Global Corporate Xpansion

private and public benefits of these technologies can be recognized. Under this view, the role of government is to devise the most efficient incentives to draw out private initiative and investment. Most economic transactions involve something being done for a principal by an economic agent where the interests and knowledge of the two parties, the principal and the agent, are not the same. With respect to energy policy, the government becomes the principal, and on behalf of society wants energy produced and used in a way that reduces carbon emissions, provides security, and enhances economic revitalization. The economic challenge and the proper role for the

government is to provide the best set of incentives so that the private actions of the energy market agents provide energy that will also meet public goals. Here is the point of departure with past efforts: we should construct policies that reward the avoidance of carbon dioxide, and not add the cost of the carbon dioxide to the price of the kilowatt-hour generated from coal, oil or natural gas.

Revitalizing the domestic manufacturing sector can and should be a major goal of a new national energy policy. Combining energy policy with economic development will not happen automatically, however. At a minimum,

national energy policy must combine incentives for both
component manufacturing activity
as well as for project development.
This new domestic industry must
also be efficient and technologically
advanced. To support the ongoing
improvement of the component
industry, new policies should inte-
grate manufacturing innovation
and development into a domestic
program to support component
manufacturing. “Most innovation
does not come from some disem-
bodied laboratory,” says Stephen S.
Cohen, co-director of the Berkeley
Roundtable on the

International Economy at the University of California. “In order to innovate in what you make, you have to be pretty good at making it — and we are losing that ability.” ⁵Every renewable technology relies upon a supply chain of component manufacturers. Major development efforts will strain existing supply chains and lead to bottlenecks. To some extent, the support for the development of a domestic renewable supply chain is similar to those provided for other projects but with important differences. To build a renewable industry, federal policies must build on cooperation among the states. State-on-state competition is often a zero-sum game. A major focus of federal policy must be to offer states a set of policies that will expand the total opportunities available to all of them. The policies should be aimed first at alleviating the potential for supply chain bottlenecks. A major program mandating an aggressive renewable development effort could lead quickly to shortages of critical components, price spikes and delays in development. Industry participants must be integrated with research and deployment of advanced manufacturing techniques.