Eyes on a climate prize:rewarding energy innovation to achieve climate stabilization

Harvard Environmental Law Review

Volumn 35, Issue 1, 2011, Pages 1-45

  Adler, Jonathan H ^a  

^a CASE WESTERN RESERVE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EMISSION CONTROL; ENVIRONMENTAL LEGISLATION; ENVIRONMENTAL POLICY; INNOVATION; REGULATORY FRAMEWORK; RESEARCH AND DEVELOPMENT;

EID: 78751635909     PISSN: 01478257     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (426)

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2. James Owen, Scrub CO2 From the Air, Win $25 Million - But How?, NAT'L. GEOGRAPHIC NEWS, Feb. 16, 2007 (stating that the Virgin Earth Challenge is the "biggest science prize in history"), available at http://news.nationalgeographic.com/news/2007/02/070216-virgin-earth.html; VIRGIN EARTH CHALLENGE, supra note 1.
3. VIRGIN EARTH CHALLENGE, supra note 1;
4. Kevin Sullivan, $25 Million Offered In Climate Challenge, WASH. POST, Feb. 10, 2007, at A13.
5. In 2006, the U.S. government appropriated just under $3 billion to fund research and development of technologies related to climate change policy.
6. U.S. DEP'T OF ENERGY, U.S. CLIMATE CHANGE TECHNOLOGY PROGRAM, STRATEGIC PLAN 219-20 (Sept. 2006), available at http://www.climatetechnology.gov/ stratplan/final/index.htm [hereinafter USCCTP].
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9. The Obama-Biden Plan, Agenda, Energy & Environment, CHANGE.GOV http://change.gov/agenda/energy-and-environment-agenda/ (last visited Dec. 2, 2010) (on file with the Harvard Law School Library).
10. infra notes 38-39.
11. infra Part I.
12. id.
13. infra notes 107-110. 12
14. infra Part IV.
15. infra Part V.
16. infra notes 280-282.
17. infra notes 111-136.
18. infra notes 117-138, 148-152.
19. infra notes 139-147.
20. infra notes 153-192.
21. Joseph Alois Schumpeter, in THE CONCISE ENCYCLOPEDIA OF ECONOMICS, 2d ed. (David R. Henderson ed., 2008), http://www.econlib.org/library/Enc/bios/ Schumpeter.html
22. see also Adam B. Jaffe, Richard G. Newell & Robert N. Stavins, Technological Change and the Environment, in 1 HANDBOOK OF ENVIRONMENTAL ECONOMICS, 464-65 (Karl-Göran Maler & Jeffery R. Vincent eds., 2003) (distinguishing between invention, "the first development of a scientifically or technically new product or process," innovation, "when the new product or process is commercialized" or "made available on the market," and diffu sion, when an innovation becomes "widely available for use in relevant applications through adoption by firms or individuals").
23. infra Part IV.
24. infra Part V.
25. On the use of intellectual property to spur environmentally friendly technologies.
26. generally Michael A. Gollin, Using Intellectual Property to Improve Environmental Protection, 4 HARV. J.L. & TECH. 193 (1991).
27. NAT'L ACAD. OF SCI., LIMITING THE FUTURE MAGNITUDE OF CLIMATE CHANGE 104 (2010) (noting the lack of markets for emission-reducing technologies) [hereinafter NAT'L ACAD. OF SCI., LIMITING]
28. David Popp, Innovation and Climate Policy, 2 ANN. REV. RESOURCE ECON. 275, 277-78 (2010).
29. Little economic incentive does not mean no economic incentive. There could be other economic benefits from technological innovations that reduce emissions, such as increased energy efficiency, and some may pursue emission-reducing technologies in the hope that such innovations will become valuable at some future date at which emission controls or prices on carbon dioxide emissions are imposed.
30. For a brief and accessible summary of the science of global climate change
31. William Collins et al., The Physical Science behind Climate Change, SCI. AM., Aug. 2007, at 64.
32. Other GHGs of particular concern are methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexaflouride.
33. Collins, supra note 25. 28 Even many so-called "skeptics" accept the premise that human activity is ontributing to a gradual warming of the atmosphere, even if they reject apocalyptic projections of the likely consequences.
34. See, e.g., PATRICK J. MICHAELS & ROBERT C. BALLING, JR., CLIMATE OF EXTREMES: GLOBAL WARMING SCIENCE THEY DON'T WANT YOU TO KNOW 11-20 (2009). The case for taking action to address rising atmospheric concentrations of GHGs need not be premised upon apocalyptic climate projections.
35. See, e.g., ROGER PIELKE, JR., THE CLIMATE FIX: WHAT SCIENTISTS AND POLITICIANS WON'T TELL YOU ABOUT GLOBAL WARMING (2010)
36. Jonathan H. Adler, Taking Property Rights Seriously: The Case of Climate Change, SOC. PHIL. & POL'Y, July 2009, at 296-98.
37. IPCC, CLIMATE CHANGE 2007-THE PHYSICAL SCIENCE BASIS: CONTRIBUTION OF WORKING GROUP I TO THE FOURTH ASSESSMENT REPORT OF THE INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE 665 (2007) ("Greenhouse gas forcing has very likely caused most of the observed global warming over the last 50 years.").
38. Id. at 749.
39. U.N. Framework Convention on Climate Change, art. 2, opened for signature May 9, 1992, S. Treaty Doc. No. 102-38, 1771 U.N.T.S. 164.
40. See, e.g., S. Pacala & R. Socolow, Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies, 305 SCI. 968, 968 (2004) ("Proposals to limit atmospheric CO2 to a concentration that would pRevent most damaging climate change have focused on a goal of 500 +/- 50 parts per million (ppm), or less than double the preindustrial concentration of 280 ppm."). Some organizations advocate a significantly lower target of 350 ppm.
41. See, e.g., 350.org, http://www.350.org (last visited Oct. 6, 2010) (on file with the Harvard Law School Library);
42. Andrew C. Revkin, Campaign Against Emissions Picks Number, N.Y. TIMES, Oct. 25, 2009, at A8. To some degree, all rounded numerical stabilization targets are arbitrary.
43. See, e.g., IPCC, CLIMATE CHANGE 2007-MITIGATION. CONTRIBUTION OF WORKING GROUP III TO THE FOURTH ASSESSMENT REPORT OF THE INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE 42 (B. Metz et al. eds., 2007) [hereinafter IPCC, MITIGATION], ("Limited and early analytical results from integrated analyses of the costs and benefits of mitigation indicate that these are broadly comparable in magnitude, but do not as yet permit an unambiguous determination of an emissions pathway or stabilization level where benefits exceed costs.")
44. Richard S.J. Tol, Europe's long-term climate target: A critical evaluation, 35 ENERGY POL'Y 424 (2007) (critiquing E.U. climate targets).
45. Martin I. Hoffert et al., Advanced Technology Paths to Global Climate Stability: Energy for a Greenhouse Planet, 298 SCI. 981, 981 (2002);
46. NAT'L ACAD. OF SCI., LIMITING, supra note 23, at 67 (2010) (noting difficulty of meeting 550 ppm atmospheric stabilization target). According to Hoffert et al., simply "holding at 550 ppm is a major challenge." Hoffert et al., supra.
47. Björn A. Sandén & Christian Azar, Near-term technology policies for long-term climate targets: economy wide versus technology specific approaches, 33 ENERGY POL'Y 1557, 1558 (2005).
48. INT'L ENERGY AGENCY, WORLD ENERGY OUTLOOK: EXECUTIVE SUMMARY 2008 14 (2008).
49. John Alic et al., A new strategy for energy innovation, 466 NATURE 316, 316 (2010) ("Limiting the concentration of carbon dioxide and other greenhouse gases in Earth's atmosphere requires a technological and economic Revolution.")
50. Scott Barrett, The Coming Global Climate-Technology Revolution, 23 J. ECON. PERSP. 53, 53 (2009) ("stabilizing concentrations will require a technological Revolution - a 'Revolution' because it will require fundamental change, achieved within a relatively short period of time.")
