Transatlantic Leadership for Clean Energy Solutions

Transatlantic Leadership
for Clean Energy Solutions
Brooke R. Heaton , R o b e rt Bosch Fellow 2009-10

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About This Report
This report was written as a substantive analysis to fulfill the requirements of the Robert Bosch Foundation Fellowship.
The Bosch Foundation Fellowship Program is a distinguished transatlantic initiative that each year offers twenty
accomplished young Americans the opportunity to complete a high-level professional development program in
Germany. Over the course of a nine-month program, Bosch Fellows complete two work phases at leading German
institutions, both customized to each fellow’s professional expertise, and attend three seminars with key decision-
makers from the public and private sectors, taking place across Europe. Fellows are recruited from business
administration, journalism, law, public policy and closely related fields.

The issue of international cooperation on clean energy policy was the primary focus of my work experiences in Germany,
where I performed two work placements. The first of these placements was at the German Ministry for the
Environment in a division focusing on transatlantic cooperation on renewable energy and other efforts such as the
Major Economies Forum and International Renewable Energy Agency. The second of these placements was with the
First Solar Government Affairs office in Berlin. All opinions and contents within this report are the personal
responsibility of the author and do not necessarily reflect the views of the Robert Bosch Foundation.

Author Contact Information:

Brooke R. Heaton
brookeheaton@gmail.com

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Contents

The Climate and Energy Dilemma ........................................................................................................................................... 5
Reversing Climate Challenge: A Titanic U-turn ....................................................................................................................... 8
Beyond Clean: Building Security, Independence and Growth with Low-carbon Energy ...................................................... 12
National Security ............................................................................................................................................................... 12
Price Stability .................................................................................................................................................................... 13
Environmental Quality ...................................................................................................................................................... 14
Economic Competitiveness ............................................................................................................................................... 15
Clean Energy Technologies: Harnessing limitless sources with innovation.......................................................................... 17
Energy Efficiency ............................................................................................................................................................... 18
Carbon Capture and Sequestration (CCS) ......................................................................................................................... 18
Solar Energy ...................................................................................................................................................................... 18
Wind Energy ...................................................................................................................................................................... 19
Biomass Energy ................................................................................................................................................................. 19
Hydrogen Energy............................................................................................................................................................... 19
Geothermal Energy ........................................................................................................................................................... 20
Hydropower and Ocean Energy ........................................................................................................................................ 20
Smart Grid Systems ........................................................................................................................................................... 21
Electric Vehicles (EV) ......................................................................................................................................................... 22
District Heating and Cooling ............................................................................................................................................. 22
Energy and Climate Laws in the US and Europe: Divergent Paths........................................................................................ 22
US Climate and Clean Energy Policies ............................................................................................................................... 23
National Policies and Programs for Clean Energy Technologies....................................................................................... 23
US Regional Cooperation on Climate ................................................................................................................................ 24
States – Leading US Clean Energy Policies .................................................................................................................... 25
Local Governments – Sustainable Grassroots Efforts ................................................................................................... 26
EU Climate and Clean Energy Policies ............................................................................................................................... 27
Germany, Spain and Denmark – European Clean Energy Success Stories........................................................................ 29
Germany........................................................................................................................................................................ 29
Spain .............................................................................................................................................................................. 32
Denmark ........................................................................................................................................................................ 33
International Climate and Clean Energy Efforts.................................................................................................................... 37

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UN ..................................................................................................................................................................................... 37
International Energy Agency (IEA) .................................................................................................................................... 38
International Renewable Energy Agency (IRENA)............................................................................................................. 39
Group of 20 (G20) ............................................................................................................................................................. 40
Major Economies Forum ................................................................................................................................................... 41
Climate Technology Fund.................................................................................................................................................. 41
US-EU Summit ................................................................................................................................................................... 42
Transatlantic Energy Council ............................................................................................................................................. 43
Transatlantic Business Dialogue........................................................................................................................................ 44
Transatlantic Consumer Dialogue ..................................................................................................................................... 44
NGOs and Civil Society ...................................................................................................................................................... 45
NOTES.................................................................................................................................................................................... 51

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The recent surge of support for “green growth” and a “clean energy economy” in the United States offers a critical and
urgent opportunity to forge a robust transatlantic pact to end our fossil fuel addiction and promote long-term
economic growth through clean and sustainable energy. Although the malaise and disappointment of the COP15
climate summit in December 2009 casts a long shadow on current efforts to combat climate change (1), there remains
significant motivation in the transatlantic community to promote policies at national and state levels to rapidly
deploy renewable energy and energy efficiency technologies (2). From Southern California to Eastern Europe,
innovative businesses are taking advantage of fertile economic and political frameworks to develop solar, wind and
geothermal energy and to reduce energy consumption through efficiency and conservation (3). Though clean energy
firms have proven resilient in the challenging climate of the economic crisis (4), international cooperation efforts led by
the US and Europe must be redoubled and a range of collaborative initiatives to share experiences and best practices
must be pursued.

The Climate and Energy Dilemma

As the world’s population hurdles rapidly toward 9 billion inhabitants within the next century (5) nations face a
seemingly impossible task of caring for their citizens while scrambling for increasingly scarce resources. Chief
among these is the energy required to fuel an insatiable global appetite for higher standards of living, inflated
resource consumption, and fast-growing demand in emerging economies like India and China. Yet, the cost of
energy cannot be measured in dollars alone. For nearly two centuries, the fuels that drove industrialization
have slowly disrupted the earth’s climatic balance – a global “tragedy of the commons” that is warming our
planet’s atmosphere, threatening to flood coastal communities, starve rural populations, and permanently
change our oceans and ecosystems if action is not taken to reverse course (Figure 1) (6). Scientists warn that
there is a clear point of no return - 350 parts per million (ppm) of atmospheric C02, beyond which
environmental impacts would be devastating. Worryingly, we have already surpassed this point and are in
dire need to reverse course to avoid dangerous tipping points with irreversible and catastrophic impacts in our
way of life.

Despite over two decades of scientific consensus on the link between ‘greenhouse gases’ released by burning
oil, coal and other fossil fuels, and global climate change, no binding global treaty to regulate this destructive
trend is in force (7). The Kyoto Protocol, an international agreement concluded in 1997 set binding targets for
37 industrialized countries and the European Union, offering a major first step (8), however the United States
and emerging economies like China and India did not agree to its terms. As the Kyoto Protocol nears
expiration in 2012, it is more important than ever for the world’s most developed nations to offer bold and
unwavering leadership and consensus to transition the global economy to sustainable energy and curb the
earth’s rising temperatures. With new US leadership dedicated to joining a global agreement while
aggressively promoting a “clean energy economy” there is significant potential to reach this consensus (9).

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Figure 1: Global Mean Surface Temperature 1880-2010. In 2010, the Earth’s temperature was roughly 0.5 degrees Celsius above the long-term (1951–1980) average.
(Source: NASA figure adapted from Goddard Institute for Space Studies Surface Temperature Analysis)

The Obama Administration’s commitment to sign a post-Kyoto treaty and promote clean energy through
robust policy measures offers a welcomed change of pace from the denial and inertia of the George W. Bush
era when neither congress nor the President had the political will and wisdom to overhaul the nation’s fossil
fuel addiction (10) (11). Intimate links between the fossil fuel industry and the White House under the Bush
Administration were met with generous support for oil, natural gas and coal producers and a loosening of
federal regulation on practices like off-shore drilling (10) (12) (13). Though many of these links have been severed,
public opinion and congressional leadership on energy transformation are continually undermined by partisan
politics and dubious disinformation campaigns driven by the fossil fuel lobby (14). This lobby continues to
outspend environmental and clean energy groups ten to one (14). Though the election of Barack Obama and a
Democratic majority in congress opened a window of opportunity to work Europe on this transformation,
many obstacles remain. The Obama Administration continues to be shackled by the absence of congressional
legislation on energy and climate and, lacking a national bill with clear emission caps and renewable energy
targets, robust US-European cooperation faces some formidable obstacles (15).

Nevertheless, it is more critical than ever that the United States and Europe develop consensus by exchanging
knowledge and experiences on climate and energy issues while better coordinating policies and standards at
the local and federal levels. Comprising a market that is the world’s largest (16) and built on a foundation
industrial carbon-debt (17), the United States and Europe have a moral imperative to display leadership and
historical accountability by developing effective policies and practices to deploy clean energy technologies,
like wind, solar and geothermal energy. They also possess the resources to promote investment into energy
efficiency and conservation practices at a level need to truly change the global market.

