The Business Roundtable, an association of chief executive officers committed to improving public policy, has issued a report identifying 38 specific opportunities to improve regulatory, tax, and trade policies to encourage a market-friendly approach to reducing carbon dioxide emissions.
According to the Roundtable, near-term opportunities exist to accelerate the development of advanced technology to reduce greenhouse gas emissions. The report emphasizes the private sector must place a central role in developing and commercializing new technologies.
The report, Unleashing Innovation: The Right Approach to Global Climate Change, follows a 1999 paper by the group addressing the long-term role of technology in responding to concerns about global climate change. The Roundtable has brought together technology leaders from industry, research laboratories, universities, and government agencies to address both the long-term and short-term technological prospects in reducing carbon dioxide emissions in a market-oriented manner.
The free market as a central player
The report notes that the greatest opportunities for energy innovation regarding climate-change issues involve the federal government working in conjunction with, rather than at odds with, the free market.
The Roundtable expressed encouragement in noting that many of its proposed solutions appear in President George W. Bush’s energy policy. “These improvements in the U.S. regulatory, tax, and trade policies should help encourage the development and market acceptance of the technological innovations needed to meet the needs of developing and developed economies for this generation and generations to come,” the report concludes.
In recommending a market-oriented approach to carbon dioxide emissions, the report identifies numerous instances where regulatory policy, tax, and trade laws inadvertently have a chilling effect on research and innovation. It proposes solutions that would drive more rapid innovations in addressing climate concerns.
Regulatory barriers
The Roundtable identifies 21 specific regulatory barriers to the efficient development of greenhouse gas technologies. These barriers fall into three categories: barriers to the use of alternative fuels; barriers to the use of energy-efficient technologies; and barriers that deter technological innovation.
The report identifies numerous regulatory barriers to the use of these alternative fuels, including delays and uncertainties resulting from excessive red tape under the Clean Air Act; the Federal Energy Regulatory Commission’s hydropower licensing processes; and the Resource Conservation Recovery Act’s rules forestalling the recovery of biosludge from hazardous waste treatment.
Regulatory obstacles regarding the development and use of energy-efficient technologies include conflicting federal and state vehicle emissions standards; technology-specific air quality standards that result in increased energy waste and increased energy consumption; and antiquated building codes that prohibit building designs that reduce heating and cooling requirements.
Regulatory policies that thwart innovation, according to the report, include New Source Review requirements of the Clean Air Act that impede energy-efficient technologies in the utility sector; inflexible Clean Air Act regulations preventing emissions trading; and inadequate scientific evidence for questionable environmental regulations.
Proposed regulatory improvements include: speedier permit reviews that accelerate the implementation of less carbon-intensive manufacturing and energy-generation technologies; exemption from New Source Review of new technologies that provide the same or lower regulated emissions; and greater emphasis on market mechanisms such as emissions trading to achieve environmental goals.
Tax laws
The Roundtable report identifies six significant tax barriers that discriminate against and substantially deter investments in climate-related research and innovation. These barriers fall into three broad categories: international tax policies; deficiencies in research and development tax incentives; and the federal tax code’s recovery provisions for depreciation.
While these tax barriers negatively affect many different types of business activity, they especially punish investments in energy-efficient technologies, according to the report.
Recommended tax policy improvements include: restructuring the research and development tax credit and making it permanent; eliminating the double tax penalty that results form the required allocation of U.S. interest in research and development expenses to foreign-source income; and providing enhanced tax credits to promote breakthrough energy-efficient technologies for vehicles, plants, and equipment.
Trade barriers
The Roundtable identifies 11 significant trade-related barriers to innovation in energy-efficient technologies. American laws impede the export of energy-efficient technologies; and other nations’ laws impede the import of American energy technologies and services.
According to the report, American export controls are significant barriers to U.S. exports of energy-efficient technologies. Most significantly, they interfere with the sale of high-tech equipment and computer software that can be used for energy management.
Other nations’ import barriers include high tariffs in developing economies such as China and India. Other countries, such as south Korea and the Philippines, impose regulatory restrictions on the commercial presence of American suppliers, the employment of foreign technical workers, and foreign investments in public utilities, while protecting the state-granted monopolies to local energy suppliers.
The Roundtable’s proposed solutions include: encouraging the U.S. government to press for substantial energy-efficiency tariff reductions in the next round of World Trade Organization negotiations; encouraging the U.S. government to press for removal of numerous non-tariff barriers that restrain the export of energy services; and revising the Export Administration Act to ensure U.S. export controls keep pace with rapidly changing technologies and global competition.