51. Scott Barrett, Kyoto and Beyond: Alternative Approaches to Global Warming, 9 AM. ECON. REV. 22, 22 (2006)
52. Gary E. Marchant, Sustainable Energy Technologies: Ten Lessons from the History of Technology Regulation, 18 WIDENER L.J. 831, 831 (2009) ("[I]t will not be possible to minimize these environmental stresses while still providing an adequate standard of living without new, cleaner technologies.")
53. Nancy Birdsall & Arvind Subramanian, Energy Needs and Efficiency, Not Emissions: Re-framing the Climate Change Narrative 13-14 (Ctr. for Global Dev., Working Paper No. 187, 2009) (concluding that "any prospect of meeting the aggregate global emissions target, consistent with developing countries not sacrificing their energy needs, will require massive, Revolutionary, improvements in the technology margins (production and consumption) - far greater than Seen historically ")
54. NAT'L ACAD. OF SCI., LIMITING, supra note 23, at ix (noting that reducing GHG emissions while accommodating economic growth will "require scientific and engineering genius"). Even those who argue that the climate challenge can be met in the near-term by "scaling up what we already know how to do" concede that "Revolutionary technologies" will be necessary for atmospheric stabilization. Pacala & Socolow, supra note 32, at 968.
55. See The Obama-Biden Plan, supra note 7.
56. Steven F. Hayward & Kenneth P. Green, Waxman-Markey: An Exercise in Unreality, AEI ENERGY AND ENVTL. OUTLOOK, July 2009, at 1, 3.
57. Id.
58. PIELKE, supra note 28, at 101.
59. Id.
60. Sandén & Azar, supra note 34, at 1558. 43
61. Robert D. Atkinson & Darrene Hackler, Ten Myths of Addressing Global Warming and the Green Economy, THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION (June 2010) ("[T]he magnitude of change needed is much larger than many realize[;] many conventional solutions simply won't ac (noting that the baseline sce- narios already assume a significant degree of technological change and technology diffusion)
62. Roger Pielke Jr., Tom Wigley & Christopher Green, Dangerous Assumptions, 452 NATURE 531, 531 (2008).
63. Id.
64. IPCC, MITIGATION, supra note 32, at 218-20 (noting that the baseline sce- narios already assume a significant degree of technological change and technology diffusion).hieve the global scale needed."), available at www.itif.org/files/2010-green-economy-myths.pdf.
65. Pielke, Wigley, & Green, supra note 44, at 532: Enormous advances in energy technology will be needed to stabilize atmospheric carbon dioxide concentrations at acceptable levels. If most of these advances occur spontaneously, as suggested by the scenarios used by the IPCC, then the challenge of stabilization might be less complicated and costly. However, if most decarbonization does not occur automatically, then the challenge to stabilization could in fact be much larger than presented by the IPCC. A widely cited paper by Pacala and Socolow asserting that existing technologies are sufficient to "solve the carbon and climate problem in the first half of this century" adopts similarly rosy assumptions. Pacala & Socolow, supra note 32, at 968. For example, Pacala and Socolow assume there will be only 1.5 percent annual growth in carbon emissions in their business-as-usual scenario. Id. Yet in the years since their study, emissions growth was double that rate. INT'L ENERGY AGENCY, CO2 EMISSIONS FROM FUEL COMBUSTION - HIGHLIGHTS, 2009 ed. 9 (2009) (global carbon dioxide emissions increased by 3 percent from 2005-2006 and 2006-2007). Further, Pacala and Socolow ignored the costs of their proposed emission reduction measures
66. Pacala & Socolow, supra note 32, at 969 ("our focus is not on costs") and acknowledged that the ultimate goal of atmospheric stabilization would still require the development of "Revolutionary technologies" for which "enhanced research and development would have to begin immediately."
67. Id. at 968
68. It is also important to remember that, in actual practice new technologies are "likely" to "fall short of their technical potential." 'NAT'L ACAD. OF SCI., LIMITING, supra note 23, at 67. 47
69. Pielke, Wigley & Green, supra note 44, at 532.
70. Hoffert et al., supra note 33, at 981. Given current technological capabilities, and the prospective costs of meaningful climate change policies, "we are not likely to dramatic reductions in global net emissions for some time."
71. Id.
72. Roger Pielke Jr. posits an "iron law of climate policy" such that "when policies focused on economic growth confront policies focused on emissions reductions, it is economic growth that will win out every time." PIELKE, supra note 28, at 46.
73. See Compliance under the Kyoto Protocol, UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE, http://unfccc.int/kyoto-protocol/compliance/items/ 2875.php (last visited Dec. 2, 2010) (listing Greece, Canada, Bulgaria, and Croatia policies as under questions of implementation) (on file with the Harvard Law School Library);
74. Robert W. Hahn, Climate Policy: Separating Fact from Fantasy, 33 HARV. ENVTL. L. REV. 557, 566 (2009) (reporting that "a few signatories are already having trouble filling their Kyoto commitments").
75. Hahn, supra note 50, at 566 (noting that the choice of 1990 as the base year has made it easier for some nations to meet Kyoto targets due to exogenous factors)
76. Thomas Heller, The Path to EU Climate Change Policy, in GLOBAL COMPETITION AND EU ENVIRONMENTAL POLICY 108, 120 (Jonathan Golub ed., 1998) (noting decline of CO2 emissions in eastern Europe, including the former East Germany, was due to population decline and economic transition out of Soviet economic system).
77. PIELKE, supra note 28, at 106 (the rate of decarbonization within EU countries was the same during the nine years prior to ratification of the Kyoto Protocol as it has been since). Emission reduction obligations under the Kyoto Protocol have not stopped European nations from proceeding to build additional coal-fired power plants.
78. See, e.g., Elizabeth Rosenthal, Europe Turns Back to Coal, Raising Climate Fears, N.Y. TIMES, Apr. 23, 2008, at A1 (reporting that "European countries are expected to put into operation about 50 coal-fired plants over the next five years, plants that will be in use for the next five decades").
79. INT'L ENERGY AGENCY, CO2 EMISSIONS FROM FUEL COMBUSTION - HIGHLIGHTS 44 (2010), available at http://www.iea.org/co2highlights/CO2highlights.pdf.
80. See Access to Electricity, INT'L ENERGY AGENCY, http://www.iea.org/weo/ electricity.asp(last visited Dec. 2, 2010) (on file with the Harvard Law School Library).
81. Ravi Nessman, India: Climate Deal Can't Sacrifice Poor Nations, GUARDIAN (UK), Oct. 22, 2009 (citing Indian Prime Minister Manmohan Singh, who notes, "[D]eveloping countries cannot and will not compromise on development."), available at http://www.guardian.co.uk/world/feedarticle/ 8767757
82. Lionel Barber, Transcript: Wen Jiabao, FIN. TIMES (Feb. 2, 2009), http://www.ft.com/cms/s/0/795d2bca-f0fe-11dd-8790-0000779fd2ac.html ("[I]t's difficult for China to take quantified emission reduction quotas at the Copenhagen conference, because this country is still at an early stage of development.") (on file with the Harvard Law School Library);
83. Hahn, supra note 50, at 564 ("[T]here is no simple way to get major developing countries, such as India and China, to participate in an agreement.").
84. The research supporting this point is summarized in Cass R. Sunstein, The World vs. the United States and China? The Complex Climate Change Incentives of the Leading Greenhouse Gas Emitters, 55 UCLA L. REV. 1675, 1678-90 (2008). "The United States and China are the largest emitters, and on prominent projections, they also stand to lose relatively less from climate change."
85. Id. at 1688.
86. Cf. Robert Mendelsohn, Ariel Dinar, & Larry Williams, The Distributional Impact of Climate Change on Rich and Poor Countries, 11 ENVT & DEV. ECON. 159, 173 (2006) ("Overall, the poor will suffer the bulk of the damages from climate change, wheras the richest countries will likely benefit.").
87. Cf. Sunstein, supra note 56, at 1694. It is also important to note that some chemical producers saw the phase-out as a way to obtain or maintain competitive advantage.
