State of the Union

President Bush's final State of the Union address last night included neither new targets for reduced oil consumption, along the lines of last year's speech, nor any lines as memorable as his "addicted to oil" remark in 2006. He acknowledged the passage of a bi-partisan energy bill that incorporated many of his 2007 proposals, and he generally reiterated his support for clean energy technology as the solution to both our dependence on foreign energy suppliers and the challenge of climate change. There was a subtle shift in tone concerning the latter, however, with the President espousing the need for an international agreement to reduce greenhouse gas emissions and an international clean technology fund, to transfer needed technologies to the developing world. While this still falls short of what many believe is required, it at least offers some hope that 2008 need not be a lost year in the long effort to arrest global warming.

Until we know who the Republican nominee for president will be, it is premature to suggest that a stronger response to climate change in 2009 is pre-determined. It is noteworthy, however, that any of the Democratic candidates and at least two of the Republicans would take office with a much more urgent view of this problem than that to which the current administration has evolved over the arc of the last seven years. The international negotiators at the recent climate conference in Bali took note of that likelihood, and the compromise that saved the meeting from ending in a stalemate over numerical targets for emission reductions was motivated at least in part by the desire to keep the US engaged in the process during this bridge year. But however much the current President and his aspiring successors might differ on the subject of a follow-on agreement to the Kyoto Protocol, President Bush last night offered up a meaningful project that all of them might be able to support in the meantime: facilitating the transfer of clean energy technology to where it will arguably do the most good.

As important as the development and deployment of clean energy technology is for reducing US emissions and fossil fuel consumption, it is even more critical for the large developing countries, which are still rapidly expanding basic infrastructure and capital goods. The power plants, electrical grid, pipelines and refineries that China and India build in the next few years will be in service for many decades, and the more we can do to ensure they are as green and efficient as possible, the less they will contribute to the global growth of greenhouse gas emissions. Given the ultimate scale of these economies and their much higher current energy use per unit of output, the cleantech opportunity there could be even larger than it is here.

Ensuring than the developing world has access to the best energy technology makes enormous sense from a climate change perspective, but it could be a tough sell politically and economically. We already see China and India as competing for US markets and US jobs. Our trade deficit with China is about twice as large in 2007 dollars as our late-1980s deficits with Japan. Giving them access to more efficient sources of energy could make them even tougher competitors in the future, and it won't take a populist demagogue to make that point.

It's natural for Americans to want to capture some competitive advantage from technology that resulted from our public or private investment and years of hard work. It won't be easy to devise a way to transfer that technology, while protecting the intellectual capital involved and providing American companies an opportunity to profit on it. But although an election year might not seem the ideal time to resolve such a dilemma, this issue might provide a useful gauge of the relative priority that the various candidates place on the economy and the environment, and of the creativity they bring to complex problems.