Challenges and Opportunities for a Clean Technology Revolution: A Venture Capital Perspective

Abstract: The United States, typically the birthplace for innovations and industries, finds itself in a precarious position: either our government can work towards developing clear policies to foster a homegrown clean energy industry, or our nation will risk becoming a permanent consumer of renewable energy products manufactured overseas. This paper provides insight on the prevailing uncertainty investors and companies currently encounter in the alternative energy policy landscape in America. Venture capital firms, ranging from multi-industry to energy-focused investors, are investing in high risk, early stage, and potentially disruptive clean energy technologies. However, if our government wants these firms portfolio companies to expand operations on American soil, both financial and political roadblocks need to be cleared. In todays globalized markets, foreign governments are providing enormous incentives for clean energy companies originally incorporated in the United States to outsource their commercialization. Though individual states have introduced renewable energy incentives and environmental legislation, such as Californias Solar Initiative (CSI) and Global Warming Solutions Act (Assembly Bill 32), venture capitalists concur that there needs to be a stronger consensus at the federal level. If America desires to become a manufacturing hub for clean energy products, this report details that the federal government needs to 1) enact clearer environmental policy and 2) bridge the financial valleys of death that nascent clean energy companies experience on their road to market. In conclusion, this paper elucidates our nations targets in order to remain relevant in the global clean energy conversation going forward.

Author: Varun Mehra Undergraduate Research Scholars Program Aleph Undergraduate Research Journal University of California, Los Angeles Faculty Advisor: Professor Matthew Kahn Department of Economics Department of Public Policy Institute of the Environment & Sustainability

Revised: June 2011 Introduction Climate change and global warming has put markets, governments, and society in a unique yet pressing situation; standing idly by as carbon emissions and pollution externalities exacerbate current climate conditions is not a viable solution to economic prosperity. However, there does not need to be a negative correlation between environmental degradation and GDP growth. In order to meet the needs of rising populations, markets must rethink their energy dependence and move towards achieving low-carbon growth. If one looks at the major source of energy in todays world, it took an enormous amount of time, policy implementation, and infrastructure development for coal and oil to receive significant slices of Americas energy pie. In America, coal emerged as a potential energy source in 1850 yet coal did not reach peak production until 1910; similarly, oil was first struck in 1859 but oil did not reach its full-scale capacity until the 1960s.1 What now needs to happen is a rapid deployment of a clean energy economy that can stimulate jobs, investment, and technological innovation. To give an example, increased prices caused by the 1973 Organization of Petroleum Exporting Countries oil embargo forced firms and institutions to make forward-thinking economic decisions and increase research and development. In todays world, an increase in fossil fuel energy prices would allow further research activity and investment in the alternative option: clean energy technologies. Any one of the options a carbon tax, cap and trade, or feedin tariffs for renewable energies would directly alter economic and business behavior towards cleaner forms of energy. Price signals have the power to move markets, develop industries, and allow investors to allocate capital in an efficient manner. Americas clean tech economy from innovation to investment would move with a stronger sense of urgency if policies did a better job reflecting pollution externalities within markets. There is no doubt that America faces stiff competition in the emerging global clean energy economy. Americas wavering policy commitment and neglect of clean energy research

3 in our universities and institutions have admittedly set us back. It is important to remind ourselves that other countries, specifically emerging economies like China, are out-investing and out-deploying the United States in the realm of numerous clean technologies like solar, wind, and electric vehicles. The window for decisive action to be taken is closing if the United States wishes to be relevant in the global clean energy conversation. This paper will analyze venture capitalists decision-making processes in clean technology investments as a vehicle to explore necessary benchmarks California and the country needs to reach in order to have a robust and globally competitive clean technology economy. Venture capitalists are uniquely situated on the front lines of budding industries, and their investment prowess guides the directions industries will take. Unlike any other financial mechanism, venture capitalists are able to observe market barriers to entry, innovative technological solutions, and global investment trends in developing industries over time. By complementing anecdotal evidence from venture capitalists with relevant statistics and historical trends, we will be able to paint an accurate picture on where America stands in the clean energy race: though America may be leading in technological innovation, the reality is that we are currently losing in manufacturing, deployment, and overall global market share. In addition analyzing induced technological innovations in the past and the current state of investment from a number of different angles will lead to recommendations for the future of our state and countrys clean tech economy.

