grants from various agencies of the Federal government, angel investor funding, and highly technology savvy early-stage venture capital. In contrast, as a technology matures, and nears its commercialization potential, the cost of production is often prohibitive for even the largest of private equity firms, and strategic customers may wait to ensure product bankability before they are willing to place large orders, especially so for new and by therefore definition unproven products with relatively long warranties.

The Federal government could play a role at this latter stage as well, but the often socialized meme is that “the Federal government does not pick winners and losers”. In other words, the nascent product-ready technologies are on their own, to be carried to their full commercialization potential purely by market forces. However, those market forces often include the aggregate behavior of highly risk-averse commercial banks which are asked to provide debt financing to lever into large products with new and relatively untested products – hence the collision with a very different form of low-risk tolerant business culture.

So there is a clear place for a potentially catalytic role of government at all scales, including those at the Federal, State, and Municipal levels: to close the risk gap between early-stage innovation and late-stage commercialization. For example, by embracing newly maturing technologies in a manner that commercial bankers will not, governmental can accelerate the pace of manufacturing ramps and job creation. Rather that waiting years for a new technology to prove itself out, governmental policies can backstop those new technologies, and as they become statistically de-risked through an accrual of operating history, hand off those de-risked technologies to private industry. There are a wide range of mechanisms to do so, including product warranty insurance for the early years of a new products life cycle and equipment loans targeted towards the bottleneck, production rate-limiting processes of a new factory.

With stock markets gyrating and the U.S. economy slumping, talk has turned at last to job creation. Yet where will the needed positions come from?

One promising source remains the “green” or “clean” jobs that have been multiplying in clean energy and environmental technology sectors.

Recently, my group at the Brookings Institution took the measure of these industries in a report called “Sizing the Clean Economy” and found that the so-called “clean economy” has generated some 500,000 new jobs since 2003 while a subset of smaller, newer “cleantech” industries—ranging from wind and solar energy to smart grid applications and professional energy services—grew nearly twice as fast as the rest of the economy through and after the recession. Even better, we reported that the new jobs are attractive ones—innovation-, manufacturing-, and export-oriented with a balanced occupational profile accessible to all kinds of workers. So President Obama and Senate Majority Leader Harry Reid are right to talk about a new push on accelerating the emergence of such jobs and industries in U.S. metropolitan areas.

And yet, as the president and majority leader talk, they have a bunch of stubborn problems to contend with—problems that need not run afoul of the current budget-cutting, hyper-partisan moment in Washington though they probably will.

What are these challenges? As numerous contributors to this forum have been pointing out for years, excessive policy uncertainties and massive policy gaps are depressing the growth of the clean economy. These uncertainties and gaps are JM”? clearly weakening market demand, chilling finance, and raising questions about the integrity of the nation’s innovation pipeline.

In view of that, everything we have learned in our work tells us that Washington really must throw off its paralysis to co-promote private-sector growth with targeted actions to ensure the existence of vibrant demand for clean energy goods and services; structure a favorable investment climate; and support a rich flow of cutting-edge technology. In addition, it is important that Washington place the growth of regional cleantech clusters at the center of its efforts.

Along these lines, our work suggests four major priorities for federal action in the coming years. Of top importance are, first, three broad national strategies by which Washington would:

· Address key policy gaps that are depressing domestic demand. A first priority for unleashing clean economy growth must be to catalyze stronger market demand for clean economy goods and services. A vibrant domestic market is critical because strong demand—or the expectation of strong demand—in a large and growing home market signals opportunity, attracts investment, and induces incremental innovation. However, several major gaps in the nation’s clean energy policy framework undercut domestic demand. Most notably, the lack of a coherent carbon pricing system places low-carbon goods and services at a serious price disadvantage even as the lack of a national clean or renewable energy standard for utilities has further depressed demand. Given that, Congress really must, sooner or later, put a price on carbon pollution to stimulate demand for clean products and raise revenue for needed cleantech innovation investments as well as debt reduction. And it really should pass a national clean energy standard (CES) that creates a “floor” rather than a “ceiling” for state standards and insists on substantial renewable energy use to bring consistent, large-scale demand to clean electricity markets. Also important will be redoubled efforts to employ government procurement—particularly through the military—as a source of stable demand.

