Real Numbers

Real Numbers



Reversing the Incredible Shrinking Energy R&D Budget

The federal government and private industry are both reducing their investments in energy research and development (R&D) at a time when geopolitics, environmental concerns, and economic competitiveness call instead for a major expansion in U.S. capacity to innovate in this sector. Although the Bush administration lists energy research as a “highpriority national need” and points to the recently passed energy bill as evidence of action, the 2005 federal budget reduced energy R&D by 11 percent from 2004. The American Association for the Advancement of Science projects a decline in federal energy R&D of 18 percent by 2009. Meanwhile, and arguably most troubling, the lack of vision on energy is damaging the business environment for existing and startup energy companies. Investments in energy R&D by U.S. companies fell by 50 percent between 1991 and 2003.

This decline occurred despite numerous calls from expert groups for major new commitments to energy R&D. A 1997 report from the President’s Committee of Advisors on Science and Technology and a 2004 report from the bipartisan National Commission on Energy Policy each recommended that federal R&D spending be doubled. The importance of energy has led several groups to call for much larger commitments, on the scale of the Manhattan Project of the 1940s.

A comparison with the pharmaceutical industry is revealing. In the early 1980s, energy companies were investing more in R&D than were drug companies; today, drug companies invest 10 times as much in R&D as do energy firms. Total private sector energy R&D is less than the R&D budgets of individual biotech companies such as Amgen and Genentech. The nation’s ability to respond to the challenge of climate change and to the economic consequences of disruptions in energy supply has been significantly weakened by the lack of attention to long-term energy planning. The current energy bill is a collection of subsidies without any such vision.

Comparison to previous major government research programs suggests that a serious federal commitment to energy R&D could yield dramatic results. Using emissions scenarios from the Intergovernmental Panel on Climate Change and a framework for estimating the climate-related savings from energy R&D programs developed by Robert Schock from Lawrence Livermore National Laboratory, we calculate that energy R&D spending of $15-30 billion/year would be sufficient to stabilize CO2 at double pre-industrial levels. This 5- to 10-fold increase in spending from current levels is not a pie-in-the-sky proposal; in fact it is consistent with the growth seen in several previous federal programs, each of which took place in response to clearly articulated national needs. In the private sector, U.S. energy companies could increase their R&D spending by a factor of 10 and would still be below the average R&D intensity of U.S. industry. Past experience indicates that this investment would be repaid several times over in technological innovations, business opportunities, and job growth.

R&D investment is an essential component of a broad innovation-based energy strategy that includes transforming markets and reducing barriers to the commercialization and diffusion of nascent low-carbon energy technologies. The economic benefit of such a bold move would repay the country in job creation and global economic leadership, building a vibrant, environmentally sustainable engine of new economic growth.

Daniel M. Kammen () is professor in the Energy and Resources Group and in the Goldman School of Public Policy at the University of California, Berkeley, where he is also codirector of the Berkeley Institute of the Environment. Gregory F. Nemet () is a doctoral student in the Energy and Resources Group.