In addition, the US and Europe must work together to develop a more unified position toward a global cap on
greenhouse gas emission through an international treaty that includes emerging economies and significant
assistance to developing nations. Though it is unlikely that a breakthrough will be reached at the Cancun
COP16 climate meeting in Cancun, Mexico this November (18), the US and Europe must continue to cooperate
to ensure that commitments made at the COP15 meeting in Copenhagen are realized and resolve the
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enduring political rifts on matters related to monitoring and verification of greenhouse gas emissions and
assistance to developing nations.

While political divisions garnered much attention following the COP15 summit, the rapid acceleration of the
clean energy market and clean energy installations has widely been overlooked. Despite wrangling between
the US, the EU and China over long-term limits on CO2 emissions (19), a host innovative start-ups and industrial
giants have begun to race for the lead in the lucrative market for renewable and efficient energy products.
From German manufacturing giants like Siemens to Silicon Valley newcomers like Bloom Energy, companies
around the world are developing innovative ways to generate and save energy while reaping rewards from
venture capital investors and public funds. In fact, as the global economic crisis went into full swing in 2008,
the clean energy sector continued its growth throughout the US and Europe as other sectors shrank. The US
clean energy sector remained resilient as companies set up shop in Texas, Iowa, Ohio and Michigan converting
once skeptical politicians to champions of green growth. Senior GOP leaders like Senator Charles Grassley of
Iowa, California Governor Arnold Schwarzenegger and South Dakota Congressman John Thune of have all
witnessed the rewards that can be reaped by investing in the natural and sustainable energy resources of their
states and are clear in their support for national climate and energy legislation.

Behind the dismal response to the COP15 meeting, the vibrant growth of the renewable energy sector in 2009
offers a refreshing contrast. Despite the strong headwinds of the economic crisis, more funding was invested
into renewable energy projects than in fossil fuels projects around the world in 2009 - this for the second year
in a row (3) (20). By 2009 more than 100 countries had established policy targets or incentives to deploy clean
energy compared with just 55 countries in 2005, a near doubling in just four years. Also in 2009 new
installations of wind solar power reached a record high with renewable power sources accounting for more
than half of new installed power capacity in the US and EU (3). Indeed, the strong acceleration in the clean
energy sector is highly encouraging and offers reassurance to communities looking for ways to build jobs and
businesses.

These positive trends will likely continue their current trajectory in the near-term; however they must be
bolstered and enhanced by targeted actions and programs if the world to commence a downward trajectory
toward 350 ppm of CO2. This will require far more than ‘business as usual’ efforts. Further action must be
taken to ensure that clean energy become the power the drives the future economy.

To ensure this, resources must be invested into international collaboration and cooperation on effective
policies, accelerated trade and facilitation of knowledge transfer between nations and markets. Scientists,
engineers, policymakers, business leaders, students and journalists all play a central role in this
transformation. Looking at current efforts led by international organizations, bilateral partnerships, NGOs and
global firms, a range of excellent ‘best practice’ examples stand out as models to be replicated. Inspired by
these practices, the US and Europe must lead the way through closer consultation, exchange of ideas, and
collaboration on plans for clean energy success.

Closer coordination will require focusing greater attention at all levels of governance and civil society. Key US
and European agencies can help steer these efforts by supporting the work of international organizations and
providing guidance to state and local leaders. NGOs can facilitate better exchange of data, ideas and expertise
while universities provide curricula and exchange programs that will better prepare the future leaders of the
clean energy transformation. Civil society forums can also help identify roadblocks to faster clean energy
deployment such as improved standards and permitting for clean energy installations, financial hurdles for
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consumers, better urban planning and transport systems and better labeling for green products. International
Organizations can also provide impetus to speed up this process by surveying the global market and policy
landscape and providing information to national officials and investors eager to find opportunities to invest in
the lucrative clean energy market. Through innovative concepts like farmer and engineer exchanges, “green”
study-abroad programs, “green public procurement”, renewable energy atlases, indices, and databases as well
as clean energy blogs, conferences, and tours, the transatlantic community can help broaden awareness and
appreciation of the value of renewable energy and promote growth in markets for clean tech goods and
services.

Reversing Climate Challenge: A Titanic U-turn

The global challenges presented by climate change are formidable. The International Panel on Climate Change
(IPCC)i, the scientific body of experts that releases regular evaluations on the impact of greenhouse gasesii on
the earth’s climate, has warned the international community in four reviews since 1990 that the earth’s
surface temperature has already increased between 0.3 and 0.6 °C since the late 19th century and could rise
by between 1.1 and 6.4 °C during the 21st century due to the “greenhouse effect” (21). Though CO2 and other
greenhouse gases are emitted by the earth’s natural systems, the IPCC has conclusively concluded that human
activities are the primary source of recent temperature increase and other climatic anomalies. They note that
a large part of this trend is caused by the disruption of the earth’s natural ‘carbon cycle’ whereby CO2 is
released and reabsorbed by so-called ‘carbon sinks’ such as rainforests. Eighty-five percent of these manmade
emissions are due to the burning of fossil fuels, while changes in land use and deforestation account for the
remaining 15% (22). Left unabated, these climate trends will accelerate, increasing the risk of abrupt and
irreversible impacts.

Recent reports from meteorological and climate scholars have remarked that current trends are already
nearing the ‘worse case’ scenarios outlined by the IPCC in their four reports (22). The scientists observed that
the earth’s temperature is increasing at a staggering rate, noting that eleven of the twelve years in the period
from 1995–2006 were among the twelve warmest years on record (since 1850) (21). Alarmingly, there is a
strong likelihood of immediate impacts and numerous climate anomalies can already be seen. A key worry is
the melting of the earth’s arctic ice sheets, which could cause sea levels to rise by 18 to 59 cm (21). The IPCC
also warns of more erratic climatic behavior, including frequent warm spells, heat waves, heavy rainfall, and
an increase in droughts, tropical cyclones, and extreme high tides. Additional changes will occur in the earth’s

i
The Intergovernmental Panel on Climate Change is the leading body for the assessment of climate change, established by the United Nations
Environment Programme (UNEP) and the World Meteorological Organization (WMO) in 1988. It provides the world with a clear scientific view on
the current state of climate change and its potential environmental and socio-economic consequences. Thousands of scientists from all over the
world contribute to the work of the IPCC on a voluntary basis and a main activity of the IPCC is publishing special reports on topics relevant to the
implementation of the UN Framework Convention on Climate Change (UNFCCC). The IPCC bases its assessment mainly on peer reviewed and
published scientific literature. National and international responses to climate change generally regard the UN climate panel as authoritative.
ii
Greenhouse gases, including Water vapor (H2O), carbon dioxide (CO2), nitrous oxide (N2O), methane (CH4) and ozone (O3) effectively absorb
thermal infrared radiation, emitted by the Earth’s surface, by the atmosphere itself. Atmospheric radiation is emitted to all sides, including
downward to the Earth’s surface. Thus greenhouse gases trap heat within the surface-troposphere system through the “greenhouse effect”. An
increase in the concentration of greenhouse gases leads to an increased infrared opacity of the atmosphere, and therefore to an effective radiation
into space from a higher altitude at a lower temperature. This causes a radiative forcing that leads to an enhancement of the greenhouse effect,
(220)
the so-called enhanced greenhouse effect.
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oceans as their temperature rises, resulting in changing ocean currents. In fact, the ocean has been absorbing
more than 80% of the heat added to the climate system leading to temperatures increased to depths of at
least 3000 m. Furthermore, the increased proportion of CO2 in the atmosphere is leading to ocean
acidification, a trend that, when combined with changing ocean currents can have profound impact on marine
nutrition, life-cycles and ecosystems. These trends will inevitably damage or destroy coral reefs and the many
species of marine life that inhabit or depend upon the ecosystem services of the reefs (22).

Figure 2: Climatic Stabilization scenario categories (colored bands) and their relationship to equilibrium global mean temperature change above
pre-industrial levels. In order to stabilize the concentration of GHGs in the atmosphere, emissions would need to peak and decline thereafter. The
lower the stabilization level, the more quickly this peak and decline would need to occur. (Source: IPCC AR4, WGIII, Summary for Policy Makers)

The chain of events and reactions that this dangerous process is beginning to trigger are startling and should
be of grave concern to citizens and policy makers. To stem this process, bold, concerted collective action must
be taken at all levels of society and government. There will inevitably be great sacrifices to be made if the
international community is to preserve and protect the natural resources and processes that make our current way of
living and working possible. Absence of robust action, significant economic consequences will be paid.

The good news is that many of the tools that will be needed to respond to these threats already exist. The
challenge is finding the political will needed to implement the changes necessary to bring newer and better
technologies. If society wants to avoid even more serious, and in most cases, irreversible impacts of climate
change, then there is very little time left and governments at all levels must begin devising plans and policies
that will contribute to a new global push to clean up our energy habits and develop new ways of consuming
and living that do not emit greenhouse gases. Doing so will require innovative plans that harness the power of
the market by incentivizing transitions to new energy systems and savings through efficiency.