88. See id. (citing DuPont's "ability to develop relatively inexpensive substitutes" as cultivating an "incentive to favor aggressive regulation");
89. Daniel F. McInnis, Ozone Layers and Oligopoly Profits, in ENVIRONMENTAL POLITICS: PUBLIC COSTS, PRIVATE REWARDS 129, 150
90. Michael S. GReve & Fred L. Smith, Jr. eds., 1992.
91. Sunstein, supra note 56, at 1695-96. 60
92. Hahn, supra note 50, at 564 ("R&D expenditures should not only target mitigation efforts, but also increase our understanding of climate change and help identify cost-effective methods for adaptation."). As Hoffert et al. observe: "Arguably, the most effective way to reduce CO2 emissions with economic growth and equity is to develop Revolutionary changes in the technology of energy production, distribution, storage, and conversion."
93. Hoffert et al., supra note 33, at 981
94. Kenneth J. Arrow et al., A Statement on the Appropriate Role for Research and Development in Climate Policy, ECONOMISTS' VOICE, Feb. 2009, at 1 ("A key potential benefit of focused scientific and technological research is that it could dramatically reduce the cost of restricting greenhouse gas emissions by encouraging the development of more affordable, better performing technologies.").
95. For a summary of the literature on whether there is an observable "Environmental Kuznets Curve" for carbon emissions, Jody W. Lipford & Bruce Yandle, Environmental Kuznets Curves, Carbon Emissions, and Public Choice, 15 ENV'T. & DEV. ECON. 417 (2010).
96. Id. at 421.
97. INT'L ENERGY AGENCY, WORLD ENERGY OUTLOOK 2009 74 (2009) (presenting business- as-usual reference scenario in which energy demand in 2030 is 40 percent greater than in 2007).
98. U.S. ENERGY INFO. ADMIN., ANNUAL ENERGY REVIEW 2009 13 (2009), available at http://www.eia.doe.gov/aer/pdf/aer.pdf.
99. STEVE SORRELL, THE REBOUND EFFECT: AN ASSESSMENT OF THE EVIDENCE FOR ECONOMY-WIDE ENERGY SAVINGS FROM IMPROVED ENERGY EFFICIENCY vi (UK ENERGY RESEARCH CENTRE 2007) (noting that energy efficiency improvements can produce a "rebound effect" that results in an increase in energy usage of ten percent or more and that such factors should be considered in policy analysis). It is also important to keep in mind that carbon dioxide is not the only important GHG, and that other GHGs are not directly tied to the combustion of carbon-based fuels. 66
100. generally Michael Abramowicz, Perfecting Patent Prizes, 56 VAND. L. REV. 115 (2003)
101. Steven Shavell & Tanguy van Ypersele, Rewards Versus Intellectual Property Rights, 44 J.L. & ECON. 525 (2001)
102. Brian D. Wright, The Economics of Invention Incentives: Patents, Prizes, and Research Contracts, 73 AM. ECON. REV. 691 (1983).
103. SUZANNE SCOTCHMER, INNOVATION AND INCENTIVES 41-42 (2004). Scotchmer refers to ex ante prizes.
104. Kenneth w. Dam, The Economic Underpinnings of Patent Law, 23 J. LEGAL STUD. 247, 250 (1994) (noting that a "patent that reduces the cost of making a product will permit the patentee to enjoy economic rent. To be sure, this statement assumes that other producers are not able to use the innovation to reduce cost, but that is precisely the purpose of the power to exclude from 'manufacture, use, and sale' granted by a patent.").
105. B. ZORINA KHAN, THE DEMOCRATIZATION OF INVENTION: PATENTS AND COPYRIGHTS IN AMERICAN ECONOMIC DEVELOPMENT, 1790-1920 66 (2005) (stating that in the United States, patent "statutes from the earliest years ensured that the 'progress of science and useful arts' was to be achieved through a complementary relationship between law and the market in the form of a patent system")
106. SCOTCHMER, supra note 67, at 36 ("Intellectual property rights make the proprietor a monopolist.").
107. Peter S. Menell & Suzanne Scotchmer, Intellectual Property Law, in 2 HANDBOOK OF LAW & ECONOMICS 1473, 1477 (A. Mitchell Polinsky & Steven Shavell eds., 2007) (referring to decentralization in intellectual property systems as a "virtue" and stating "[p]robably the most important obstacle to effective public procurement is in finding the ideas for invention that are widely distributed among firms and inventors. The lure of intellectual property protection does that automatically.").
108. Thomas Kalil, Prizes for Technological Innovation, Hamilton Discussion Paper 2006-08, The Brookings Institution (Dec. 2006), at 7 ("Many of the most interesting discoveries in science are serendipitous.").
109. SCOTCHMER, supra note 67, at 38;
110. See also NAT'L ACAD. OF SCI., INNOVATION INDUCEMENT PRIZES AT THE NATIONAL SCIENCE FOUNDATION 13 (2007) ("[C]ompared with grant programs, prize programs may be expected to attract more individuals, informal teams, and for-profit firms of various sizes and perhaps not as many academic institutions.").
111. MCKINSEY & COMPANY, "AND THE WINNER IS . . .": CAPTURING THE PROMISE OF PHILANTHROPIC PRIZES 23 (2009), available at http://www.mckinsey. com/clientservice/socialsector/And-the-winner-is.pdf.
112. Karim R. Lakhani et al., The Value of Openness in Scientific Problem Solving, Harvard Business School Working Paper 07-050 (October 2006), at 9, available at http://www.hbs.edu/research/pdf/07-050.pdf.
113. William A. Masters, Prizes for Innovation in African Agriculture: A Framework Document, version 2.0, 5 (Jan. 23, 2006), http://www.agecon.purdue. edu/prizes/Prizes-FrameworkDocument-RevJan2006.pdf [hereinafter Masters, Framework].
114. Kalil, supra note 71, at 5. 77 Utilizing decentralized knowledge about economic conditions is, in fact, one of the central problems of any economic system.
115. Friedrich A. Hayek, The Use of Knowledge in Society, in INDIVIDUALISM AND ECONOMIC ORDER 77, 77-78 (1948) ("The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess . . . [o]r, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.").
116. Kalil, supra note 71, at 5 ("[Prizes] help to blend the best of public purpose and the creativity, energy, and passion of private sector entrepreneurial teams.").
117. For a fuller discussion of government research grants, See infra Part IV
118. According to William Baumol, "the independent innovator and the independent entrepreneur have tended to account for most of the true, fundamentally novel innovations." William J. Baumol, Education for Innovation: Entrepreneurial Breakthroughs vs. Corporate Incremental Improvements 5 (Nat'l Bureau of Econ. Research, Working Paper No. 10578, 2004). According to Michael Witherell, vice chancellor for research at the University of California at Santa Barbara, "[m]ost of our great breakthroughs have not been through [top-down government] funding."
119. Gautam Naik, Energy Push Spurs Shift in U.S. Science, WALL ST. J., Nov. 25, 2009 at A1.
120. SCOTCHMER, supra note 67, at 38 ("The incentive operates without the inventor having to negotiate with an invention authority.")
121. MCKINSEY, supra note 73, at 23 ("Com- pared with other incentive instruments, such as grants and scholarships, prizes reduce bureaucratic barriers to entry for participants and need not screen for conventional qualifications.").
122. See, e.g., Shavell & Ypersele, supra note 66
123. Wright, supra note 66. For one of the earliest arguments for replacing patents with government funded awards
124. Michael Polanvyi, Patent Reform, 11 REV. ECON. STUD. 61 (1944).
125. Wright, supra note 66, at 696
126. SCOTCHMER, supra note 67, at 39 ("The advantage of prizes over patents is that they can avoid the deadweight loss of proprietary pricing.").
127. SCOTCHMER, supra note 67, at 41.
128. See id.
129. William A. Masters, Paying for Prosperity: How and Why to Invest in Agricultural Research and Development in Africa, 58 J. INT'L AFF. 35, 60 (2005) ("[P]rizes for technological achievements have often been used as a complement to patent rights and research contracts.") [hereinafter Masters, Prosperity].
130. Kalil, supra note 71, at 6 ("[P]rizes are especially suitable when the goal can be defined in concrete terms but the means of achieving that goal are too speculative to be reasonable for a traditional research program or procurement.").
131. John F. Duffy, Rethinking the Prospect Theory of Patents, 71 U. CHI. L. REV. 439 (2004) (asserting that patent races bring about innovations more quickly).
