The U.S. Department of Energy can marshal its innovation efforts toward beating the climate crisis. Here’s how.
This article was co-authored by Steve Capanna, Director for U.S. Climate Policy and Analysis and Jake Higdon, Senior Analyst, U.S. Climate Policy both at Environmental Defense Fund
In a new policy blueprint, EDF offers recommendations for how the Department of Energy can align its innovation budget with the climate challenge across its technology programs.
President Biden has pledged to deliver the largest ever federal investment in clean energy innovation — $400 billion over 10 years — to combat the climate crisis. And last Friday, the administration reasserted this commitment in its discretionary budget request, which aims to put us on “a path to quadruple clean energy research government-wide in four years, emphasizing U.S. preeminence in developing innovative technologies needed to tackle the climate crisis.”
This shows a recognition that, while technological innovation alone will not solve climate change, it plays a critical role in improving the costs and performance of essential climate technologies like wind turbines and electric vehicles, allowing the United States to more rapidly reduce greenhouse gases, eliminate health-harming pollution and create jobs in emerging energy sectors. Innovation is also essential for developing and commercializing the next generation of clean energy tools such as clean hydrogen and carbon removal that we need to reach net-zero emissions in the U.S. no later than 2050.
While the Department of Energy funding has helped reduce the costs and improve the performance of several key climate technologies, resulting in huge economic and environmental benefits, the agency’s innovation priorities and budgets have, to some extent, failed to keep pace with the extraordinary challenges and opportunities in front of us.
The amount of money spent on energy research, development and demonstration (RD&D) as a percentage of GDP has declined by 75% since the 1970s; if it had kept pace, it would be $32 billion today. DOE’s portfolio also does not reflect where the major sources of climate pollution are found in our economy, as more than two-thirds of funding for R&D goes to power sector technologies, despite the power sector accounting for one-third of U.S. greenhouse gas emissions. Finally, DOE’s innovation budget is heavily weighted toward R&D today, but essential climate tools need support throughout the full innovation cycle, including demonstration projects to test cutting-edge solutions at real-world scale and commercialization programs such as the Clean Energy and Sustainability Accelerator proposed in President Biden’s American Jobs Plan. In short, DOE’s innovation programs are not armed with the tools and resources that can fully drive clean energy and climate technologies to the maturity and scale we need.
To rise to this challenge, we need to expand and reorient federal energy innovation programs to become a climate innovation portfolio — one that tackles the largest sources of pollution across the economy.
EDF teamed up with Evolved Energy Research to develop an analytical framework for assessing the emissions impact of potential breakthroughs in cost and performance across a set of clean energy technologies. We tested the impact of these breakthroughs under different scenarios of climate policy, including one stringent enough to achieve net-zero carbon emissions by 2050. These results offer a blueprint for ensuring innovation budgets and priorities translate into rapid and deep cuts in emissions over the next three decades. Our focus is on the RD&D budget at DOE, including the applied energy programs, ARPA-E (Advanced Research Projects Agency–Energy), and clean energy activities within the Office of Science.
Our blueprint includes four key recommendations for Congress and the administration:
- To meet the scale of the climate crisis and make up for lost time, grow the clean energy research, development and demonstration (RD&D) budget at DOE to $32 billion by FY 2025. This includes nearly $17 billion in the applied energy programs, $1 billion for ARPA-E, $4 billion for clean energy at the Office of Science, and $10 billion in commercial-scale demonstration projects. These budgets would put us on track to meet the Biden campaign commitment of $400 billion for clean energy and innovation over 10 years, assuming roughly 75% of those funds go to DOE (the same share as today). They also echo recommendations from the National Academies of Sciences, Columbia University, and other expert literature.
- Rebalance the DOE portfolio to focus on technologies that cut the most cumulative emissions. As overall funding increases, policymakers should align the applied energy program budgets with current emissions by sector, increasing budgets for offices focused on sectors under-represented in DOE’s current budget — including transportation, industry and buildings — at a faster rate than those focused on the power sector. Within these sectors, policymakers can apply the Evolved Energy framework to adjust RD&D budgets in accordance with technologies’ potential climate benefit should they experience a breakthrough, which leads to relative increases for technologies such as EV batteries, renewables, hydrogen electrolysis and geologic sequestration.
- Create new cross-cutting programs at DOE that coordinate RD&D across ‘complementary’ technologies — those that can boost the deployment of other energy technologies. The Evolved analysis enables us to see system-wide benefits of technology progress, revealing complementary technology clusters. For instance, breakthroughs in solar energy, hydrogen electrolysis and synthetic liquid fuel production each drive increased utilization of the others. Based on those clusters, we recommend restructuring the Office of Fossil Energy to become an Office of Carbon Management, with applications across the power, industrial and transportation sectors. We also recommend cross-cutting DOE programs for electrification, clean fuels and industrial decarbonization.
- Finally, update the formal mission of DOE’s energy and science offices to be focused on reducing greenhouse gases and other harmful pollution. Adjusting the mission and expanding its scope can ensure that program funding continues to develop technologies that drive down damaging climate pollution for years to come, even as federal leadership changes hands. However, we caution against using metrics such as cumulative emissions reductions as the sole factor in setting DOE innovation priorities. Other critical considerations include issues of environmental and energy justice; fairness for energy workers; and resilient, reliable, secure and affordable energy systems.
While our policy blueprint focuses on RD&D at DOE, the federal climate innovation portfolio should also include a major increase in DOE’s commercialization and deployment activities, as well as a whole-of-government approach that includes greater funding for climate innovation at the National Science Foundation, U.S. Department of Agriculture, Department of Housing and Urban Development, Department of Transportation, and more.
We already have many of the tools at our disposal to reduce greenhouse gas emissions and other harmful pollution, and the climate crisis demands that we speed up deployment of those tools. Federal climate innovation can drive down costs to allow us to deploy these technologies more quickly, affordably and universally, while also developing and commercializing the other solutions we need to get to a stronger and more competitive, 100% clean economy.
To do so, we need to update and re-orient the Department of Energy’s innovation efforts to tackle today’s climate crisis. Policymakers should align federal innovation priorities with the technologies that have the greatest potential to drive down emissions — and position the U.S. to lead on climate.