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Figure 3: The "Stabilization Triangle" produced by the Princeton University Carbon Mitigation Initiative. A
current path climbing upward from 1.9 Billion Tons of Carbon Emitted per year in 1954, to 14 Billion of Tons
by 2054 would tripling CO2 in the atmosphere. To avoid doubling CO2, a "flat Path" at 8 Billions of Tons
Carbon Emitted per year must be achieved by a combination of various adaptation strategies.

As figure 3 illustrates, there is significant room for improvement if the world is to flatten out its levels of CO2
to below 350 ppm. Carbon emissions from fossil fuel burning are projected to double in the next 50 years,
keeping the world on course to more than triple the atmosphere’s carbon dioxide concentration from its pre-
industrial level. This course would to lead to dangerous levels of global warming by the end of the century. If
emission rates are kept flat over the next 50 years (orange line) then the negative impacts of climate change
can be mitigated. The flat path, followed by emissions reductions later in the century would to limit CO2 rise to
less than a doubling and skirt the worst predicted consequences of climate change.

But flattening off CO2 for 50 years would require reducing our projected carbon output by roughly 7 billion
tons per year by 2054, preventing 175 billion tons of carbon from entering the atmosphere (yellow triangle).
Filling in this “stabilization triangle” while fulfilling global energy needs will require the world to find energy
technologies that emit little to no carbon and develop the capacity for carbon storage.

Responding to the call for innovative solutions to this global dilemma, a number of institutions and scholars
have proposed forward thinking and groundbreaking concepts. One such report that has garnered much
attention due to its depth and clarity is the McKinsey & Associates report “Pathways to a Low Carbon
Economy” (23). Providing policy makers an in-depth set of information on the efficacy of various actions to
lower greenhouse gas emission, the report offers a sober and meticulous inventory of potential changes that
can be made by national, state and local actors. This detailed how-to guide to build a low-carbon economy
weighs the significance and cost of each possible method of reducing emissions and the relative importance of
different regions and sectors. The report also provides important information for business leaders to help
them understand the implications of potential regulatory actions for companies and industries (23).

The report is clear that with appropriate action, greenhouse gas emissions could be lowered by over one-third
by 2030 from 1990 levels, in order to limit global warming to a 2 °C increase from pre-industrial levels. It
outlines over 200 greenhouse gas abatement opportunities across 10 economic sectors and 21 world regions
and concludes that the annual cost of reducing greenhouse gas emissions to 35-40% below 1990 levels by

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2030 would be $260 to 450 billion – or less than 1 percent of forecasted global gross domestic product in
2030.

A highly encouraging aspect of the McKinsey report is that a great number of changes could come at no cost at
all and can, in fact, save money. As the global greenhouse gas abatement cost curve below shows, nearly 20
different sector changes would result in a net gain for businesses and consumers. From waste recycling to
utilizing hybrid cars and more efficient appliances, tackling global climate change will not always be expensive
(23)
. In fact, the first course of action, according to the McKinsey report is to focus efforts fast and furiously on
energy efficiency. By increasing the energy efficiency of vehicles, buildings, and industrial equipment while
shifting to low-carbon energy alternatives such as wind, nuclear, hydro, and carbon capture technologies,
consumers will be able to see some direct saving on their energy bills.

Accomplishing this ambitious plan laid out will not be easy. To do so, global consumers will need to
purchase42 million hybrid vehicle, land areas equivalent to the size of India will need to be reforested and
deforestation must be prevented on another 170 million hectares (23). Meeting these goals would also require
an increase in the world’s relative share of low-carbon electricity from 30% to 70%. If implemented the plan
would increase global carbon productivityiii from around 1.2% to 5-7%. While the plan does present a number
of questions about how to achieve these tasks, it does provide a general roadmap that can inform a broader
discussion by national leaders.

There are five areas on which we should focus. First, boosting energy efficiency could cut global energy
demand by 20-24 percent of projected 2020 demand. Second, to reduce emissions by one-fifth of current
levels by 2020, the carbon productivity of energy sources must increase by two-thirds. Third, additional
investment in R&D and incentives to boost innovation will be necessary. Fourth, companies and governments

iii
Carbon productivity is the amount of GDP produced per unit of carbon equivalents (CO2e) emitted.
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can do more to educate consumers on "green" behavior. Fifth, forestation and avoided forestation offer the
largest abatement lever at 25 percent of the global total under €40 per ton. (24)

Beyond Clean: Building Security, Independence and Growth with Low-carbon Energy

Although the threat of global climate change and the resulting ecological, agricultural and economic damage
present ample reason to kick-start an accelerated move away from fossil fuels, it is not the only motive. A
host of other reasons could convince even the most hardened skeptics of climate change to champion a clean
energy transformation. Linkages between national security and energy supply, our growing foreign
dependence, instability of fuel prices and threats to national economic competitiveness all present convincing
motivations to speed up our national energy transformation. From cutting off the source of funding for
Islamic fundamentalist networks to improving human health and gaining an edge in the global race of the
clean tech market, there are many reasons to support policies promoting a clean energy transformation.

National Security
Even for those unconcerned or unconvinced of global warming’s impact on our fragile atmosphere, there is
irrefutable evidence that national fossil fuel addiction is increasingly dangerous and destructive. In a famous
essay drafted in the January 1999 addition of Foreign Affairs, US Senator Richard Lugar (R-IN) and former CIA
Director James Woolsey made the case that oil is a magnet for conflict. Noting that over two-thirds of the
world’s oil reserves lie in the Middle East, US dependence on oil makes it highly dependent on a number of
autocrats and dictators in the region. As a result, Lugar and Woolsey argued that US oil dependence continues
to prop up highly undemocratic regimes driven more by a desire to control valuable resources than to provide
for their citizens (25). In fact, the authors note, the US intervention in Iraq in 1990 was triggered by Saddam
Hussein’s attempt to seize oil resources from neighboring Kuwait, a maneuver that proved costly to the lives
of US servicemen. Lugar and Woolsey make the case that the US must aggressively pursue alternative sources
of liquid fuels in order to cut off this cycle of dependence that has required the US to maintain a military
presence in the region for decades (25).

Echoing these sentiments six years later, Thomas Friedman penned an essay in Foreign Affairs titled “The First
Law of Petropolitics” arguing that the pace of democratic reform in oil producing nations moves inversely with
the price of oil (26). As the global market pushes the price of oil upward, oil-rich petrolist states begin to repress
freedom of speech and the press, halt free and fair elections, and erode the independent judiciary, rule of law,
and independent political parties. As a result, the bottomless demand for oil in the United States means the
American’s are unintentionally but inevitable eroding the movement toward democratic reform in these
countries.

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Friedman returned to this argument with his 2008 book “Hot, Flat, and Crowded”. Picking up on the problem
of petropolitics, Friedman makes the case the current global struggle against Islamic fundamentalism is being
exacerbated by the flow of money from oil consuming states to oil producing states in the Middle East. As
leaders in countries like Saudi Arabia funnel cash from oil exports to support fundamentalist schools and
organizations throughout the Middle East, Americans and Europeans become targets for terrorist attacks. In
addition to strengthening the “most intolerant, anti-modern, anti-Western, anti-women's rights, and anti-
pluralistic strain of Islam”, Friedman argues, we are funding both sides of the war on terror. By enriching
conservative, Islamic governments in the Persian Gulf that share their windfalls with charities, mosques,
religious schools, and individuals in Saudi Arabia, the United Arab Emirates, Qatar, Dubai, Kuwait, and around
the Muslim world, American and European wealth is eventually passed on to anti-American terrorist groups,
suicide bombers, and preachers (27).

This rather unsustainable trend means that Americans and Europeans are financing their enemies' armies as
well as their own. While financing national armies and NATO operations in Afghanistan, Pakistan and Iraq with
tax dollars, the transatlantic community is indirectly financing al-Qaeda, Hamas, Hezbollah, and Islamic Jihad
with imported petroleum. In addition to being an environmental necessity, kicking the fossil fuel habit has
become a strategic imperative. By reducing global demand for oil and gas, the US and Europe can help
promote a more democratic, more stable and more peaceful future.

Price Stability
As commodities on the global market that are extracted, processed, transported and sold to consumers, fossil
fuels are highly vulnerable to price changes due to shifts in supply, transport and speculation in futures
markets. This vulnerability can have devastating impacts on consumers, leading to unaffordable prices for
consumers. While this may lead to some desired shifts in behavior to decrease fossil fuel consumption and to
use public transportation, these shifts are risky and destabilizing to national economies. Moving toward
cleaner, domestic energy sources would remove the great degree of uncertainty about energy cost and access
and would produce a stable and predictable price measure.