132. Kalil, supra note 71, at 7.
133. MCKINSEY, supra note 73, at 25.
134. See, e.g., id. at 21. By 2008 over 300 people had signed up for $200,000 trips on SpaceShipTwo, the successor to the vehicle that won the Ansari X-Prize.
135. id. at 25 (discussing leveraging of investment by NASA Centennial Challenge)
136. id. at 29 ("One of prizes' great strengths is their ability to attract investments from competitors many Times greater than the cost of delivering and awarding a prize."). The leveraging feature of prizes is particularly important given the potential for research grants to "crowd out" other R&D efforts. As a consequence, increased R&D support in one area does not necessarily result in a net increase of overall R&D efforts.
137. David Popp & Richard G. Newell, Where Does Energy R&D Come From? Examining Crowding Out from Environmentally Friendly R&D, NBER Working Paper 15423 (Oct. 2009), available at http://www.nber.org/papers/w15423;
138. Dominque Guellec et al., The Effectiveness of Public Policies in R&D, 94 REVUE D'ECONOMIE INDUSTRIELLE 49, 62 (2001) (Fr.) (discussing potential "crowding out" effect of public R&D funding on private R&D funding).
139. MCKINSEY, supra note 73, at 19 ("Prizes also add additional layers of motivation be- yond money, such as prestige and intellectual curiosity.").
140. Id. at 26 ("[T]he recognition accompanying a prize can be very valuable in itself.").
141. Masters, Framework, supra note 75, at 11.
142. Marlynn Wei, Should Prizes Replace Patents? A Critique of the Medical Innovation Prize Act of 2005, 13 B.U. J. SCI. & TECH. L. 25, 25 (2007) (noting the problem of potential duplication of effort is the same under the patent system as it is under a prize system).
143. Kalil, supra note 71, at 7.
144. See infra notes 193-200. 99
145. generally F. Scott Kieff, Property Rights and Property Rules for Commercializing Inventions, 85 MINN. L. REV. 697 (2001).
146. MCKINSEY, supra note 73, at 21 ("There are many examples of well-crafted prizes, backed by a relatively small amount of capital, establishing the importance of a field, catalyzing market demand, shaping public debate, and even changing the image of sponsors.").
147. Masters, Prosperity, supra note 86, at 56.
148. Cf. NAT'L ACAD. OF SCI., supra note 72, at 12-13 ("[Prizes] may be less well suited than grants and contracts to the development of basic scientific and engineering understanding underlying the achievement of goals.").
149. Abramowicz, supra note 66, at 121 ("[T]he devil is in the details and the devil for the prize system is the government's ability to dispense rewards accurately.").
150. Wei, supra note 97, at 22 ("If the prize is too low, then the system will inadequately stimulate R&D investment. If the prize is too high, then costs such as resource duplication and the problem of favoritism will be exacerbated.").
151. Masters, Prosperity, supra note 86, at 61 ("The unique virtue of a prize program is to provide rewards ex post, letting other institutions provide the working capital.").
152. NAT'L ACAD. OF SCI., supra note 72, at 13 ("The requirement in a prize contest that would-be innovators fund the research up front may inhibit participation by entities that do not otherwise have access to discretionary funding for innovative activities.").
153. See supra Part I.
154. USCCTP, supra note 4.
155. Adam B. Jaffe, Richard G. Newell & Robert N. Stavins, Technological Change and the Environment, in 1 HANDBOOK OF ENVIRONMENTAL ECONOMICS 462, 473 (Karl-Göran Maler and Jeffrey R. Vincent eds., 2003) (noting that "the external social benefits of environmentally benign technology are unlikely to be fully captured by private innovators")
156. Marchant, supra note 36, at 833 (characterizing private efforts as unlikely to be "sufficient to generate the massive technology changes, fast enough, needed to meet the challenge of sustainability, and therefore, public policies are needed to stimulate induced technological change").
157. Hahn, supra note 50, at 564;
158. Kenneth J. Arrow et al., A Statement on the Appropriate Role for Research and Development in Climate Policy, 6 ECONOMISTS' VOICE 1, Feb. 2009, available at www.bepress.com/ev/vol6/iss1/art6/.
159. Robin Hanson, Patterns of Patronage: Why Grants Won Over Prizes in Science, 2 (July 28, 1998), http://hanson.gmu.edu/whygrant.pdf (on file with the Harvard Law School Library).
160. MCKINSEY, supra note 73, at 15 ("For centuries, [prizes] were a core instrument of sovereigns, royal societies, and private benefactors alike who sought to solve pressing societal problems and idiosyncratic technical challenges.").
161. Hanson, supra note 111, at 5.
162. SCOTCHMER, supra note 67, at 9-10.
163. See id. at 9.
164. See id. at 12-13.
165. DAVA SOBEL, LONGITUDE (1995).
166. Id. at 4.
167. Id. at 8. Twenty thousand pounds sterling in 1714 would be worth "several million dollars in today's currency."
168. Id.
169. See id. at 53.
170. Id. at 54.
171. See id. at 24-27.
172. SCOTCHMER, supra note 67, at 32.
173. Id. at 32-33.
174. See id.
175. SOBEL, supra note 117, at 99.
176. Id. at 163.
177. Maurice Crosland & Antonio Gálvez, The Emergence of Research Grants within the Prize System of the French Academy of Sciences, 1795-1914, 19 SOC. STUD. OF SCI. 71, 71-72 (1989).
178. Id. at 74.
179. Id. at 75.
180. Id. at 92.
181. Id.
182. Masters, Framework, supra note 75, at 7;
183. David M. Kiefer, It Was All about Alkali, TODAY'S CHEMIST AT WORK, Jan. 2002, available at http://pubs.acs.org/subscribe/archive/tcaw/11/i01/html/ 01chemchron.html.
184. Masters, Framework, supra note 75, at 7. 135
185. Lee Davis, How Effective Are Prizes as Incentives to Innovation? Evidence from Three 20th Century Contests, DRUID Summer Conference: Industrial Dynamics, Innovation and Development, May 7, 2004, at 4.
186. SCOTCHMER, supra note 67, at 43.
187. Wright, supra note 66, at 704.
188. SCOTCHMER, supra note 67, at 44.
189. Hanson, supra note 111, at 6.
190. See id. at 6 (citing Jack Sommer, Radical Proposal for Reorganizing Research Support: Lotteries, Prizes, THE NEW SCIENTIST (June 10, 1991), at 11 (noting the tendency to award grants based upon reputation instead of a proposal's merit)).
191. Hanson, supra note 111, at 6.
192. Id.
193. David Leonhardt, You Want Innovation? Offer a Prize, N.Y. TIMES, Jan. 31, 2007, at C1.
194. Hanson, supra note 111, at 9.
195. NAT'L ACAD. OF SCI., supra note 72, at 10 (noting that prizes "have been used only sparingly by governments").
196. Hanson, supra note 111, at 17.
197. Id. at 18.
198. See Gregg Maryniak, When Will We See a Golden Age of Space Flight?, in SPACE: THE FREE-MARKET FRONTIER 11, 20-22 (Edward L. Hudgins ed., 2002) (identifying aviation prizes offered between 1900 and 1913)
199. See also ALEX SCHROEDER, INDEPENDENCE INST., THE APPLICATION AND ADMINISTRATION OF INDUCEMENT PRIZES IN TECHNOLOGY 7, (2004) (citing estimate of $1 million in prizes offered in 1911 alone).
200. Maryniak, supra note 148, at 20-22.
201. Kalil, supra note 71, at 6.
202. Id.
203. Id.
204. SCHROEDER, supra note 148, at 7-8.
205. SCOTCHMER, supra note 67, at 44;
206. MCKINSEY, supra note 73, at 16 (noting "prizes are booming once again" and citing an increase in prizes since 2000)
207. Eric S. Hintz, Creative Financing: The Rise of Cash Prizes for Innovation Is a Response to Changing Business Conditions - And a Return to Winning Strategy, WALL ST. J., Sept. 27, 2010, at R8 (reporting on the rise of prizes for innovation). In 1972, President Richard Nixon proposed the use of prizes to "foster useful innovation."
208. Harry Goldsmith, An Olympiad of Science, 177 SCI. 35, 35 (1972). Congress never acted on this proposal.
209. SCOTCHMER, supra note 67, at 45.
210. See The Netflix Prize Rules, NETFLIX, http://www.netflixprize.com/rules (last visited Dec. 2, 2010) (on file with the Harvard Law School Library).
