April 26, 2012

Catalyzing Ingenuity Endnotes

1. Joseph E. Stiglitz, “Informaton and the Change in the Paradigm in Economics,” American Economic Review 92, no. 3 (2002): 486.

Figure 1.

National Science Foundation. Federal research and development obligations, budget authority, and budget authority for basic research, by budget function: FY 1955-2011 (adjusted to 2005 USD). Arlington, VA: NSF, October 2010. Table 37. http://www.nsf.gov/statistics/nsf10323/content.cfm?pub_id=4083&id=2

2. Constitution of the United States of America, Article I, Section 8.

3. Many of us were involved in the National Academies of Science report Rising above the Gathering Storm which assessed the role of federal R&D in considerably more detail. That study, like many others, found that federal investments in R&D have achieved demonstrably high rates of return: “estimates of return on investment (ROI) for publicly funded R&D range from 20% to 67%.” [National Academies of Science. Rising above the gathering storm: energizing and employing America for a brighter economic future. Washington, DC: National Academies Press, 2007.] Other, more targeted, studies have shown that federal energy innovation programs have resulted in real benefits: National Research Council, Energy Research at DOE: Was it Worth it? (Washington, DC: National Academies Press, 2001).

Figure 2.

Notes: 2007 last year available. Company spending only; does not include federal R&D, nor R&D funded by the company but contracted to outside organizations, including non-profits and research institutions. The Electric Power Research Institute (EPRI), for example, is a non-profit company that performs RD&D in the electricity sector. EPRI is funded by its members, who represent 90% of the U.S. electricity generated and delivered in the U.S. EPRI funding ranged from 333-377 million 2008 dollars from 2004-2007. Data through 1999 for SIC (Standard Industrial Classification) 49, Electric, gas, & sanitary services, then NAICS (North American Industry Classification System) 22, Utilities. Power companies predominate in the larger utility industry, accounting for about three-quarters of employment.

Sources: (1) National Science Foundation. Survey of Industrial R&D, various years.

(2) Electric Power Research Institute. Annual Report, various years.

4. National Science Foundation. Science and Engineering Indicators 2010. Arlington, VA: NSF, 2010. Chapter 4, Table 4-14. http://www.nsf.gov/statistics/seind10/c4/c4s3.htm

5. National Science Foundation, Research and Development in Industry: 2006-07 (Arlington, VA: National Science Foundation, 2011), 191. Table 51. http://www.nsf.gov/statistics/nsf11301/pdf/nsf11301.pdf

6. Ibid., 130-131, Table 31 and 261. Table 68.

7. Product differentiation does, of course, drive innovation in energy end-use technologies. For example, a new car could be marketed on the basis of its fuel economy performance in addition to other attributes. The evidence suggests, however, that consumers have historically ranked energy consumption well below other attributes when making purchasing decisions.

8. Appliances are somewhat different but still face investment challenges. Energy efficient appliances, such as space heating, air conditioners, water heaters, lighting and refrigeration, typically last between 10 and 20 years, do not require large up-front investments and have payback times that are usually less than three years. Still, there is significant inertia by consumers to make these investments.

Figure 3.

Note: Includes data for latest year available‚ÄČ-‚ÄČ2005 for Energy; 2010 for Pharmaceuticals; 2007 for others.

Sources: (1) National Science Foundation. Federal research and development obligations, budget authority, and budget authority for basic research, by budget function: FY 1955-2011. Arlington, VA: NSF, October 2010. Table 37. http://www.nsf.gov/statistics/nsf10323/content.cfm?pub_id=4083&id=2

(2) National Science Foundation. Science and Engineering Indicators 2010. Arlington, VA: NSF, 2010. www.nsf.gov/statistics/seind10/pdf/c04.pdf

(3) Dooley, JJ. The Rise and Decline of U.S. Private Sector Investments in Energy R&D since the Arab Oil Embargo of 1973. Pacific Northwest National Laboratory, November 2010. http://www.pnl.gov/main/publications/external/technical_reports/PNNL-19958.pdf

(4) Pharmaceutical Research and Manufacturers of America. Pharmaceutical Industry Profile 2011. Washington, DC: PhRMA, 2011. http://www.phrma.org/sites/default/files/159/phrma_profile_2011_final.pdf

(5) Energy Information Administration. Annual Energy Review 2007. Washington, DC: EIA, 2007. Table 3.5.

9. A particularly influential voice at this time was that of Vannevar Bush, who directed the Office of Scientific Research and Development in the early 1940s and whose influential 1945 report Science, the Endless Frontier argued that basic research was the “pacemaker of technological progress.” Bush’s proposals eventually led to the creation of the National Science Foundation in 1950.

