Investment in energy R&D declines despite supply problems, soaring prices

September 26, 2005

Berkeley -- At a time of soaring gas prices, public concern over the country's dependence on foreign oil, and mounting evidence of global warming, the nation's investment in energy research and development is declining, according to a report by scientists at the University of California, Berkeley.

In a paper in the journal Issues in Science & Technology, Dan Kammen, a UC Berkeley professor and co-director of the campus's Berkeley Institute of the Environment, and doctoral student Greg Nemet, marshal statistics to show that both the federal government and private business investments in energy research and development have declined significantly since the 1980s. They use data on patents, federal and industry spending, and emerging venture capital funds to examine the relationship between federal investment and innovation.

Despite the current administration's expressed concern about the nation's energy problems, the 2005 federal budget reduced energy research and development by 11 percent below the 2004 level, Kammen and Nemet note. Equally worrisome is the 50 percent decline in U. S. companies' investments in energy research and development between 1991 and 2003.

"Energy issues facing the country warrant a massive increase in energy spending, and our findings indicate that this can be done while bolstering the economy," said Kammen, who will present his results at a Capital Hill briefing later this fall.

"An increase in federal energy R&D spending by a full factor of 5 to 10, or from $3 billion to $15-to-$30 billion would act as an economic and employment stimulus package, and is a small investment in our future that contrasts dramatically with the hundreds of billions we are spending fighting wars over oil or addressing the early effects of global warming," Kammen concluded.

"This study makes it clear that our nation isn't doing enough to develop clean and secure sources of energy," said Congressman Jay Inslee, a member of the House Resources Committee. "In order to spur innovation, we need to focus investment priorities - like we did in the 1960s to become the world leader in manned space exploration."

The downward spiral in energy research and development expenditures is already having an impact on the nation's innovation and perhaps is sabotaging our energy future.

"Arguably most troubling, the lack of vision on energy is damaging the business environment for existing and start-up energy companies," Kammen and Nemet wrote.

Kammen and Nemet show a correlation between declining energy research and development funding and fewer energy patents filed, arguing that successful patents are a good indication of the state of innovation in the United States. Citations of federal energy patents also are declining, indicating a lack of development of government-sponsored inventions as innovation in private energy companies declines.

"In the private sector, U.S. energy companies could increase their R&D spending by a factor of 10 and would still be below the average R&D intensity of U.S. industry. Past experience indicates that this investment would be repaid several times over in technological innovations, business opportunities and job growth," they wrote.

Research and development in the pharmaceutical industry, for example, is over 10 times that in the energy industry, the authors noted.

Using emissions scenarios from the Intergovernmental Panel on Climate Change, Kammen and Nemet estimate that energy research and development spending of $15 to $30 billion would be sufficient to stabilize carbon dioxide levels at twice the levels of pre-industrial times.

Kammen and Nemet argue that a five- to ten-fold increase in federal investment in energy research and development is feasible based on a comparison with previous government research programs, such as the Manhattan Project, the Apollo Program and today's War on Terror. They recommend that such funding be spread throughout the federal budget, across government agencies, with the new funding made available for a range of programs prioritized by their impact on national energy security, job creation, and environmental protection.

"The nation's ability to respond to the challenge of climate change and to the economic consequences of disruptions in energy supply has been significantly weakened by the lack of attention to long-term energy planning," they wrote. "The current energy bill is a collection of subsidies without any such vision."

Kammen and Nemet's report updates a study that appeared in the July 30, 1999, issue of Science, in which Kammen and coauthor Robert M. Margolis, who is now at the National Renewable Energy Laboratory, showed a 39 percent drop over the previous 20 years in worldwide energy research and development spending. They called for increased investment in research and development - in particular, a focus on small-scale technologies that would benefit the Third World.

The new study focuses on the United State's "incredible shrinking energy R&D budget," concluding that "R&D investment is an essential component of a broad innovation-based energy strategy that includes transforming markets and reducing barriers to the commercialization and diffusion of nascent low-carbon energy technologies. The economic benefit of such a bold move would repay the country in job creation and global economic leadership, building a vibrant, environmentally sustainable engine of new economic growth."
In addition to co-directing the Berkeley Institute of the Environment (, Kammen is the founding director of the UC Berkeley-based Renewable and Appropriate Energy Laboratory (, where copies of this paper and the laboratory's other publications are available for download. Kammen is the Class of 1935 Distinguished Chair in Energy and a professor in the Energy and Resources Group and in the Goldman School of Public Policy.

University of California - Berkeley

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