The incredible impact that prices instability can have on national economies was illustrated all too well by the
1973 OAPEC oil embargo. After years of cheap and stable oil imports by the US and European nationsiv, a
global crisis was unleashed in October 1973 when the members of Organization of Arab Petroleum Exporting
Countries proclaimed an oil embargo in response to the U.S. decision to re-supply the Israeli military during
the Yom Kippur war. Aiming to leverage influence over U.S. foreign policy in the Middle East, OAPEC members
demanded a peaceful resolution to the Arab-Israeli conflict that had been inflamed by Israeli occupation of the
Sinai Peninsula and Golan Heights.

Following a joint surprise attack by Egypt and Syria against the Israel occupied Sinai Peninsula, Israel
responded with a four-day counter-offensive. As a key ally in the Middle East, the US offered significant aid to
Israel and air-lift to replace Israeli military losses. These actions triggered a collective OAPEC response

iv
From 1947-1967 the price of oil in U.S. dollars had risen by less than two percent per year. Until the Oil Shock, the price
remained fairly stable versus other currencies and commodities, but suddenly became extremely volatile thereafter. (227)
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including an embargo of all oil shipments to the United States, which they viewed as a “principal hostile
country”. The embargo was variously extended to Western Europe and Japan and the market price for oil rose
substantially, from $3 a barrel to $12 (Figure 4).

The increase in the global price led massive shortages in the U.S. and prices to levels previously thought
impossible. Customers experienced lines and empty pumps at the gas. By December 1973, the situation was
so desperate that US President Richard Nixon announced that the lights on the national Christmas tree would
not be turned on (28). The crisis shifted energy to the center of public attention and, combined with an ongoing
economic recession, led to a reassessment of America's strategic position in the world (28).

Price Shocks

Figure 4: Oil prices from 1861–2007, showing a sharp increase in the 1973 and 1979 energy crises. The orange line is adjusted for inflation. Source: US Energy
Information Administration

For nearly a decade following the 1973 embargo, the price of oil climbed, putting excessive pressure on
consumers and leading to a national wake-up call. In the aftermath of the crisis, industrialized nations took
steps to define principles for international cooperation and to identify solutions for the major challenges that
confronted the global energy system. In November 1974, the International Energy Agency (IEA) was
established within the framework of the Organization of Economic Cooperation and Development with a
broad mandate to promote improved energy security through cooperation on energy policy between major
consuming nations (29). In addition to coordinating information and policy, the IEA nations established a
requirement of all members to maintain national oil reserves sufficient to sustain consumption for at least 60
days with no net oil imports, leading to national petroleum reserve systems (30).

As the experience of the 1973 embargo and subsequent oil shocks in 1979 and 2007 illustrate, there is great reason for
concern for nations that rely heavily upon imported fuel sources. In addition to the dangers presented to national
security outlined above, these fuels pose a significant threat to economic security. Moving away from dirty, imported
fuels to a system of domestically produced energy from clean, renewable sources will bolster national economic security
and provide a predictable means to drive future growth without risk of interruption.

Environmental Quality
Fossil fuels pose a danger not only to national and economic security, but also to the quality of human health.
Through the process of transporting, processing and burning fossil fuels, an array of damaging effects are
unleashed. From vast oil spills that impact local communities and waterways for decades to clouds of smog

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hovering over urban centers to prolonged and even deadly sickness, our fossil fuel habits have a number of
hidden costs that are paid for by diminished quality of life.

As a result of burning fossil fuels like oil, coal, or natural gas, numerous toxins are released. These include
carbon monoxide, nitrogen oxides, sulfur oxides, and hydrocarbons. Inhaling these chemicals can significantly
damage human health and the accumulation of these particles in the air can significantly reduce on air, land,
and water quality. Nitrogen oxides and hydrocarbons can build-up in the atmosphere to form tropospheric
ozone, leading to permanent lung damage, smog, and even reduced cop yields (31). Inhaling the accumulated
exhaust from automobiles, power plants and other industrial sites can lead to a range of health problems such
as headaches, lung damage, bronchitis, pneumonia and heart disease. Inhaling these pollutants can also
impair the immune systems, leaving the body vulnerable to more health problems. In the US, the
transportation sector is responsible for close to half of all emissions of nitrogen oxides while power plants
produce most of the rest (31).

In addition to burning fuels, the process of producing and transporting them can also lead to significant
pollution and damage to waterways and land. Oil spills, like the massive leak from a BP offshore well that
spewed oil for months during the spring and summer of 2010, can leave waterways and their surrounding
shores uninhabitable for some time. Oil spills also lead to the loss of plant and animal life and can cause
disruptions to the local economies of coastal areas. They are also very costly. The BP catastrophe of 2010 has
been estimated to have cost over $30 billion, including cleanup costs and losses to local fisherman, shrimpers
and beaches (32).

Beyond the threat that coal poses to the lives of miners, thousands of whom have lost their lives from ‘black
lung’ (33) or collapsed mines (34), coal has many damaging impacts on the environment. The most extreme
environmental damage is caused by coal mining, especially strip mining. After mining is completed, lands
around the mine often remain barren. Materials other than coal can rise to the surface in the process and are
left as solid waste. When water washes through a coal mine a dilute acid is formed and can wash into nearby
rivers and streams. In washing the coal for later use more waste material is left. Finally, when coal is burned,
the remaining ash is left as a waste product (31).

Unfortunately, a history of lax or nonexistent regulations and weak oversight has meant that many of the
hidden environmental consequences of fossil fuels have gone unchecked. The expenses for the myriad of
health problems and environmental damage have gone unpaid, resulting in a massive market failure that has
to date, not been fully corrected. While environmental regulations are being increasingly put in place to
protect individuals from the damage caused by fossil fuels, their low cost and near-term abundance means
that they will be around for some time to come. Nevertheless, the advantage of clean energy technologies
over their dirtier peers offers a sobering reason to switch to cleaner and greener pastures.

Economic Competitiveness
In sheer economic terms, clean energy solutions make bottom line sense. From the cost of adjusting to the
effects of climate change to the potential to save consumers on their energy bills, to the need to create high-
skilled jobs in areas hit by the economic crisis, there is no shortage of economic motivators for a clean energy
15

transformation. There are scores of success stories of bright, innovative ideas leading to smart new products
that can produce cheaper and cleaner energy and do it more efficiently. The global market for such products
is growing fierce so that policies that are put in place today will decide who dominates the market tomorrow.
As companies look for welcoming nations to set up their shops, the US and Europe will have to keep pace with
competitors in Asia who have embraced renewable energy technologies as the way of the future and are
willing to back this up with robust government support.

A key economic motivation to transition to cleaner and more efficient power supply is avoiding the economic
damage that may be wrought by climate change. The high price of preventing a global climate catastrophe
has been intricately detailed by Sir Nicholas Stern in his famous reportv in which he argues that strong, early
action on climate change considerably outweighs the costs of inaction. The Stern Review proposes that one
percent of global gross domestic product (GDP) must be invested in order to avoid the worst effects of climate
change, and that failure to do so could risk sinking global GDP to 20% lower than it otherwise might be (35).
This figure has most recently been increased to 2% percent of GDP due to the continued worsening of the
earth’s climatic balance and reticence from the world’s biggest green-house gas emitters to take action.

Another major economic incentive to change paths is the potential to spur ‘green growth’ with investment
into clean energy ventures. With global investment in renewable energy projects rapidly increasing,
communities are hoping to win over potential companies and firms by offering a

$162 billion. Investment only fell 6.6% from 2008 - small potatoes compared to the 19% decrease in the oil
and gas industry. Investment next year should reverse and make a huge leap forward. Global renewable
energy investment expectations for 2010 are $200 billion, up 25% from last year, according to Bloomberg New
Energy Finance. It's not a passionate movement to save the earth that's behind the clean energy market; its
market competition and job creation driving the clean energy race - and the United States is losing. Prices of
renewable technologies are decreasing, making them more competitive. If climate concern isn't enough
motivation to encourage use, economic and employment benefits will.

v
The Stern Review on the Economics of Climate Change is a 700-page report released for the British government on October 30, 2006 by economist Nicholas Stern,
chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. The report discusses the effect of global
warming on the world economy. It is the largest and most widely known and discussed report of its kind and argues that climate change is the greatest and widest-
ranging market failure ever seen, presenting a unique challenge for economics
16

Clean Energy Technologies: Harnessing limitless sources with innovation

A central problem with dependence on fossil fuels for national energy production is that the sources for fossil
fuels are finite and due to reach peak levels within a generation. Clean energy technologies offer relief from
this unsustainable scenario and lift national addictions to external resources by conserving resources and
harnessing the earth’s natural processes for virtually limitless supplies of energy. The benefits of doing so are
numerous. By focusing on domestic resources and domestic innovation, nations can help build job
opportunities for local communities and help relieve national transmission and distribution systems by
diversifying energy resources. By harnessing locally generated electricity, residents and businesses will
become less vulnerable to large-scale blackouts caused by overly stressed grids and utilities.

