Climate policy is in a state of near crisis. Cap-and-trade is dead in US politics for now. Analysts and advocates, focused for so long on that approach, are largely bereft of credible alternatives. It has become fashionable to advocate instead for energy innovation or for "making clean energy cheap." But unlike cap-and-trade, these are not policies: They are goals. Advocates of energy innovation--and advocates for cap-and-trade--need to put new policies on the table.
As Shellenberger and Nordhaus point out, government support for clean-energy innovation is essential to bringing down the cost of cutting emissions, and to making meaningful carbon pricing more politically palatable down the road. Alas, the political prospects of increased government support for clean-technology innovation are weak in the near term. Congress has little appetite for new spending; even the gambit of supporting energy innovation through the defense budget, which should be tried, may fail in an austere fiscal environment. Tax incentives hold more political promise, but they may also be tougher to target effectively.