10. In addition to the innovations listed above, a number of innovative developments with broad societal benefits have stemmed from NASA’s activities, including breathing apparatuses, school bus chasses, and robotic surgical devices, among others. This activity is documented in Douglas A. Comstock and Daniel Lockney’s 2007 report: NASA’s Legacy of Technology Transfer and Prospects for Future Benefits. .

11. The Federal government has long supported energy research, development and demonstration. During the late 1970s the government invested more than $7 billion per year (2005$) in energy RD&D. From the 1980s through the mid-200s federal investment hovered around $3 billion annually. Since then, federal energy RD&D has increased slowly, excluding the one-time jump in stimulus funding.

Source: Gallagher, Kelly, and Anadon, Lauren. “DOE Budget Authority for Energy Research, Development, and Demonstration Database.” Cambridge, MA: John F. Kennedy School of Government, Harvard University, 2009. http://belfercenter.ksg.harvard.edu/publication/19119/

Figure 4.

Source: National Science Foundation. Federal research and development obligations, budget authority, and budget authority for basic research, by budget function: FY 1955-2011 (adjusted to 2005 USD). Arlington, VA: NSF, October 2010. Table 37.

Figure 5.

Technology innovation involves a complex network of linked activities from scientific research, engineering development, and prototype demonstration to commercialization. In the past, industry participated strongly in all stages of innovation, including in the early research stages. Industrial laboratories such as Bell Labs, which invented the first workable photovoltaic solar cell in 1954, were legendary for their contributions to basic science. Structural changes in the global economy and investor requirements for return on capital have shifted the focus of most private companies to later-stage engineering and commercial-stage technologies.

12. The appropriate level of taxpayer support for existing commercial energy technologies, whether clean or conventional, is currently a matter of intense debate. While a detailed examination of energy production incentives is beyond the scope of our efforts, we are heartened that our colleagues at the Bipartisan Policy Center are engaged in such an examination.

13. For early stage R&D grants, DOE typically provides 80 percent of project funding. For project demonstrations, DOE typically provides 50:50 public-private cost sharing.

14. National Academy of Science. Real Prospects of Energy Efficiency in the US. Washington, DC: National Academies Press, 2010. http://www.nap.edu/openbook.php?record_id=12621&page=R1

15. In addition to the undertakings we cite in this report, we also believe that the government must continue to improve its ability to deliver on its clearly recognized responsibility to provide a strong foundation for innovative activities. These responsibilities include providing public schools that successfully educate our youth (particularly in science, mathematics and engineering), protecting intellectual capital, and attracting needed foreign talent to our country. For a more detailed discussion of ways to improve these responsibilities please see the report: “Rising above the Gathering Storm.”

16. Specifically, we encourage the QER to coordinate robust technology linkages between the DOE and DOD to build on the strengths of each organization and avoid programmatic duplication.

17. Executive Office of the President, President’s Council of Advisors on Science and Technology. Report to the President on Accelerating the Pace of Change in Energy Technologies through an Integrated Federal Energy Policy. Washington, DC: GPO, 2010. http://www.whitehouse.gov/sites/default/files/microsites/ostp/pcast-energy-tech-report.pdf

Figure 6.

Source: Pew Charitable Trusts. Who’s Winning the Clean Energy Race? 2010 Edition. March 2011. http://www.pewenvironment.org/uploadedFiles/PEG/Publications/Report/G-20Report-LOWRes-FINAL.pdf

18. OMB “scoring” is the mechanism used to assess a program’s likely impact on the federal budget.

Figure 7.

Sources: (1) Executive Office of the President of the United States.

Budget of the United States Government: Detailed Functional Tables Fiscal Year 2011. Washington, DC: GPO, 2011. Table 32-1. http://www.gpoaccess.gov/usbudget/fy11/fct.html

(2) National Science Foundation. Federal research and development obligations, budget authority, and budget authority for basic research, by budget function: FY 1955-2011 (adjusted to 2005 USD). Arlington, VA: NSF, October 2010. Table 37.

19. Sources: (1) Ogden, Peter, et al. A New Strategy to Spur Energy Innovation. Center for American Progress, January 2008. http://www.americanprogress.org/issues/2008/01/energy_innovation.html

(2) Hayward, Steven, et al. Post Partisan Power: How a limited and direct approach to energy innovation can deliver clean, cheap energy, economic productivity and national prosperity (American Enterprise Institute, Brookings Institution, and Breakthrough Institute, 2010). http://www.aei.org/docLib/Post-Partisan-Power-Hayward-101310.pdf

20. Congressional Budget Office. The Budget and Economic Outlook:An Update. Washington, DC: CBO, August 2011. http://www.cbo.gov/ftpdocs/123xx/doc12316/Update_SummaryforWeb.pdf

21. From 2001 to 2010, federal oil and gas royalty revenues have averaged just more than $11 billion per year. Excluding 2008, which saw a significant increase in federal royalties due to the release of millions of acres of new leases in Gulf waters, federal oil and gas royalties have averaged more than $9.5 billion per year. Source: Department of the Interior’s Office of Natural Resources Revenue.