A range of energy production technologies being developed over the last century are reaching levels of
maturity that will soon make them competitive with traditional fuels. These energy sources, when combined
with techniques that help save energy by squeezing more out of each unit of input, will provide the recipe
necessary to level-out and decrease green-house gas emissions. These innovations will also provide a more
sustainable supply by making national resources autonomous from outside forces or market speculation.
Finally, focusing on and perfecting these technologies will provide a competitive edge to nations hoping to eke
out a niche in high quality goods and services in the increasingly competitive global market.

The clean energy economy of tomorrow will focus on a range of emerging and established technologies.
While some current energy resources such as nuclear fission and natural gas will be needed as bridging
technologies, the energy revolution will be driven by energy efficient measures, carbon capture and
sequestration, solar energy, wind energy, biomass energy, hydrogen energy, geothermal energy, hydropower
and ocean energy, smart grid systems, electric vehicles and community heating and cooling.

17

Figure 5: Greenhouse Gas stabilization 'wedge' to 2050 utilzing a range of clean energy technologies

Energy Efficiency
Using less energy to provide the same level of energy service in various ways, from heating and cooling homes
to providing light for office buildings to getting more mileage out of a tank of gas. For example, insulating a
home allows a building to use less heating and cooling energy to achieve and maintain a comfortable
temperature and installing LED lights and/or skylights instead of incandescent lights can achieve the level of
illumination while using far less energy. Getting more out of each unit of energy input can help reduce global
greenhouse gas emissions by millions of tons per year. Many
reports estimate that energy efficiency measures will provide the
largest return on investment of all clean energy technology
measures.

Carbon Capture and Sequestration (CCS)
CCS is a broad term for technologies used to capture CO2 from
point sources, such as power plants and other industrial facilities,
compress it and transport it mainly by pipeline to suitable
locations where it can be injected it into deep subsurface
geological formations for indefinite isolation from the atmosphere. While CCS remains to be proven in large
scale commercial installations, it is widely seen to be a critical option in the portfolio of solutions available to
combat climate change, because it allows for significant reductions in CO2 emissions from currently available
and price-competitive fossil fuels (36). Like nuclear energy and lower-emission natural gas, CCS is likely be used
as a bridging technology until such point that renewable energy can cover 100% of consumer demand.

Solar Energy
Most renewable energy comes either directly or indirectly from the sun. Sunlight, or solar energy, can be used
directly for heating and lighting homes and other buildings, for generating electricity, and for hot water
heating, solar cooling, and a variety of commercial and industrial uses (37). Photovoltaic solar power is the

18

Figure 6: Global solar irradiance. Source: 3Trier Inc.

energy created by converting solar energy into electricity using photovoltaic solar cells. Solar thermal energy is
the energy created by converting solar energy into heat. Concentrating solar power is a type of solar thermal
energy that is used to generate solar power electricity. This technology is aimed at large-scale energy
production. Because of this, as a homeowner, you won't use concentrated solar power directly, but could take
advantage of it through a green-pricing service offered by your regulated utility or an alternative energy
supplier. There are several solar applications a homeowner can use to take advantage of solar thermal
energy... Solar space heating Solar water heating Solar pool heating Solar thermal cooling.

Wind Energy
Wind energy uses ground or ocean mounted turbines to capture the wind currents driven by the earth’s
natural weather patterns. To generate electricity, wind rotates large blades on a turbine, which spin an
internal shaft connected to a generator. The generator produces electricity, the amount of which depends on
the size and scale of the turbine. Multiple wind turbine sizes are available from a few kilowatts to tens of
megawatts (MW). At the end of 2009, worldwide nameplate capacity of wind-powered generators was 159
gigawatts (GW). (38) Energy production was 340 TWh or about 2% of worldwide electricity usage (38) and is
growing rapidly, having doubled in the past three years. Several countries have achieved relatively high levels
of wind power penetration (with large governmental subsidies), such as 20% of stationary electricity
production in Denmark, 14% in Portugal and Spain, 11% in Republic of Ireland, and 8% in Germany in 2009 (39)
As of May 2009, 80 countries around the world are using wind power on a commercial basis. (38)

Biomass Energy
Biomass energy is fuel, heat, or electricity produced from organic materials such as plants, residues, and
waste. These organic materials span several sources, including agriculture, forestry, primary and secondary
mill residues, urban waste, landfill gases, wastewater treatment plants, and dedicated energy crops. Biomass
energy takes many forms and can have a wide variety of applications ranging including direct firing or co-firing
with fossil fuels for electricity to produce electricity, direct firing of boiler for heating or combined heat and
power (CHP). Biomass may also be converted into a gas or liquid to be burned as fuel, particularly in transport
(40)
.

Hydrogen Energy
Hydrogen is the most abundant element on the Earth. Though it does not occur naturally as a gas it can be
separated from other elements and be burned as a fuel or converted into electricity with pure water as its
only emission (37). Hydrogen has been proposed as a solution for transport fuel and as a fuel for large scale
power plants, utilizing Carbon Capture and Sequestration with hydrogen derived from coal or natural gas (41).

19

Figure 7: Availability of Renewable Energy Compared to Current Energy Demand (German Federal Ministry for the Environment, 2007)

Geothermal Energy
Geothermal energy is produced from heat and hot water found within the earth. Geothermal energy can be
used to heat and cool air and water, as well as for electricity production. Geothermal resources can be at or
near the surface or miles deep in the earth. Geothermal systems move heat from these locations where it can
be used more efficiently for thermal or electrical energy applications. Geothermal systems include heat
pumps (GHPs) that use the ground, groundwater, or surface water as a heat source or heat sink as well as
direct-use applications that use hot water directly for space conditioning or process heat. Geothermal energy
may also be used to fuel utility scale power plants to generate electricity by leveraging heat from geothermal
resources to drive turbines (42).

Hydropower and Ocean Energy
Hydropower refers to various forms of renewable energy harnessed from the flow of water. Hydropower
dams generate electricity by harnessing the kinetic power of moving water with turbines. Oceanic forms of
energy include tidal power, tidal stream power and wave power. Tidal power harnesses the tides in a bay or
estuary with turbines that capture water entering and escaping the tidal barrage. Tidal stream generators
draw energy from currents in much the same way that wind generators do by capturing the flow of water with
turbines (43). Wave power harnesses power from ocean surface wave motion using floating devices or by
capturing the displaced by waves in hollow concrete structures. Using these three technologies, electricity can
be generated (44).

20

Smart Grid Systems
Today’s electricity ‘grids’ – the network of electricity transmission stations and power lines that bring
electricity from power providers to consumers – were with technology that has been around for more than a
half-century – decades before the integrated circuit made things like laptops, iPhones and mp3s integral parts
of our lives. Whereas electronic and digital products have evolved greatly in sophistication and efficiency, the
power grid remains clumsy, inefficient and difficult to manage. With power producers unable to communicate
effectively with customers, it is difficult to introduce more effective way buying, selling and managing
electricity.

The ‘smart grid’ concept aims to solve this by harnessing the communicating power of information technology
with national electricity distribution. By installing smart meters capable of communicating with the source of
energy in their homes and business, consumers can better monitor their energy use against the price of
energy at any time of day. Smart grid technology does this by using uses information technologies to improve
how electricity travels from power plants to consumers and allowing them to interact with the grid. A smarter
grid will enable many benefits, including improved response to power demand, more intelligent management
of outages, better integration of renewable forms of energy, and the storage of electricity.

Up and down the electric power system, the Smart Grid will generate billions of data points from thousands of
system devices and hundreds of thousands of consumers. What makes this grid "smart" is the ability to sense,
monitor, and, in some cases, control (automatically or remotely) how the system operates or behaves under a
given set of conditions. In its most basic form, implementation of a smarter grid is adding intelligence to all
areas of the electric power system to optimize our use of electricity

.
Figure 8: Smart Grid: A Smart Power Grid incorporates information and communications technology into
every aspect of electricity generation, delivery and consumption in order to minimize environmental
impact, enhance markets, improve reliability and service, reduce costs and improve efficiency Source:
Electric Power Research Institute (http://www.smartgrid.epri.com/)

21

Electric Vehicles (EV)
Electric vehicles are propelled by electric motors that derive power from rechargeable battery packs. Electric
vehicles offer a number of advantages over traditional internal combustion engines (ICEs). The motors in
electric vehicles are far more efficient than combustion engines as they convert over 75% of the chemical
energy from the batteries to power the wheels. Internal combustion engines (ICEs) convert a mere 20% of the
energy from gasoline. They also emit no exhaust from burning fuel. When powered with electricity from clean
energy sources. Importantly, electric vehicles do not rely on foreign oil and help reduce energy dependence.
Since electricity is a domestic energy source.