Historical Parallels: Induced Innovation Effects The rate and overall size of the future clean tech economy in America is at a crossroads: we can either adopt a crawling or sprinting pace, and this rate of movement will determine our long-term prospects within the clean technology economy. In order to gain a firmer understanding of the policy decisions were considering today, its helpful to comprehend similar situations that have occurred in the past that spurred economic growth. In analyzing the effect the 1973 oil embargo had on our economy amongst other examples, we can extrapolate relevant tenants to shaping policy in todays world.

4 When the Organization of Petroleum Exporting Countries (OPEC) enacted its oil embargo in 1973, prices for oil spiked dramatically. However, the embargo did have beneficial consequences on our energy consumption and innovation. The induced innovation theory essentially states that increase in prices generate invention opportunities to economize costlier resources. By studying patent data as a framework to measure invention activity before and after the embargo, one can dissect the effect energy prices had on the induced development of energy efficient and alternative energy technologies. Through a series of metrics and by monitoring patent activity in a variety of technological industries, the results show that coal liquefaction and gasification, solar, fuel cells, and more all saw an increase in patents after 1973, and that energy prices had a positive impact on new innovations (see Appendix 1). 2 Thus, the rise in energy prices did have a causal effect on the development of energy technologies that were less dependent or entirely independent of oil as an input. The embargo shows that energy price signals in the past have had profound movements on innovation activity, and incorporating polluting externalities within energy costs would have a similar beneficial effect for clean energy technologies in todays world. The second set of historical parallels is the effect government research programs have had on the birth of explosive industries. Government research has the ability to tackle and finance technological roadblocks in a way nearly impossible for private industry to undertake. Furthermore, government should take advantage of its ability to guide markets, promote investment, and stimulate innovative activity. Take the aviation industry as a brief example: the first successful airborne flights took place by the Wright Brothers on American soil in 1903, but our government ranked 14th in aviation industry investment by 1913. This startling news prompted the creation of the National Advisory Committee for Aeronautics in 1915 to coordinate research and development in flight. This committee helped spur Lockheed Martin aircraft to reach a new maximum speed as well as develop the first passenger aircraft, the DC-3, which gave rise to todays airline industry.3 Historically speaking, another fundamental government program has been the Defense Advanced Research Projects Agency (DARPA). A subset of military research, DARPAs goal is

5 to make transformational technological discoveries, and many world-changing innovations have come through this agency: GPS systems, stealth technology, gallium arsenide as a semiconductor material, and more.4 One of the most groundbreaking projects through DARPA was the birth of the internet. The concept originated when the military desired computers to share information across the globe during the Cold War era in the 1950s. By 1962, federal government was investing in computing more than the rest of the world combined. Thanks to these efforts, we saw the first version of the Internet in 1969 on American soil.5 The takeaway point is that having a similar DARPA-like institution for the realm of federally funded energy research can provide system-wide change in energy usage. In both financially and intellectually capital-intensive industries like renewable energy, the optimal level of government intervention needs to be relatively high. It is up to the federal government to jumpstart innovation and early-stage investment in order for new energy technologies to see the light of day. Institutionalizing these research grants through a government organization, similar to how the National Institutes of Health or the National Science Foundation operate, would provide for a competitive landscape for American firms, laboratories, and universities to contend for. The government cannot overlook the need to fund the research of truly innovative energy technologies not only for the sake of national energy security or climate change, but to also encourage the development a homegrown clean energy economy for the future.

Relating Innovation to Market Size Since all industries share common characteristics, both of the examples in this section have important aspects that can be relevant to clean energy. What we can generally extrapolate from the following two examples is that progressive policy measures, profit incentives and increased competition can help create a large future market here in the United States. The overall clean energy market is potentially worth 2.2 trillion dollar worldwide market between now and 2020 and can generate as many as 20.4 million jobs worldwide by 2030.6 Using these two industry parallels as a backdrop, we can begin to formulate how the United States can acquire a considerable share of these numbers.