211. Leonhardt, supra note 143.
212. And the winner is . . ., THE ECONOMIST, Aug. 5, 2010.
213. Harrison Hoffman, Netflix Awards $1 Million for Outdoing Cinematch, THE WEB SERVICES REPORT (Sept. 21, 2009, 3:28 PM), http://news.cnet.com/8301-13515-3-10357807-26.html (on file with the Harvard Law School Library).
214. Id.
215. And the winner is . . ., supra note 157
216. John J. Miller, Extraordinary Feats of an X- Man, PHILANTHROPY, July 2005, available at http://www.philanthropyroundtable.org/article.asp?article= 750&paper=1&cat=147.
217. Peter Pae, Rocket Takes 1st Prize of a New Space Race, L.A. TIMES, Oct. 5, 2004, at A2.
218. MCKINSEY, supra note 73, at 25. The 2004 Defense Advanced Research Projects Agency ("DARPA") Grand Challenge is another example, as contest entrants invested an estimated total of $55 million in pursuit of a $2 million prize.
219. Miller, supra note 160.
220. Masters, Framework, supra note 75, at 11; Pae, supra note 161 (reporting Allen in- vested $25 million in SpaceShipOne).
221. David L. Chandler, Final Frontier: Space Tourism Prize Gives Space Tourism a Boost, BOS. GLOBE, Oct. 19, 2004, at B9.
222. See Virgin Spaceship to Pass New Milestone, AGENCE FRANCE PRESSE, Oct. 22, 2010, available at http://news.yahoo.com/s/afp/20101022/ts-alt-afp/ usaviationspacebritainvirgin-20101022091717 (reporting on maiden flight of spacecraft for commercial spaceflight).
223. Id.
224. See And the winner is . . ., supra note 157. For additional details on this prize
225. PROGRESSIVE AUTOMOTIVE X PRIZE, http://progressiveautoxprize.org (last visited Dec. 2, 2010) (on file with the Harvard Law School Library).
226. Kalil, supra note 71, at 13.
227. See And the winner is . . ., supra note 157.
228. Joseph B. White, No Radio, but It Gets 100 Miles a Gallon, WALL ST. J., Sept. 17, 2010, at A3.
229. MCKINSEY, supra note 73, at 30 (noting aim of launching ten prizes over 5-7 years).
230. NAT'L ACAD. OF ENG'G, CONCERNING FEDERALLY SPONSORED INDUCEMENT PRIZES IN ENGINEERING AND SCIENCE (1999);
231. NAT'L ACAD. OF SCI., supra note 72, at 11 (credit- ing increase in prizes to NAE report).
232. Kalil, supra note 71, at 18
233. NAT'L ACAD. OF SCI., supra note 72, at 10.
234. SCOTCHMER, supra note 67, at 2.
235. Kalil, supra note 71, at 8.
236. MCKINSEY, supra note 73, at 86.
237. Id. at 23.
238. For a summary of congressionally authorized prizes DEBORAH D. STINE, CONG. RESEARCH SERV., FEDERALLY FUNDED INNOVATION INDUCEMENT PRIZES (2009), available at http://www.fas.org/sgp/crs/misc/R40677.pdf.
239. Science, State, Justice, Commerce, and Related Agencies Appropriations Act, Pub. L. No. 109-108, 119 Stat. 2290, 2318 (2006).
240. NAT'L ACAD. OF SCI., supra note 72, at vii.
241. See generally id.
242. Id. at 42.
243. Kalil, supra note 71, at 12.
244. THE FREEDOM PRIZE, http://www.freedomprize.org (last visited Dec. 2, 2010) (on file with the Harvard Law School Library).
245. For example, prizes were briefly mentioned in a September 2009 Obama Administration white paper on spurring technological innovation. NAT'L ECON. COUNCIL, OFFICE OF SCI. & TECH. POLICY, A STRATEGY FOR AMERICAN INNOVATION: DRIVING TOWARDS SUSTAINABLE GROWTH AND QUALITY JOBS, 17 (2009), available at http://www.whitehouse.gov/assets/documents/SEPT-20-Innovation-Whitepaper-FINAL. pdf. During the 2008 presidential campaign, Republican candidate John McCain also proposed using prizes to spur innovation in electric car battery technology.
246. Jonathan H. Adler, A Prize for McCain, NATIONAL REVIEW ONLINE (June 23, 2008, 3:00 PM), http://www.nationalReview.com/articles/224850/prizemccain/ jonathan-h-adler (on file with the Harvard Law School Library).
247. Beth Noveck, Live from the White House Summit on Promoting Innovation through Prizes, Challenges, and Open Grantmaking, THE WHITE HOUSE (Apr. 30, 2010, 11:36 AM), http://www.whitehouse.gov/blog/2010/04/30/live-white-house- summit-promoting-inno vation-through-prizes-challenges-and-open-gran (on file with the Harvard Law School Library).
248. Memorandum from Jeffrey D. Zienst, Deputy Director for Management, Office of Management and Budget, to the Heads of Executive Departments and Agencies (Mar. 8, 2010) (on file with author) [hereinafter OMB Memo];
249. See also Federal Agencies Encouraged to Offer Grand Challenges and Prize Contests, SCI. CAREERS BLOG (Mar. 15, 2010), http://blogs.sciencemag.org/ sciencecareers/2010/03/federal-agencie.html (on file with the Harvard Law School Library).
250. OMB Memo, supra note 187, at 2.
251. Id. at 5.
252. Id. at 5-6.
253. Id. at 6.
254. Id. at 6-7.
255. Hahn, supra note 50, at 583 ("It is fashionable to call for a large increase in R&D funding.")
256. Gwyn Prins & Steve Rayner, Time to ditch Kyoto, 449 NATURE 973, 974 (2007) ("[I]nvestment in energy R&D should be placed on a wartime footing. This is a cause that embraces the political spectrum . . . .")
257. David Leonhardt, A Climate Proposal Beyond Cap and Trade, N.Y. TIMES, Oct. 12, 2010, at B1 (noting that increased funding in clean energy research has "a growing list of supporters" across the political spectrum). For an example of cross-ideological support for increased clean energy research
258. STEVEN F. HAYWARD ET AL., POST-PARTISAN POWER: HOW A LIMITED AND DIRECT APPROACH TO ENERGY INNOVATION CAN DELIVER CHEAP ENERGY, ECONOMIC PRODUCTIVITY, AND NATIONAL PROSPERITY (2010), available at http://www.aei.org/docLib/Post- Partisan-Power-Hayward-101310.pdf, a recent report co-authored by analysts at conservative and liberal think tanks calling for increased energy R&D funding as an alternative to regulatory measures to address climate change.
259. USCCTP, supra note 4, at 17. Some sources claim it is more than $4 billion.
260. Richard G. Newell, The Energy Innovation System: A Historical Perspective, in ACCELERATING ENERGY INNOVATION: INSIGHTS FROM MULTIPLE SECTORS (Rebecca Henderson & Richard Newell eds., forthcoming) (manuscript at 13), available at www.nber.org/chapters/c11747.pdf .
261. Gregory F. Nemet & Daniel M. Kammen, U.S. Energy Research and Development: Declining Investment, Increasing Need, and the Feasibility of Expansion, 35 ENERGY POL'Y 746, 746 (2007) ("Investment in innovation in the U.S. energy sector is declining just as concerns about the environmental, geopolitical, and macroeconomic impacts of energy production and use are intensifying."). Of note, energy R&D funding has declined while overall R&D funding has increased.
262. Id. at 747
263. A.D. Sagar & J.P. Holdren, Assessing the Global Energy Innovation System: Some Key Issues, 30 ENERGY POL'Y 465, 467 (2002) (noting decline in public and private energy-related R&D funding).
264. Nemet & Kammen, supra note 195, at 749-50;
265. Alic et al., supra note 36, at 316 ("Many analysts in the United States have pointed to underinvestment in R&D by the US Department of Energy (DOE) since the 1980s as a symptom and cause of slow energytechnology development.").
266. NAT'L ACAD. OF SCI., LIMITING, supra note 23, at 120 (noting decline in energy R&D as percentage of non-defense federal spending from 1980 to 2008).