Currently, a number of barriers stand in the way of large-scale EV deployment, notably the significant battery
and driving range challenges. Most EVs can only go about 100–200 miles before recharging their batteries
while gasoline vehicles can go over 300 miles before refueling. Fully recharging the battery pack can take 4 to
8 hours and even a "quick charge" to 80% capacity can take 30 min. The batteries are also costly and bulky (45).
Future R&D and demonstration projects will be needed in order to help this technology become more mature.
For the moment, plug-in hybrid cars, which combine traditional combustion engines with battery back-up and
power generation are hitting the market and will help to increase fuel efficiency and save consumers at the
pump.

District Heating and Cooling
District Heating and Cooling (DHC) is an established technology that has proven to be a significant asset in
Greenhouse Gas (GHG)reduction. DHC involves the use of steam, hot water, or chilled water generated in a
centralized plant and transported to multiple other buildings, sometimes an entire town or community via an
underground pipeline system. DHC offers a highly reliable, efficient, cost-effective way to heat and cool
building without on-site boilers, furnaces, chillers, or air conditioners. (46). When combined with Combined
Heat and Power (CHP) technology to recapture heat that would otherwise be lost in the production of electric
power DHC can offer an ideal solution. DHC can also utilize biomass or biogas fuels and waste in order to
reduce carbon emissions and minimize resource depletion. Several countries such as Denmark are already
supplying urban centers with heat from waste burning CHP plants. (47).

Energy and Climate Laws in the US and Europe: Divergent Paths

Laws and policies promoting renewable energy and energy efficiency take very different shape and form in the
United States and European Union, with the US taking a decentralized ‘bottom up’ approach as the EU takes a
centralized ‘top down’ approach (48). This divergence is reflective of the different nature of governance
between the two polities as well as divergent political cultures, economic and legal institutions and resources.
While the US has generated far-reaching legislation on various environmental and energy matters, climate
change remains a highly controversial issue, leaving representatives in Congress vulnerable to a host of
interest groups vying for influence over the drafting of national legislation. American resistance toward non-
market based solutions as well as fears over the impact of increased costs for energy have hampered progress
on a national energy bill. In the EU, a unique system of ‘multi-layered governance’ allows for centralized
lawmaking on energy and climate matters that are implemented on the national level by member states.
22

More ‘statist’ countries, like Germany or Denmark, have been able to implement highly centralized policies
that have had significant impacts on their national energy portfolios. While Europe has continued to ratchet
up its ambition at the supranational level, the US continues on a very federal path with individual states taking
the initiative with their own policies.

US Climate and Clean Energy Policies

While the US has been slow to develop far reaching legislation at the national level a great amount of activity
can be seen at the state and local level. Numerous states such as California, Iowa, Nevada, Vermont and New
York, have been tailoring their state laws in ways to encourage greater adoption of clean energy and energy
efficiency for a decade or more (49) (50). Furthermore, individual communities, such as Gainesville Florida, or San
Francisco are taking extra steps beyond state requirements to respond to residents’ concerns about climate
change and the need to reduce carbon emissions. Combined, these policies and programs create a complex
yet effective patchworkvi of action that is has led to dividends locally, investments in new businesses and
increased options for energy consumers (51).

National Policies and Programs for Clean Energy Technologies
Though individual states have served as the primary driver of US clean energy policies, the US federal
government offers significant incentives to businesses and individuals through federal tax credits, loan
guarantees, grants, funding for research and development and national standards for transportation. These
policies received a significant boost in 2009, as the Obama Administration and US Congress chose to boost
incentives for clean energy deployment through extensions of corporate tax credits and funding from the US
stimulus package. Through the American Recovery and Reinvestment Act over

A key piece of federal legislation that has helped boost recent investments into clean energy businesses and
increased solar, wind, geothermal biomass energy installations is the federal renewable electricity production
tax credit (PTC). The PTC is a per-kilowatt-hour tax credit for power generated by renewable energy
technologies that was originally introduced in 1992 and renewed and expanded numerous times, most
recently in February 2009. Under the PTC, companies that generate wind, solar, geothermal, and “closed-
loop”vii bio-energy are eligible for a 2.1 2.1-cent per kilowatt-hour (kWh) benefit for the first ten years of a
renewable energy facility's operation. Other technologies receive a reduced credit of 1.0 cent per kWh (52). In
2009, the credit was adapted in order to allow buyers of renewable energy technology to take a grant from
the US Treasury, in lieu of the tax credit. This change served to significantly boost the number of businesses
and individuals claiming the credit, as it allowed them to circumvent the rather shaky tax-credit equity market
that had dried up during the economic crisis. The PTC can be applied to federal tax liabilities dating from the
previous year and can be carried forward up to 20 years

Another significant federal incentive, the federal Business Energy Investment Tax Credit (ITC) is an incentive
that reduces federal income taxes for qualified tax-paying owners based on the amount investment in
renewable energy projects. This credit is earned once the renewable energy system is placed into service and
allows businesses and individuals to offset upfront investments in projects and provide an incentive to deploy

vi
According to the Database of State Incentives for Renewables & Efficiency, there are over 2200 distinct state programs promoting clean energy technology. The
scope of this analysis does not permit an exhaustive discussion of these programs.
vii
Not exposed to air.
23

capital-intensive technologies, such as more costly solar photovoltaic systems and fuel cells. The ITC was
expanded significantly in 2009 and provides a premium credit to solar, geothermal and fuel cell technologies.
As with the PTC, the ITC can be applied to federal tax liabilities dating from the previous year and can be
carried forward up to 20 years (53).

Beyond federal tax credits to companies and individuals, the federal government provides significant support
to renewable energy investors with the U.S. Department of Energy (DOE) loan guarantee program. This
program is of significant importance, as it provides investor security to banks and other lenders by providing
federal backing for massive clean energy projects allaying fears of borrower default (54). Initiated in 2005, the
program allows the DOE to issue loan guarantees for projects employ in renewable energy and energy
efficiency technologies, plug-in hybrid vehicles and power transmission (54). The loan guarantee program has
been authorized to offer more than $10 billion in loan guarantees. These guarantee target the commercial
use of innovative technologies rather than energy research, development, or demonstration programs.
Manufacturing projects, stand-alone projects, and large-scale integration projects that combine renewable
energy, energy efficiency and transmission technologies are eligible for billions of dollars under the program.
In 2009, the program was allotted $8.5 billion in funding, with the stimulus bill (ARRA) expanding funding by
$2.5 billion (54).

In addition to the loan guarantee program, the DOE is a leading force in funding R&D on new and novel energy
and energy efficiency technologies. The lead division for this innovation is the Energy Efficiency and
Renewable Energy Program (EERE), which works to enhance energy efficiency and productivity and accelerate
clean technologies to the marketplace (55). From its headquarters in Washington, DC the EERE division oversees
deployment and diffusion projects across the country and works collaboratively other organizations as well as
DOE research labs to develop and implement codes, standards, rules and regulations for clean energy and
energy efficiency (55). EERE identifies market barriers interfering with the widespread adoption of these
technologies and helps formulate solutions. EERE also helps promote education and workforce development
to increase awareness about the benefits of clean energy and energy-efficient technologies. The American
Recovery and Reinvestment Act of 2009, or "Recovery Act," provides a significant boost to the projects at EERE
by awarding $16.8 billion to its programs and initiatives. This funding is now being released to research
centers, universities and clean tech countries across the nation.

US Regional Cooperation on Climate

Outside of actions by national and state leaders, regional coordination provides another important dimension
to the complex American energy and climate scene. Currently in US, three major regional initiatives have been
established to create a market-based ‘cap and trade’ system for carbon emissions from utilities. As advocates
of clean energy await the potential for a national ‘cap and trade’ system and federal requirements for
renewable energy in the power sector, these regional accords are making strong headway. Recognizing the
trans-boundary nature of greenhouse gas emissions and the shared responsibility states have for the quality of
their citizens’ health and environment, progressive states have opted to move ahead when national leaders
are deadlocked.

