CFR Study Offers Strategy for Balancing Clean Energy Competition and Cooperation

A new study by CFR scholars Michael A. Levi, Elizabeth C. Economy, Shannon K. O’Neil, and Adam Segal examines how low-carbon innovations develop and spread, which will be essential for cutting greenhouse gas emissions in the coming decades. The study’s analysis and recommendations are of immediate importance as tensions rise over international trade and investment in clean energy, and as the world searches for alternative approaches to mitigating climate change.

Using China, India, and Brazil as case studies, the scholars seek to answer several critical questions:

- Who is likely to create and commercialize new low-carbon technologies?

- What are the mechanisms through which low-carbon technologies developed in one country get produced or adopted in others?

- How do countries’ positions as inventors and manufacturers of low-carbon technologies affect their willingness to encourage stronger action on climate change?

- How can a better understanding of the dynamics of technology flows be used to craft a more effective response to climate change?

The following are among the findings of the CFR study, Energy Innovation: Driving Technology Competition and Cooperation Among the United States, China, India, and Brazil:

- “China, India, and Brazil have not yet put in place programs to incentivize the deployment of low-carbon technologies on a scale commensurate with the challenge posed by climate change. All of them do, however, have significant programs.”

- “The Chinese government does not appear to have a coherent strategy tying the country’s efforts in the low-carbon technology sector to domestic emission reductions.”

- “In most areas of innovation, it is China again that leads the pack. Yet as a clean energy technology innovator, it remains behind the curve, with most of its successes having to do with process rather than product innovation and affecting the less technologically advanced parts of the supply chain.”

- “India ... has prioritized addressing energy scarcity over enhancing its own competitiveness in low-carbon technologies.”

- “Brazil’s ability to solve emissions problems with domestic technology is an important contributor to its willingness to confront those problems in the first place.”

- “The link between domestic technology development and deployment in the major emerging economies means that the United States can often encourage emissions reductions by promoting the spread of low-carbon technology to those countries. At the same time, the range of wise policy options will be limited by the need to preserve U.S. competitiveness.”

The authors also assess government support for innovation, trade, investment, and intellectual property rights policy, as well as the influence of corporate culture and market structure on the ability of each country to develop and absorb low-carbon technologies.

They use their analysis to explain how the United States can balance efforts to spread clean technology with its broader economic interests, outlining strategies to effectively balance competition and cooperation. They emphasize the need for the United States to combine efforts with the major emerging economies to grow and open markets for low-carbon technologies, while actively supporting their acceleration and diffusion. This approach  will allow the United States to take advantage of each country’s goal to be both a consumer and producer of clean energy, while safeguarding broader U.S. interests, write the authors.

The study urges the United States to “start its strategy by strengthening its own system for low-carbon innovation. The pace of innovation in low-carbon technology, both in the United States and abroad, is too slow given the challenge climate change poses.” It also calls on Washington to “promote openness at all phases of the innovation process as it tries to create demand for low-carbon technology in the major emerging economies. But it should also be sensitive to the fact that some limited protections may be necessary to build domestic political support for policies that increase demand for low-carbon options.”

The authors warn that openness alone is not enough and that “technology has to be actively pushed out into emerging economies throughout the innovation process—from research and development (R&D), through demonstration and commercialization, to diffusion and deployment. The United States should, however, withhold certain elements of support for cooperation when dealing with countries that refuse to adopt open and cooperative approaches themselves.”

Additional recommendations address government support for innovation, R&D cooperation, trade and investment rules, intellectual property rights, standard setting, financing for cross-border demonstration projects, the role of export and investment promotion agencies, and multilateral institutions. The report also includes detailed case studies of wind energy in all three countries, clean coal in China and India, solar energy in India, electric vehicles in China, and biofuels and deforestation in Brazil.

To view the report, visit: http://www.cfr.org/energy_innovation_report.

Michael Levi is the David M. Rubenstein senior fellow for energy and the environment and director of the Program on Energy Security and Climate Change at the Council on Foreign Relations. He directed CFR’s Independent Task Force on climate change in 2007–2008. His most recent book, On Nuclear Terrorism, was published by Harvard University Press in 2007. He received his PhD in war studies from the University of London (King’s College) and his MA in physics from Princeton University.

Elizabeth Economy is C.V. Starr Senior Fellow and Director, Asia Studies at the Council on Foreign Relations. Her most recent book, The River Runs Black: The Environmental Challenge to China’s Future, published by Cornell University Press in 2004, was named one of the Top 50 Sustainability Books in 2008 by the University of Cambridge. She is a member of the World Economic Forum’s Global Agenda Council on the Future of China. She received her PhD from the University of Michigan, her AM from Stanford University, and her BA from Swarthmore College.

Shannon O’Neil is the Douglas Dillon fellow for Latin America studies at the Council on Foreign Relations. Her expertise includes political and economic reform in Latin America, with a focus on Mexico and Brazil, U.S.-Latin American relations, energy policy, trade, and immigration. She directed CFR’s Independent Task Force on U.S.-Latin America Relations. Dr. O’Neil is currently working on a book on Mexico’s political, economic, and social transformation, and also publishes www.latinintelligence.com. She received her PhD in government from Harvard University and her MA and BA from Yale University.

Adam Segal is the Ira A. Lipman senior fellow for counterterrorism and national security studies at the Council on Foreign Relations. His new book, Advantage: How American Innovation Can Overcome the Asian Challenge, will be published by W.W. Norton in January 2011. His previous book, Digital Dragon: High-Technology Enterprises in China, was published by Cornell University Press. He received his PhD, MA, and BA in government from Cornell University.

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