267. ARPA-E was created in 2009 to spur greater technological innovation in the energy sector. Modeled on the DARPA within the Department of Defense, ARPA-E
268. Katie Howell et al., DOE: White House boosts nuclear, basic science funding, GREENWIRE, Feb. 1, 2010.
269. See Newell, supra note 194, at 1
270. [P]ublic resources are likely to be substantially constrained going forward given the current long-term fiscal outlook in the United States and elsewhere. This reality prompts additional questions: First what options realistically exist for funding expanded investments in energy technology innovation? Second what institutions are best positioned to direct and overpublicly funded technology programs? At the time of this writing it also appears that the Obama Administration is backing away from its pledge to "invest $150 billion over ten years in energy research and development."
271. Andrew C. Revkin, The Case of the Missing Climate Pledge, DOT EARTH (Aug. 19, 2010, 11:25 AM), http://dotearth.blogs.nyTimes.com/2010/08/19/the-case-of- the-missingclimate-pledge/ (on file with the Harvard Law School Library).
272. Alic et al., supra note 36, at 316 ("[I]t is doubtful whether DOE-funded R&D alone can catalyse the type of innovation needed").
273. Masters, Framework, supra note 75, at 5.
274. See JOHN A. ALIC ET AL., PEW CTR. ON GLOBAL CLIMATE CHANGE, U.S. TECHNOLOGY AND INNOVATION POLICIES: LESSONS FOR CLIMATE CHANGE 18-19 (2003), available at http:// www.pewclimate.org/docUploads/ US%20Technology%20&%201nnovation%20Policies%20(pdf).pdf ("Where government has sought to define technical attributes or design features and 'pick winners' in the marketplace, failure has been a common outcome.").
275. David C. Mowery, Richard R. Nelson & Ben R. Martin, Technology Policy and Global Warming: Why New Policy Models Are Needed (or Why Putting New Wine in Old Bottles Won't Work), 39 RES. POL'Y 1011, 1012 (2010).
276. See, e.g., John M. Amidon, America's Strategic Imperative: A "Manhattan Project" for Energy, JOINT FORCE Q., Autumn 2005 at 68
277. Jay Michaelson, Geoengineering: A Climate Change Manhattan Project, 17 STAN. ENVTL. L.J. 73, 73 (1998)
278. Thomas L. Friedman, Bush's Waterlogged Halo, N.Y. TIMES, Sept. 21, 2005, at A25 (calling for a Manhattan Project for developing alternatives for energy independence)
279. Why Do We Call It the Apollo Alliance?, APPOLO ALLIANCE, http://apolloalliance.org/about/why-do-we-call-it-the-apollo-alliance/ (last visited Dec. 2, 2010) (on file with the Harvard Law School Library).
280. See, e.g., Chi-Jen Yang & Michael Oppenheimer, A "Manhattan Project" for Climate Change?, 80 CLIMATIC CHANGE 199, 199, 203 (2007) (calling for increased R&D efforts but not under a Manhattan Project "style of governance").
281. Mowery, Nelson & Martin, supra note 203, at 1012.
282. Jaffe, Newell & Stavins, supra note 19, at 489 (noting that technology diffusion has been slow in a "variety of disciplines" because "potential technology adopters are heterogenous, so that a technology that is generally superior will not be equally superior for all potential users . . . .").
283. Mowery, Nelson & Martin, supra note 203, at 1013 (noting there was no "technol- ogy adoption" issue with either the Manhattan or Apollo projects);
284. Newell, supra note 194, at 3-4 (noting need for economic incentives, including market demand, for innovation and diffusion of technology).
285. But see TERENCE KEALEY, THE ECONOMIC LAWS OF SCIENTIFIC RESEARCH 344-45 (1996) (questioning value of any government support for science, including basic research).
286. Jaffe, Newell & Stavins, supra note 19, at 473 ("Examples of successful govern- ment technology development (as opposed to research) have been particularly few.").
287. Alic et al., supra note 36, at 316 ("The DOE neither buys nor sells goods or services based on energy and climate innovations. It therefore has few incentives to manage R&D in accord with marketplace needs rather than scientific norms.").
288. See id. at 317 ("The DOD is better placed for catalysing rapid innovation in energy technologies than the DOE because the DOD is a major customer for energy-consuming systems and equipment for its roughly 500 permanent installations, as well as for operational equipment . . . .").
289. Benjamin K. Sovacool, Replacing tedium with transformation: Why the U.S. Department of Energy needs to change the way it conducts long-term R&D, 36 ENERGY POL'Y 923, 926 (2008) (quoting former DARPA director F.L. Fernandez).
290. Jerry Taylor & Peter VanDoren, Soft Energy Versus Hard Facts: Powering the Twenty- First Century, in EARTH REPORT 2000: REVISITING THE TRUE STATE OF THE PLANET 147 (Ronald Bailey ed., 2000) (citing Department of Energy, Energy Research Advisory Board member Eric Reichl).
291. See, e.g., Michael Jefferson, Accelerating the Transition to Sustainable Energy Systems, 36 ENERGY POL'Y 4116, 4119 (2008) (noting subsidy support for "mature renewable energy technologies, which should be able to prosper without [it]").
292. Naik, supra note 80, at A1 (noting concerns about high administrative costs in federal energy R&D).
293. Kalil, supra note 71, at 7.
294. Masters, Prosperity, supra note 86, at 61.
295. Newell, supra note 194, at 3 ("substantial public investments in alternative energy have by and large not yielded game-changing technological advances that would allow for a fundamental shift in the distribution of primary energy sources"). A 2001 NAS report examining Department of Energy research concluded that some of the Department's energy efficiency research had been worthwhile, and that the overall portfolio of DOE energy research produced a positive return, largely due to substantial benefits from a handful of projects.
296. NAT'L ACAD. OF SCI., ENERGY RESEARCH AT DOE: WAS IT WORTH IT? ENERGY EFFICIENCY AND FOSSIL ENERGY RESEARCH 1978 TO 2000 5-8 (2001).
297. LINDA COHEN & ROGER NOLL, THE TECHNOLOGY PORK BARREL 365-69 (1991). Richard G. Newell, confirmed in 2009 as head of the Energy Information Administration in the Department of Energy, characterized the Synfuels Corporation as a failure.
298. Newell, supra note 194, at 6.
299. Michael Hart, The Chimera of Industrial Policy: Yesterday, Today, and Tomorrow, 19 CAN - U.S. L.J. 19, 38 (1993).
300. COHEN & NOLL, supra note 220, at 378;
301. Ronald J. Sutherland & Jerry Taylor, Time to Overhaul Federal Energy R&D, POL'Y ANALYSIS No. 424, Cato Institute, Feb. 7, 2002, at 6.
302. Newell, supra note 194, at 18
303. COHEN & NOLL, supra note 220, at 370.
304. supra notes 70-81.
305. In the case of patents, on the other hand, the costs of developing successful innovations are passed through to consumers.
306. SCOTCHMER, supra note 67, at 34-39.
307. As Scotchmer notes, "When innovations are funded out of general Revenue, there is no guarantee that the benefits received by any individual taxpayer outweigh that taxpayer's share of the cost," if, that is, the funding generates any innovation benefits at all.
308. SCOTCHMER, supra note 67, at 38.
309. Contrary to some claims, it is unclear how much government science and R&D funding directly contribute to economic growth.
310. Julia Lane, Assessing the Impact of Science Funding, 324 SCI. 1273, 1273 (2009).
311. As Hanson notes, "Standard principal-agent theory suggests that paying for results is attractive when the principal can more easily specify the results she prefers, when the principal is more risk averse, and when agents can take more risks and have more access to capital. Paying for effort, on the other hand, is attractive when the principal can more cheaply monitor effort, when she knows better whom to hire, and when the principal can take more risks."
312. Hanson, supra note 111, at 4.
313. Kalil, supra note 71, at 7.
314. SCOTCHMER, supra note 67, at 55 ("ex post regret does not mean that an invest- ment was ex ante inefficient.").
315. See WILLIAM M. LANDES & RICHARD A. POSNER, THE ECONOMIC STRUCTURE OF INTELLECTUAL PROPERTY LAW 301 (2003) (stating "research expenditures of the losers of the race may not be wasted" because they "will generate information that the losers may be able to use in other projects")
316. Arrow et al., supra note 60, at 2 ("Government R&D should encourage more risk-taking and tolerate failures that could provide valuable information.").