· Address the shortage of affordable, risk-tolerant capital that now impedes the scale up of promising industries. Market-making policies won’t be enough, however. A second priority must be to address the serious finance problems that surround clean economy scale up. For years it has been recognized that promising cleantech enterprises—whether in renewable energy or energy efficiency—often draw together intriguing but new technology, unusually heavy up-front capital requirements, and tricky regulatory or market settings. Given that, an unstable patchwork of federal loan programs and tax incentives has been set up over the years to address the investment challenges of the commercialization Valley of Death. Now, though, with the wind-down of the federal Recovery Act’s provisions and the scheduled “sunsetting” of multiple tax code programs, the whole rickety structure stands on the brink of collapse. In view of this, Congress must act. First, Congress should create an emerging technology deployment finance entity to address the commercialization Valley of Death. To be sure, debates persist about the exact design of such a new entity. However, several sound, cost-effective models appear promising. One is the proposed Clean Energy Deployment Administration (CEDA), which would provide loans, loan guarantees, insurance products, and other credit enhancements to facilitate less expensive lending in the private sector. And another is the so-called Energy Independence Trust (EIT) concept developed by the Coalition for Green Capital, which would also expand access to low-cost financing to increase investment and lower the cost of deployment. Both could make a big difference at modest to little cost, say if they were charged with paying back to the government any initial capitalization. Also essential, at the same time, will be a push to rationalize and reform the myriad tax provisions and incentives that currently encourage capital investments in clean energy projects. In this respect, the expiration of multiple elements of the nation’s mish-mash of federal deployment finance supports in fact represents an opportunity for reform. Such reform might well pair significant extensions of key production, investment, and manufacturing tax credits as well as the Treasury grant cash-back program with staged, technology-specific phase-outs, which would at once provide new industries support, predictability, and a nudge toward innovation and cost-reduction.

· Renew the drifting clean energy innovation system. Recharging and renewing the U.S. innovation system is going to be critical too. Innovation (both radical and incremental) matters because too few clean technologies can as yet compete with their incumbent competitors on an unsubsidized price basis—which remains the ultimate requirement if clean and green new technologies, processes, or services are to pervade the U.S. and world economy. In view of that, Washington needs to invest both more and differently in the clean economy innovation system. On the “more” part, Congress at least needs to embrace continued incremental growth of key energy RD&D budgets even if the needed major scale-up appears unlikely for now. At the same time, Congress should continue its recent institutional experimentation through measured expansion of such recent start-ups as the Energy Frontier Research Centers, ARPA-E, and Energy Innovation Hubs programs. For resources for all of this there is no shortage of options: Revenue to support these investments could be located through the phasing out of counter-productive energy subsidies, the “off-budget” establishment of a small surcharge on electricity sales, the implementation of a small fee on imported oil, or even the dedication of revenues from a very low carbon tax.

And there is one more area of action we believe essential. In addition, we believe Washington (as well as the states) needs to:

· Place more emphasis on fostering regional cleantech industry clusters. On this final front, our research demonstrates that the number of jobs in “clustered” clean economy established—ones embedded in local concentrations of activity—grew significantly faster than did those in more isolated enterprises. In view of that, we assert that U.S. metropolitan areas and the regional industry clusters they contain play a critical role in clean energy growth and merit special attention on the part of policymakers. And yet, notwithstanding a modest embrace of cluster concepts in recent economic discourse, much room exists for a more concerted focus in Washington on the importance of regions in clean economy development efforts. Happily, the growing recognition in Congress of the value of regional strategies and local innovation clusters—as evidenced by the inclusion of a new “regional innovation program” in last year’s America COMPETES reauthorization—encourages hopes that Congress will support increased investment in new regional innovation and industry cluster programs. Competitive awards like the EDA’s i6 Green Challenge for the establishment or expansion of regional proof of concept centers in various green technology fields have the power to further catalyze the “bottom up” clean economy development work that has broken out in numerous regions. So might the funding of a number of regionally based clean economy innovation consortia such as has been proposed by the New England Clean Energy Council.

* * *

The takeaway is clear: While private enterprise ultimately will deliver a robust clean economy (or not), government has an important role to play in contributing to a clear, supportive, and stable growth environment.

In that role, Washington must play its part, and work to structure a vibrant domestic market, ensure the availability of finance, and keep the innovation pipeline charged as well foster the rise of regions and clean economy industry clusters.

In this fashion, the nation can and will build the domestic clean economy, firm by firm, job by job, and region by region.

In that sense, the most nagging question this summer is not whether the “green jobs” promise is legitimate, but whether America wants to reap its potential benefits.