22. Energy Information Administration. Federal Financial Interventions and Subsidies in Energy Markets in Fiscal Year 2010. Washington, DC: EIA, July 2011. http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf. This study includes the American Recovery and Reinvestment Act of 2009 and other legislation that provided an increase in federal spending, particularly for conservation and renewables programs, and appropriately caveats the findings: “Focusing on a single year’s data also does not capture the imbedded effects of subsidies that may have occurred over many years across all energy fuels and technologies.”

23. Senators Coburn and Feinstein have introduced a bill to eliminate the Volumetric Ethanol Excise Tax Credit (VEETC) and repeal the import tariff on foreign ethanol. The Ethanol Subsidy and Tariff Repeal Act was introduced in the form of an amendment to a small business bill in the Senate (Amendment #309, S. 493). Congressman Lance introduced bipartisan legislation, H.R. 1188, to eliminate the ethanol tax credit. A new proposal, H.R. 2307, offered by Congressman Herger, would achieve similar ends. Senator Menendez has introduced S. 940, the Close Big Oil Tax Loopholes Act, a bill that would eliminate five tax expenditures benefitting oil companies.

24. Reverse auctions are a mechanism for competitively distributing government contracts and subsidies to private entities. Reverse auctions require private firms to submit bids that stipulate the minimum price or subsidy level they would accept for a specified output.

25. Oil, gas, coal and ethanol subsidies together totaled just shy of $10 billion in 2010. Creating competitive subsidies for relatively mature technologies like wind could potentially free even more federal resources.

26. Assuming average household electricity consumption of 1,000 kWh per month.

27. H.R. 6258, June 12, 2008.

28. H.R. 1689, March 24, 2009.

29. Massachusetts Institute of Technology. The Future of Natural Gas: An Interdisciplinary MIT Study. Cambridge, MA: MIT, June 2011. http://web.mit.edu/mitei/research/studies/natural-gas-2011.shtml

30. If a 0.03 cent-per-kilowatt-hour wires charge had been applied to all retail electricity sales in 2010, 3,749,985 million kilowatt hours, it would have raised more than $1.1 billion. If a 0.1 cent-per-kilowatt-hour wires charge had been applied, it would have raised more than $3.7 billion.

31. However, its fate is currently uncertain because 4.3 cents-per-gallon of the federal gasoline tax and the current Surface Transportation Reauthorization extension are both set to expire on Sept. 30, 2011 unless Congress acts.

32. For instance, total U.S. gasoline consumption in 2010 was nearly 138 billion gallons (Source: EIA). Increasing the federal gasoline tax by 1 cent per gallon would generate approximately $1.4 billion in revenue per year. Increasing the tax by 5 cents per gallon would generate nearly $7 billion annually.

33. A fee on imports of crude and refined petroleum products at a rate of $4.00 and $5.00 per barrel, respectively, could generate approximately $7 billion annually. It should also be noted that an oil import fee would likely be challenged under the free-trade rules of the World Trade Organization (WTO). However, WTO rules allow some tariffs and fees if those are expressly designed to protect national security, public health, or the environment.

34. The CBO has estimated that a carbon dioxide tax starting at $20/ton in 2012 and increasing slowly over time would raise nearly $1.2 trillion by 2022. [Congressional Budget Office. Reducing the Deficit: Spending and Revenue Options. Washington, DC: CBO, March 2011. http://www.cbo.gov/ftpdocs/120xx/doc12085/03-10-ReducingTheDeficit.pdf]

35. For instance, CBO estimates that reducing the size of the Strategic Petroleum Reserve could save $6,200 in outlays from 2012-2016.

Figure 8.

Sources: (1) All GDP data are from: Alan Heston, Robert Summers, and Bettina Aten. Penn World Table Version 7.0. Philadelphia, PA: Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, May 2011. http://pwt.econ.upenn.edu/php_site/pwt_index.php

(2) Japan, Canada, South Korea, and U.S. RD&D data are from: International Energy Agency. Energy Technology RD&D 2011 Edition. http://wds.iea.org/WDS/ReportFolders/ReportFolders.aspx

(3) China’s RD&D data are derived from: State and Science Technology Commission, China Statistical Yearbook on Science and Technology (2009), as cited in: Gallagher, K.S., et al. Trends in investments in global energy research, development, and demonstration. Wiley Interdisciplinary Reviews: Climate Change, Volume 2, Issue 3, pages 373-396, May/June 2011