317. generally COHEN & NOLL, supra note 220, at 53-71 (discussing political influence on research expenditures).
318. NAT'L ACAD. OF SCI., THE GOVERNMENT ROLE IN CIVILIAN TECHNOLOGY: BUILDING A NEW ALLIANCE 59 (1992).
319. For example, the synthetic fuels program invested in projects involving high-sulfur eastern coal for political reasons, even though low-sulfur western coal was more promising.
320. COHEN & NOLL, supra note 220, at 368.
321. Id. at 378.
322. MICHAEL KREMER & RACHEL GLENNERSTER, STRONG MEDICINE: CREATING INCENTIVES FOR PHARMACEUTICAL RESEARCH ON NEGLECTED DISEASES 49 (2004) ("Researchers funded on the basis of an outsiders' [sic] assessment of potential rather than actual product delivery have incentives to exaggerate the prospects that their approach will succeed, and once they are funded, may even have incentives to divert resources away from the search for the desired product.");
323. SCOTCHMER, supra note 67, at 248.
324. SCOTCHMER, supra note 67, at 247 (With grants, "the whole point is to reimburse costs before they are incurred.").
325. Jonathan H. Adler, Free & Green: A New Approach to Environmental Protection, 24 HARV. J. L. & PUB. POL'Y 653 (2001) (discussing the conventional approach to environmental protection in contrast to an alternative paradigm).
326. See, e.g., Richard B. Stewart, Controlling Environmental Risks through Economic Incentives, 13 COLUM. J. ENVTL. L. 153 (1988) (discussing theoretical merits of market mechanisms). For an example of market mechanisms in use
327. Clean Air Act §§ 401-416, 42 U.S.C. §7651 (2006) (Acid Depositions Control and Emissions Trading).
328. Jonathan H. Adler, Warming Up to Climate Change Litigation, 93 VA. L. REV. IN BRIEF 63, 75 (May 21, 2007), (on file with the Harvard Law School Library).
329. Massachusetts v. EPA, 549 U.S. 497, 533 (2007).
330. Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, 74 Fed. Reg. 66496 (Dec. 15, 2009) (to be codified at 40 C.F.R. Ch.1)
331. Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards, 75 Fed. Reg. 25323 (May 7, 2010) (to be codified at 40 C.F.R. pts. 85, 86, and 600, 49 C.F.R. pts. 531, 533, 536-538)
332. PRevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, 75 Fed. Reg. 31513 (June 3, 2010) (to be codified at 40 C.F.R. pts 51, 52, 70, and 71).
333. American Clean Energy and Security Act of 2009, H.R. 2454, 111th Cong. (as passed by H.R., June 26, 2009).
334. Arrow et al., supra note 60, at 3 ("Mandates and subsidies aimed at supporting the deployment of relatively mature technologies are unlikely to be cost-effective tools for eliciting the major reductions of greenhouse gas emissions that now appear to be called for.")
335. Hoffert et al., supra note 33, at 986 ("[T]he fossil fuel greenhouse effect is an energy problem that cannot be simply regulated away.").
336. See supra notes 36-42.
337. Hahn, supra note 50, at 580 (observing that neither mandated standards nor subsi- dies are "particularly well-suited for generating cost-effective innovation addressing the problem of climate change").
338. See supra Part III.
339. Adam Jaffe, Richard G. Newell & Robert N. Stavins, Environmental Policy and Technological Change, 22 ENVTL. & RES. ECON. 41, 55 (2002)
340. David E. Adelman, Climate Change, Federalism, and Promoting Technological Change, in BEYOND ENVIRONMENTAL LAW: POLICY PROPOSALS FOR A BETTER ENVIRONMENTAL FUTURE 209-11 (Alyson C. Flournoy & David M. Driesen eds., 2010).
341. Jaffe, Newell & Stavins, supra note 248, at 55.
342. 2 Control, 27 LAW & POL'Y 348, 370 (2005) (finding no evidence that emissions trading under the Clean Air Act of 1990 induced greater technological innovation than traditional regulation).
343. Eric W. Orts, Reflexive Environmental Law, 89 NW. U. L. REV. 1227, 1229 (1995) (quoting Carol Browner).
344. Hahn, supra note 50, at 580 ("The regulator typically lacks the kind of information needed to set standards appropriately for forcing innovation.")
345. Marchant, supra note 36, at 836 ("[I]t is difficult to predict the ingenious and creative innovations" that scientists and inventors might develop).
346. Jaffe, Newell & Stavins, supra note 248, at 50.
347. Arrow et al., supra note 60, at 3.
348. Hahn supra note 50, at 580 ("Standards may be effective in limited situations where the technological solution is reasonably clear, but they are unlikely to result in major breakthroughs.").
349. Marchant, supra note 36, at 836.
350. Gustavo Collantes & Daniel Sperling, The Origin of California's Zero Emission Vehicle Mandate, 42 TRANS. RES. PART A 1302, 1307 (2008) ("Uncertainty is . . . an inherent characteristic of technology-forcing approaches, as regulators do not know how much innovation industry is capable of achieving, and industry is reluctant to provide such information (even if they knew)."); Jaffe, Newell & Stavins, supra note 19, at 477 ("while regulators can typically assume that some amount of improvement over existing technology will always be feasible, it is impossible to know how much. Standards must either be made unambitious, or else run the risk of being ultimately unachievable, leading to great political and economic disruption.")
351. Marchant, supra note 36, at 836.
352. See id. at 838.
353. Collantes & Sperling, supra note 256, at 1304, 1309-10.
354. For an overview of the California Zero Emissions Vehicles ("ZEV") mandate
355. Collantes & Sperling, supra note 256. Though referred to as "Zero Emission Vehicles," elec- tric cars are not truly emission free. The generation of electricity to charge the vehicle battery can be a substantial source of emissions.
356. Michael Moyer, The Dirty Truth about Plug-In Hybrids, SCI. AMER., July 2010, at 54. In some parts of the country, the use of plug-in electric vehicles will actually result in greater net emissions of carbon dioxide than traditional hybrid vehicles.
357. Id. Electric vehicles are also not necessarily "zero emission" in terms of direct vehicle emissions. Due to the need to operate vehicles in colder temperatures in Northern California, in 1993 CARB issued a waiver to allow automakers to equip electric vehicles with gasoline or diesel-powered heaters without losing their "ZEV" status.
358. Oscar Suris, Cold Weather Is Still a Problem In Electric Cars, WALL ST. J., Mar. 8, 1994, at B1. The program also included requirements for fuel content. Insofar as the oil industry opposed the CARB policy, it opposed the fuel mandates and ignored the ZEV requirement.
359. Collantes & Sperling, supra note 256, at 1310.
360. Under the original mandate, ZEVs had to account for five percent of vehicles sold in 2001 and 2002 and ten percent in 2003 and thereafter.
361. Collantes & Sperling, supra note 256, at 1304.
362. See id. at 1307.
363. Among other things, CARB's estimates of the costs of operating battery-powered vehicles did not include the costs of home-recharging equipment.
364. Id. CARB's cost estimates were also substantially lower than those of other economic analysts.
365. KAY H. JONES & JONATHAN H. ADLER, CATO INST., TIME TO REOPEN THE CLEAN AIR ACT 9-10 (1995). Interestingly enough, CARB may have only been following the lead of then-General Motors ("GM") CEO Roger Smith who also presented an overly optimistic view of GM's electric car prototype, the "Impact."
366. Collantes & Sperling, supra note 256, at 1306.
367. GM's optimistic projections were that the Impact could account for 0.5% of its California vehicle sales, only one quarter of the CARB mandate.
368. Collantes & Sperling, supra note 256, at 1308. One study, financed by two automakers, found that consumers would not purchase electric vehicles over traditional gasoline vehicles unless they were $28,000 cheaper, and yet electric vehicles were (and still are) substantially more expensive than gasoline-powered vehicles.