The first of these regional cooperative systems to be established was the Regional Greenhouse Gas Initiative
(RGGI), is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts,
New Hampshire, New Jersey, New York, Rhode Island, and Vermont to cap and will reduce CO2 emissions from
electricity by 10 percent by 2018 (56). On the US west coast, the Western Climate Initiative or WCI is an initiative
24

of US states and Canadian provinces along the western rim of North America aiming to reduce greenhouse gas
emissions by 15% from 2005 levels by 2020 (57). The first phase of this plan will be implemented on January 1,
2012, followed three years later by a broader cap on carbon emissions in 2015. Both the RGGI and WCI utilize
a system of CO2 allowances and auctions to trade these credits in a free-market based system. Like its coastal
peers, the Midwestern Greenhouse Gas Reduction Accord is a regional agreement by six governors of states in
the US Midwest and the Premier of one Manitoba to reduce greenhouse gas emissions. Established by the
Midwestern Governors Association, the Midwest Accord will establish greenhouse gas reduction targets and
time frames, develop a market-based and multi-sector cap-and-trade mechanism, establish a system to enable
tracking, management, and crediting for entities that reduce emissions (58) (59).

While the primary objective of these regional cooperation schemes is to reduce greenhouse gas gases, they
also play an important role in exchanging experiences and best practices on clean energy deployment in
individual states and in paving the path for a potential national ‘cap and trade’ bill. Through regular forums
and meetings, these regions are aiming to increase the effectiveness and impact of their policies. In May,
2010, these three regional initiatives joined forces through a cooperative effort to share experiences in the
design and implementation of regional cap-and-trade program and to inform federal decision makers
currently working on national climate change policy and explore the potential for further collaboration among
the programs in the future. Together the three regional programs encompass 23 U.S. states and four
Canadian Province, accounting for over half of the U.S. population and half of Canada’s greenhouse gas
emissions (60).

States – Leading US Clean Energy Policies

As legislators in Washington continue to debate various proposals for strict national green-house gas
emissions caps, individual states are already using the constitutional powers reserved to them to adopt
forward thinking and progressive clean energy laws. In fact, many states already have over three decades of
experience in tailoring such legislation and have increasingly added new and more effective elements to their
existing portfolio of laws. Through a combination of various legislative tools including renewable portfolio
standards (RPS)viii, business and personal tax credits and deductions and other programs, states are providing
incentives to consumers and requirements and guidelines to utilities in order to increase the share of clean
energy in their state energy portfolios. Combined with participation in the regional ‘cap-and-trade’ initiatives
outlined above, these state-level efforts

One of the most effective and common policy mechanisms utilized by states is the renewable portfolio
standard (RPS). An RPS is a market based mechanism for the American Wind Energy Association in 1996 that
obliges supply companies or consumers to purchase a specific amount of electricity from renewable energy
sources. The goal of the RPS is to minimize the costs of increasing renewable energy capacity through
competition to fulfill obligations. In order to facilitate this market mechanism, energy providers may purchase
certificates (renewable energy certificates), which may also be bought and sold freely on the market. By
purchasing such a certificate, a utility can certify that a portion of the electricity that it has produced or
purchased is from verified renewable energy sources. Funds from the purchase of such certificates can be
used by renewable energy producers to cover the higher cost of their production process. By increasing the
required portion of renewable over time -- the RPS can put the electricity industry on a path toward increasing
sustainability.

viii
RPS policies may also be described as ‘renewable electricity standard’ or a renewable energy quota or obligation mechanism.
25

Currently, 29 states and the District of Columbia have RPS schemes. While not having strict requirements, a
further 7 states of goals. California, for instance has a RPS target of 33% renewable energy by 2020. Texas has
a goal of 5,880 megawatts of renewable energy capacity by 2015 and Minnesota has a target of 25% by 2025.
Some states, such as New Jersey, Massachusetts, and Maryland include more specific targets for certain
renewable energy sources, such as solar electricity, solar heating, wind and . Many states, such as Colorado,
Missouri, and Arizona offer additional credits for renewable energy produced within the state, rather than
purchased through renewable energy credit markets or for smaller scale projects that may otherwise face
difficulty financing their operation (61). Though various proposals for a national RPS have been raised in
congress, it has not been determined how such legislation might impact RPS models at the state level.

Another popular policy mechanism employed by states is the tax credit or tax deduction. These credits may
be offered to individuals (personal income tax credits and deductions) or to corporations as corporate tax
credits, deduction and exemptions. These credits aim to reduce the expense of purchasing and installing
renewable energy or energy efficiency systems and equipment. There is frequently a maximum limit on the
dollar amount of the credit or deduction. The credits may also be earned through the construction of energy
efficient, ‘green buildings’ and may also be used to support the manufacture of renewable energy systems or
equipment, or energy efficiency equipment (62).

Additional measures used by individual states in the US include ‘net metering’, efficiency standards for
buildings and transport, rebates, biofuel policies and public benefit funds. Net metering is a policy that
requires power providers to purchase excess electricity that is not used on-site by a renewable energy
producer, sometimes at a set premium rate per kilowatt hour. This policy is made possible through the use of
so-called ‘smart meters’ that are able to gauge power flowing from the electricity grid as well as back into it.
Efficiency standards for buildings and transport set a minimum level of efficiency for things like building
insulation and windows, heating and cooling systems and miles-per-gallon for cars. California, the largest
market for automobiles in the US, has been a model example in the field of transport efficiency, having set the
standards prior to a national policy. Biofuel policies offer premium pricing to producers of ethanol and
biodiesel in order to encourage motorists to burn cleaner fuels. In order to achieve a goal of replacing 10
percent of fuel needs with ethanol Minnesota instituted a producer payment program of 20¢/gallon for small,
in-state producers. Finally, public benefit funds (PBFs) offer financial support for renewable energy, energy
efficiency and low-income energy programs through a surcharge on electricity consumption. PBFs commonly
support rebate programs, loan programs, research and development, and energy education programs (63).

Local Governments – Sustainable Grassroots Efforts

As US States provide the political momentum for the America’s clean energy transformation, a number of local
communities have passed laws and ordinances that go a step further by providing for locally tailored rules,
programs and institutions to fight climate change and provide sustainable energy to their residents. Working
together with municipal utilities and local authorities, communities from California to Vermont are building on
top of efforts by state and national legislators by drafting local rules to encourage residents to invest in clean
energy and adopt low-carbon and sustainable consumer habits. These efforts are reaping important benefits
for clean energy companies as well as for the health and wellbeing of citizens.

Gainesville, Florida offers a unique example of a local community taking extra steps to harness the states
abundant solar resources. The city of Gainesville established a local ‘feed-in tariff’ program in early 2009 that
offers solar energy producers a premium rate for electric power derived from photovoltaic installations.
26

Under the terms of the program, these electricity producers will receive a premium rate for each kilowatt hour
of energy between 26¢ and 32¢, depending on the size and location of the installation. Modeled after similar
programs in Europe (outlined below), solar energy producers receive this rate through a 20 year fixed contract
The Gainesville program was the first feed-in tariff in the United States and has already been fully subscribed
through 2016. (64).

San Francisco voters have also expressed their strong local support for solar energy by approving a proposition
to allow the city to issue $100 million in revenue bonds to finance enough renewable energy to supply about
25 percent of the city government's needs. With the program, San Francisco aims to become the largest single
producer of solar energy in the U.S. San Francisco voters have also allowed the city to issue other bonds for
renewable energy projects in the future without their approval at the ballot box. The goal is to have 10-12
megawatts of new solar energy and 30 megawatts of wind energy online in a year or two (65).

In 2004, Residents in Washington, DC took action to confront local air pollution and to encourage the use of
hybrid cars with a local law that makes it more expensive to own and drive vehicles consumer high-amounts of
gas. Under the new Act, owners of hybrid and other alternative fuel vehicles are not required to pay a local
excise tax and their vehicle registration fee is cut in half. To discourage use of heavy passenger vehicles, such
as SUVs, owners must pay an increased excise tax of 8% (up from 7%) and higher registration fee. Thus, an
owner whose SUV costs $60,000 would pay an excise tax of $4.800 (an increase of $600) while the owner of a
hybrid vehicle would pay nothing. By encouraging residents to purchase hybrid vehicles, Washington is
providing support and visibility to fuel efficient car models while protecting residents health (66).

Also aiming at more efficient, low-emission transport, communities in southern California launched a major
effort to promote plug-in hybrid cars. The regional initiative launched in December 2009 is helping to ease the
transition to electric vehicles by bringing together cities, utilities, automakers and others in the Southern
California region to actively to support and build the necessary infrastructure for the commercial launch of
electric vehicles. The collaborative includes: Southern California Edison, Los Angeles Department of Water and
Power, Southern California Public Power Authority, California Electric Transportation Coalition, Electric Power
Research Institute, South Coast AQMD, Nissan, GM, Ford, and the cities of Burbank, Los Angeles, Pasadena,
Santa Ana, and Santa Monica. (67) Recognizing the long-term benefits of plug-in hybrids as well as the
significant barriers presented to their deployment, Southern California is preparing for the future with needed
investments today. With current infrastructure heavily geared toward conventional, inefficient and polluting
combustion engine vehicles, this initiative will build a foundation for the rapid deployment of hybrid and fully
electric vehicles tomorrow.

