Other Voices: On Energy , R&D and Jobs
Fed Chairman Bernanke
What about the present? Is government support of R&D today at the “right” level? This question is not easily answered; it involves not only difficult technical assessments, but also a number of value judgments about public priorities. As background, however, a consideration of recent trends in expenditures on R&D in the United States and the rest of the world should be instructive. In the United States, total R&D spending (both public and private) has been relatively stable over the past three decades, at roughly 2-1/2 percent of gross domestic product.
However, this apparent stability masks some important underlying trends. First, since the 1970s, R&D spending by the federal government has trended down as a share of GDP, while the share of R&D done by the private sector has correspondingly increased. Second, the share of R&D spending targeted to basic research, as opposed to more applied R&D activities, has also been declining.
These two trends—the declines in the share of basic research and in the federal share of R&D spending—are related, as government R&D spending tends to be more heavily weighted toward basic research and science. The declining emphasis on basic research is somewhat concerning because fundamental research is ultimately the source of most innovation, albeit often with long lags. Indeed, some economists have argued that, because of the potentially high social return to basic research, expanded government support for R&D could, over time, significantly boost economic growth. That said, in a time of fiscal stringency, the congress and the administration will clearly need to carefully weigh competing priorities in their budgetary decisions.
However it is channeled, government support for innovation and R&D will be more effective if it is thought of as a long-run investment. Gestation lags from basic research to commercial application to the ultimate economic benefits can be very long. The internet revolution of the 1990s was based on scientific investments made in the 1970s and 1980s. And today’s widespread commercialization of biotechnology was based, in part, on key research findings developed in the 1950s. Thus, governments that choose to provide support for R&D are likely to get better results if that support is stable, avoiding a pattern of feast or famine.
Ben Bernanke, Federal Reserve Chairman, spoke at a conference in Washington, D.C.
The Times’s Friedman
Frankly, I have no problem with more oil drilling, as long as it is done under the highest environmental standards. I have no problem with more nuclear power, if you can find a utility ready to put up the money. My problem is with an energy policy that focuses exclusively on oil drilling and nuclear power. That is not an energy policy. That is a policy for campaign donations. It will have no impact at the pump.
A real energy policy is a system. It has to start with a national renewable energy standard that requires every utility to build up their use of renewable energy— wind, solar, hydro, nuclear, bio—to 20 percent of their total output by 2020. This would be accompanied with higher auto mileage standards and higher national appliance and building efficiency standards. All these standards would then be reinforced with a price on carbon. That is how you get higher energy prices but lower energy bills, because efficiency improvements mean everyone uses less.
We are going to have to raise taxes. Why not a carbon tax that also reduces energy consumption, drives innovation, cleans the air and reduces our dependence on the Middle East? We don’t want the Arab democracy rebellions to stop, but no one can predict how they will end. The smart thing for us and Israel to do is avoid what we can’t manage, and manage what we can’t avoid. Right now we’re doing neither.
Thomas Friedman is a columnist for The New York Times
I’m speaking with you today from the Allison Transmissions plant in Indianapolis, Indiana. I came here because this is a place where American workers are doing some big and impressive things. The hybrid technology they manufacture here already powers nearly 4,000 buses all over the world—buses that have already saved 15 million gallons of fuel. Soon, they’ll expand this new technology to trucks as well. That means more vehicles using less oil, and that means jobs—more than 200 new workers at this plant alone….
The clean energy jobs at this plant are the jobs of the future—jobs that pay well right here in America. And in the years ahead, it’s clean energy companies like this one that will keep our economy growing, create new jobs and make sure America remains the most prosperous nation in the world.
Allison Transmissions is also part of the ultimate solution to high gas prices. We know there are no quick fixes to this problem. In the short term, we’re doing everything we can to boost safe and responsible oil production here at home—in fact, last year, American oil production reached its highest level since 2003.
But over the long term, the only way we can avoid being held hostage to the ups and downs of oil prices is if we reduce our dependence on oil. That means investing in clean, alternative sources of energy, like advanced biofuels and natural gas. And that means making cars and trucks and buses that use less oil. Other countries know this, and they’re going all in to invest in clean energy technologies and clean energy jobs. But I don’t want other countries to win the competition for these technologies and these jobs….
Now, I know that in a difficult fiscal climate like the one we’re in, it’s tempting for some to try and cut back our investments in clean energy. And I absolutely agree that the only way we’ll be able to afford the things we need is by cutting the things we don’t and living within our means. But I refuse to cut investments like clean energy that will help us out-innovate and out-compete the rest of the world. I refuse to cut investments that are making it possible for plants like this one to grow and add jobs across America….
From the president’s weekly radio/internet address
Chevron CEO Watson
Technology can help us unlock the value in unconventional resources, which is one of the reasons we’re witnessing such interest in shale gas. And technology holds great potential to help us use energy more efficiently—lowering per-capita costs and emissions from energy use.
Arguably the biggest challenge for technology is how it can be applied to the economic development of renewables and other alternatives to fossil fuels at industrial scale. Right now, alternatives make up less than 15 percent of the global energy portfolio. Even under the most promising scenarios, it will take decades for alternatives to reach the affordability, reliability and scale of fossil fuels.
If one had any doubts at all, some European governments have gone ahead and proved it for us, by spending billions of euros in subsidies for renewables that aren’t market-ready. Don’t misunderstand me. In the long run, renewables are going to play an important role in meeting global demand and my company will contribute to that.
Today, Chevron is the world’s largest producer of geothermal energy. In fact, we produce nearly twice as much power from geothermal in Indonesia and the Philippines than all of the solar electricity generated for sale in the United States. We’re also a significant investor in the development of biofuels, and we’re leading our industry in energy efficiency.
So we’re committed to renewables. But I’ve charged my company with developing a renewables business that is profitable and can operate at scale without subsidies. I believe that should be the basis of any sound public policy as well.
The right approach to building our energy future is to balance aspiration with reality, investing in solutions that can compete at scale reliably and affordably. We simply can’t build a secure energy future through complex, command-and-control schemes that defy basic market principles. We can do it through human creativity, technology and innovation, sound economics and strong partnerships.
Chevron president John S. Watson spoke at International Petroleum Week in London