369. James R. Healey, California May Soften Electric Car Mandate, USA TODAY, June 2, 2000, at 3B;
370. Stuart F. Brown, It's the Battery, Stupid!, POPULAR SCI., Feb. 1995, at 62 (arguing that batteries for electric vehicles "aren't ready for prime time")
371. Lawrence M. Fisher, California is Backing Off Mandate for Electric Car, N.Y. TIMES, Dec. 26, 1995, at A14 (noting the view of "some automobile experts" that "current electric cars fall short on performance, range, or both").
372. Indeed, even in 2010 it is not clear that battery technology is sufficient to capture a significant portion of the vehicle market. The newly released Volt from GM is, by some accounts, "a vehicle that costs $41,000 but offers the performance and interior space of a $15,000 economy car."
373. Edward Niedermeyer, G.M.'s Electric Lemon, N.Y. TIMES, July 30, 2010, at A23
374. JUDE ANDERSON & CURTIS D. ANDERSON, ELECTRIC AND HYBRID CARS 161 (2005) (noting limits of battery technology)
375. ANDRES DINGER ET AL., BOSTON CONSULTATION GROUP, BATTERIES FOR ELECTRIC CARS: CHALLENGES, OPPORTUNITIES AND THE OUTLOOK TO 2020 (2010) (same), available at .
376. In 1996, CARB removed the initial "ramp up" ZEV sales requirement. In 1998, it agreed to offer automakers credit toward the ZEV mandate for sales of extremely clean vehicles. In 2001 it expanded the credit for non-ZEVs further, and then made additional Revisions (some in response to litigation) in 2003.
377. See Zero-Emission Vehicle Legal and Regulatory Activities - Background, CAL. AIR RES. BD. (Mar. 17, 2010), http://www.arb.ca.gov/msprog/zevprog/ background.htm (on file with the Harvard Law School Library).
378. Marchant, supra note 36, at 837-38.
379. See id. at 838.
380. Arrow et al., supra note 60, at 3.
381. Newell, supra note 194, at 15-16 (noting research showing that changing regula- tory conditions and uncertainty can dampen private sector investment in technological innovation).
382. Marchant, supra note 36, at 848.
383. ENVIRONMENTAL LAW INSTITUTE, BARRIERS TO ENVIRONMENTAL TECHNOLOGY INNOVATION AND USE 6 (1998) (noting potential for environmental regulation to create "significant barriers to innovation") [hereinafter BARRIERS].
384. U.S. OFFICE OF TECH. ASSESSMENT, INNOVATION AND COMMERCIALIZATION OF EMERGING TECHNOLOGIES 87 (1995) ("Regulatory systems that grandfather existing facilities may dissuade investments in new or upgraded technologies if such changes trigger more stringent standards or lengthy permitting processes.").
385. BARRIERS, supra note 271, at 7. This report further explains: "Emission limits or dis- charge standards based on a single best technology create practical barriers to innovation by limiting permissible technologies to available ones that meet the standard. This requirement precludes the normal development and refinement process most technologies need to achieve their best performance and, in many cases, can limit permissible technologies to a single one."
386. Id.
387. see also Jaffe, Newell & Stavins, supra note 248, at 50 ("Technology standards are partic- ularly problematic, since they tend to freeze the development of technologies that might otherwise result in greater levels of control.").
388. U.S. OFFICE OF TECH. ASSESSMENT, INNOVATION AND COMMERCIALIZATION OF EMERGING TECHNOLOGIES 87-88 (1995) [hereinafter OTA].
389. Jaffe, Newell & Stavins, supra note 248, at 50.
390. Adam B. Jaffe and Robert N. Stavins, Dynamic Incentives of Environmental Regulations: The Effects of Alternative Policy Instruments on Technology Diffusion, 29 J. ENVTL. ECON. & MGMT. 43, 46 (1995) ("Once a performance standard has been satisfied, there may be little benefit to developing and/or adopting even cleaner technology.").
391. Wesley A. Magat, The Effects of Environmental Regulation on Innovation, 43 LAW & CONTEMP. PROBLEMS 4, 21 (1979).
392. OTA, supra note 274, at 88.
393. Joshua S. Gans, Innovation and Climate Change Policy 1 (Apr. 27, 2009) (unpublished manuscript), available at .
394. Gans, supra note 278, at 2. As regulations reduce overall economic activity, they could further offset the incentive to develop emission-reducing technologies.
395. See id. at 3 ("Even if socially beneficial, climate change policy reduces the size of the 'real' economy and hence, may reduce the overall rate of innovation.")
396. Jaffe, Newell & Stavins, supra note 19, at 474 ("To the extent that regulation inhibits investment and/or slows productivity growth, this can be viewed as indirect evidence suggesting that induced innovation effects are either small or are outweighed by other costs of regulation.").
397. David M. Driesen, An Environmental Competition Statute, in BEYOND ENVIRONMENTAL LAW: POLICY PROPSOALS FOR A BETTER ENVIRONMENTAL FUTURE 175-76 (Alyson C. Flournoy & David M. Driesen eds., 2010).
398. Jaffe, Newell & Stavins, supra note 19, at 477 (noting that market-based instru- ments provide greater incentives and opportunity for innovation than performance standards which provide greater incentives than technology standards).
399. But see Popp, supra note 23, at 284 (citing research questioning whether market-based instruments induce greater innovation than command-and-control regulations).
400. Lane, supra note 227, at 3;
401. 2 Emissions - Not as Low as You Might Think (Ctr. For Energy and Envtl. Policy Research, Working Paper No. 98010, 1998).
402. As Nobel laureate economist Ronald Coase noted, setting a tax at a level equal to the social costs of pollution "would require a detailed knowledge of individual preferences," and it is unclear "how the data for such a taxation system could be assembled."
403. R.H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1, 41 (1960).
404. Noted economist A.C. Pigou proposed the imposition of taxes equivalent to the social costs imposed by polluting or other externality-generating activities. Even assuming that governmental agencies have the necessary information to set pollution taxes at such an ideal level, Ronald Coase showed that such taxes do not necessarily enhance economic efficiency.
405. Coase, supra note 283, at 42 ("[E]ven if the tax is exactly adjusted to equal the damage that would be done to neighboring properties as a result of the emission of each additional puff of smoke, the tax would not necessarily bring about optimal conditions.").
406. See supra notes 58-59.
407. Kalil, supra note 71, at 9.
408. USCCTP, supra note 4, at 207 (noting FY 2006 funding of "nearly $3 billion").
409. The USCCTP defines "near-term" as less than 20 years, "mid-term" as 20-40 years, and "long-term" as more than 40 years.
410. Id. at 211
411. Id.
412. It is also possible that the creation of prizes would not require an equal offset of existing USCCTP funding, as prize awards would not be paid out unless and until the necessary innovations were developed and proven.
413. MCKINSEY, supra note 73, at 21-22 (discussing potential for prizes to change public perception and the ability of prizes to focus a community's efforts on a specific problem).
414. X-Prize Foundation Chairman and CEO Peter Diamandis testified before Congress that "writing the rules is more than 80% of the battle." NASA Contests and Prizes: How Can They Help Advance Space Exploration?: Hearing Before the Subcomm. on Space and Aeronautics of the H. Comm. on Sci., 108th Cong. 29 (2004) (statement of Dr. Peter H. Diamandis, Chairman & CEO, X-Prize Foundation).
415. MCKINSEY, supra note 73, at 39-45 (discussing the goal setting process for prize competitions).
416. Id. at 54 (noting "objectivity and simplicity are the biggest challenges" in drafting prize criteria).
417. Timothy N. Cason, William A. Masters & Roman M. Sheremeta, Entry Into Winner- Take-All and Proportional Prize Contests: An Experimental Study, 94 J. PUB. ECON. 604 (2010).
418. NAT'L ACAD OF SCI., supra note 72, at 18-39.
419. Id. at 21.
420. Id. at 33.
421. Id.
422. Kalil, supra note 71, at 5.
423. Although the NAE recommended consideration of prizes in 1999, the NSF did not consider using prizes until required to by federal statute many years later.
424. NAT'L ACAD. OF SCI., supra note 72, at 11.
425. Mowery, Nelson & Martin, supra note 203, at 1021 (noting potential drawbacks of inducement prizes in the energy context)
426. See also infra notes 102-106.