EU Climate and Clean Energy Policies

These trends stand in contrast to the European Union where increasingly ambitious energy and climate
legislation originating at the EU level is being implemented by member states (48). In contrast to the US, the
European Union has not confronted significant barriers to legislating caps on carbon and establishing EU-wide
goals for clean energy as a percentage of its overall energy portfolio. With the EU Commission providing
guidance and initiating legislation, the European Council and European Parliament formulate the details of EU

27

legislation on climate and energy. EU legislation on climate and energy is issued in the form directives that
provide guidelines and targets for EU member states to achieve or face the consequence of sanctionix.

Energy is not a new issue for EU policymakers. In fact, energy issues were central to the formation of the
European Community in 1951 when the European Coal and Steel Community (ECSC), the initial and less
elaborate incarnation of the EU was established. The ECSC played a key role in managing the coal and steel
production of France and Germany, thus aiming to prevent a repeat of the disastrous events of the Second
World War. With the 1973 oil crisis, the EU began to work more closely on the EU actively sought "to expand
the role of renewable in the EU energy mix". In 1973, the European Commission issued "Guidelines and
Priority Actions for Community Energy Policy," making note of the increasing world demand for energy and its
corresponding scarcity (68).

By the 1990s, with increasingly strong levels of European policy coordination, EU expansion and increasing
pressure to confront environmental issues related to energy, the EU the Commission released a Green Paper
entitled "Energy for the future: Renewable sources of energy", followed a year later with a White Paper urging
the formulation of a renewable energy directive (69). Following the Commissions initiation, a Directive of the
European Parliament and the Council on the promotion of electricity from renewable energy sources in the
internal electricity market was introduced and went into force in October 2001. The directive set the
requirement of all EU member states to increase the share of renewable electricity in their overall electricity
supply. The directive also set out targets for each Member amounting to a collective goal of 22 percent share
of renewable electricity sources by 2010. This requirement has been set for all new EU accession nations, and
applies now to all 27 EU nations.

The goals set out in the 2001 renewable energy sources directive have been further increased with the
approval of the 2009 EU Climate and Energy Package - a set of directives that outline new goals for renewable
energy, energy efficiency, and biofuels applicable to all 27 EU member states (70). This package outlines the so-
called “20-20-20 goals”: a 20% cut in emissions of greenhouse gases by 2020, compared with 1990 levels; a
20% increase in the share of renewables in the energy mix; and a 20% cut in energy consumption (71). These
ambitious goals are set out by a number of new directives.

These directives include a new EU Emissions Trading System (EU ETS) directive to reduce CO2 emissions from
energy intensive sectors. Taking effect in 2013 establishing, it will establish an EU wide cap on CO2 which will
decline each year to 2020 and beyond. The Renewables Directive, in addition to mandating an EU wide goal of
20% renewable energy, also sets every Member State a target of supplying 10% of transport fuel from
renewable sources by 2020. Finally, a Directive on the geological storage of CO2 outlines a regulatory
framework for the safe capture, transport and storage of carbon dioxide in the EU (70).

The new Renewable Energy Directive sets out a set of targets for individual countries - 'indicative trajectories',
- to ensure that each nation makes progress towards the 2020 targets. However these targets are not binding.
Each nation may decide upon its own 'mix' of renewables, allowing them to best harness their national

ix
Adopted by the Council in conjunction with the European Parliament or by the Commission alone, a directive is addressed to the
Member States. Its main purpose is to align national legislation. A directive is binding on the Member States as to the result to be
achieved but leaves them the choice of the form and method they adopt to realise the Community objectives within the framework
of their internal legal order. If a directive has not been transposed into national legislation in a Member State, if it has been
transposed incompletely or if there is a delay in transposing it, citizens can directly invoke the directive in question before the
national courts (234).
28

resources and domestic industry. Should a member state fail to meets its targets, they must take appropriate
measures of face infringement proceedings (72). Member states will be able to harness their own national
support schemes to those of other EU states and to import 'physical' renewable energy from third-country
sources, such as large solar farms in North Africa. As with the ETS, trading scheme allowing member states to
sell or trade excess renewables credits to another, based on statistical values, will be permitted. However
these so-called 'statistical transfers' may take place only if the member state has reached its interim
renewables targets.

In implementing the EU legislation to achieve the “20-20-20” goals, member states must find effective and
efficient policy mechanism at the national level to ensure results. Through a mix of government coordination,
financial incentives, low-interest loans and research grants, EU nations are aiming to quickly increase energy
savings and clean energy production. Leading the pack are countries Germany, Spain and Denmark where a
combination of ambitious national policies, a strong knowledge base and rich clean energy resources are
leading accelerating the clean energy share in their national energy portfolios.

Germany, Spain and Denmark – European Clean Energy Success Stories
Germany

As the world’s fifth largest economy, Germany is a dominant player in the global clean energy arena. Germany
has led global growth in wind and solar production by making use of its rich industrial infrastructure as well as
its strong history of high-skill, precision manufacturing. Driven by its highly effective Feed-In-Tariff law for
renewable energy, Germany has dramatically expanded its onshore wind energy capacity while investing
heavily in domestic solar energy installation. Despite a national solar energy resource on par with the US state
of Alaska, Germany has become the global leader in installed solar energy capacity with over 9.8 GW of
installed solar PV in 2009 - 47 percent of existing global solar PV capacity.

Like many nations, Germany was hit hard by the 1973 OPEC
embargo and sought ways to expand its domestic energy
supply. In addition to investments in nuclear energy
Germany initiated a research program wind turbine
development in 1974. Its large-scale wind plant project
(GROWIAN) produced what was then the largest wind
turbine ever before built. Experiments with new wind
technologies continued through the late 1970s and early 80s
before Germany decided to end the GROWIAN project in
1987 due to manufacturing and system integration problems
(73)
. Meanwhile, Germany constructed a number of nuclear
reactors throughout the 1970s and 1980s. This ended
abruptly with the nuclear catastrophe of Chernobyl when
public opinion and political leadership shifted swiftly against Figure 9: Solar Resource: United States - Spain - Germany
nuclear energy, resulting in a halt to nuclear plant
construction with the ultimate aim to phase out its use by
2022.

29

As a consequence, and due to the rising power of the German environmental movement and Green Party,
Germany once again aimed to rapidly expand renewable energy technologies. In 1991, Germany adopted a
federal Electricity Feed- In Law (StrEG) which has become the central national instrument for the promotion of
renewable energy in Germany. The law established a requirement for public utilities to purchase renewably-
generated power from wind, solar, hydro, biomass and landfill gas sources, on a yearly fixed rate basis, based
on the average revenue per kWh for energy. Specific rates were set for each type of technology depending on
plant size, with smaller plants receiving the higher subsidy level (74). The cost of this premium rate for
renewable energy producers is paid for by the electricity consumers, not by government funds, so the tariff is
not a subsidy in the conventional sense.

The Feed-In Law was successful in launching Germany’s wind power market throughout the 1990s, driving the
total national wind energy capacity to over 6 GW by 2000. The Feed-In law was complemented by other policy
instruments including nationally funded research programs and low interest loans subsidized by a domestic,
state-owned development bank, the Deutsche Ausgleichsbank. This provided badly needed funding for new
wind power development (74).

In 2000, the StrEG was updated and reformed with the introduction of the Renewable Energy Law (EEG). The
new EEG aimed to double Germany’s renewable energy capacity from 1997 levels by 2010 with the ultimate
goal to reach a minimum of 12.5% electricity from renewable sources. In contrast to the StrEG, the EEG’s tariff
rate was based, not on the average utility revenue per kWh sold, but on a set of fixed, regressive rates based
on technology and plant size. Low-cost renewable energy producers, such as wind farms, were compensated
at a lower rate than higher-cost producers, such as solar PV. The EEG also set a requirement for electric grid
operators to purchase power from local producers and set up a national equalization scheme to minimize
regional differences in electricity production so that all national regions share an equal share of costs (74).

Figure 10: Development of electricity generation from renewable energies in Germany since 1990

As a result of the EEG, Germany has managed to rapidly transform its energy sector and set itself on a path
toward 100% clean energy usage by 2050 (75). As illustrated by Figure 7, Germany has doubled its share of
renewable energy time and time again. Renewable energy now accounts for over 10 % of Germany’s total
energy consumption and over 16 % of gross electricity consumption (76). By 2008, Germany had already
overshot its goal of 12.5%, three years ahead of schedule (77). Due to such rapid growth in Germany’s clean
energy sector, over 340,000 people are employed directly or indirectly by clean energy companies in Germany
a doubling of clean energy jobs from 2004 (78).
30

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