6 In such an interdisciplinary field such as renewable energy, pioneering government policies are only one piece to the puzzle; another unique angle worth studying is how innovation itself can similarly affect market sizes. In the first example, a unique analysis of the pharmaceutical industry found economically significant and relatively robust effects of potential market size on innovation activities; federal drug policies gave pharmaceutical manufacturers a glimpse into the future and served as a profit incentive. 7 In the second example, its shown that higher levels of imports from low-cost regions forced firms in Europe to reassess their product strategies and allocate more capital and labor towards R&D. Together, the pharmaceutical industries growth and European countries technological advancement over recent decades can be attributable to both policy and globalization-induced endogenous technological change; both instances are ideal case studies for todays policymakers to grasp when looking at the clean technology industry. There are many valid points seen in the pharmaceutical industries growth that can be understood within our industries of interest. Interestingly enough, if we exploit a potentially exogenous source of variation on market size, theres a way to link innovation rates to current and future market size in the pharmaceutical industry. This can be accomplished by investigating the effect incoming drug entries into markets had on market size. Specifically, some estimates showed that a 1% increase in the size of a potential market for a particular drug category resulted in a 6% responsive increase in total amount of new pharmaceutical drugs entering the US market. Granted, the response may have partially been due to entries of generic drugs that are bioequivalent to an existing drug no longer under patent protection, i.e. copycats. Regardless, non-generic drugs saw a 4% increase with a 1% increase in potential market size. These would be drugs with new molecular entities, and shows the importance future market size had on genuine pharmaceutical innovation. 8 Government policies were the main underlying drivers behind these outcomes. For example, the Orphan Drug Act of 1983 pushed for drugs for orphans with rare medical conditions that resulted in a decline in mortality; this was the effect of the variety of policy incentives within the act to develop new drugs for these diseases. Additionally, the 1991 Center

7 for Disease Control policy for hepatitis B vaccines for infants, the 1993 Medicare decision to bear the costs of influenza vaccine, and the 1986 introduction of funds to protect vaccine manufacturers against product liability lawsuits for a handful of other vaccines were other policy provisions that changed profitability opportunities. 9 All of these policy changes were associated with an increase in clinical trials to develop new vaccines a metric to put a figure on innovation rates. These results are fascinating, as there is quantifiable evidence on government policies effects on research and development of new drugs; this is a significant finding not just for the pharmaceutical industry but also for markets in general. The second example is to see the positive effects of global competition by estimating the economic impact imports from low-wage countries have on high-wage countries. Looking at the effects Chinese import competition has had over the period of 1996-2007 on European countries, the results actually yield two effects: an increase in R&D, patenting activity within firms, and a reallocation of labor between firms towards more technologically advanced firms. The lowwage import competition materialized in a 15% upgrading in European technology between 2000-2007. Consider Chinas import effects chronologically: China only accounted for 1% of the United States and European Unions imports in the 1980s, and that number was only at 2% by 1991; however, by 2007, Chinas share of imports rose to about 11%.10 There is an underlying survival of the fittest argument here, i.e. that only firms with advanced and capital intensive technologies will be able to withstand these imported obstacles. Essentially, Chinese import competition lowers employment and survival probabilities in lowtech firms; those firms that faced higher levels of Chinese import competition ended up filing more patents and spent more on R&D. To be specific, its estimated that an increase in 10 percentage points of Chinese imports is related to a 3.2% increase in patenting and a 12% increase in R&D in the twelve countries evaluated. 11 The overall point is that China is actually an important factor for technological advancement, and can have a transitive positive effect on economic growth in developed countries such as the United States. We have now understood a variety of historical parallels, ranging from government research initiatives to market size and innovation rates, which we can extrapolate to the clean

8 energy industry. Progressive institutions, universities, energy technology companies, and investors would similarly react the way pharmaceutical-related research centers and companies did to the news of an augmented future domestic market. Furthermore, global competition in clean energy can and will require energy companies to respond with additional iterations of their technologies. Now that we have compiled a wide-ranging set of historical parallels, we will soon understand where we can apply these lessons in the clean technology economy.

Trends in Clean Technology & Venture Capital Venture capital can be described as arguably the most significant early stage investors in the development timeline of a company; venture capital firms aggregate and pool together funds to invest in high-risk, high (potential) reward start-up companies (see Appendix 3). There are a handful of reasons why this paper chooses to analyze venture capital investment processes. Firstly, venture capital has the greatest ability to absorb technology risk versus other financing models. As a result, venture capitalists are on the front lines observing the true happenings of the clean energy technologies, from Series A financing to initial public offerings. Another reason is that venture capitalism is perhaps the most efficient driver of job creation. Its estimated that 2,700 direct jobs are created for every 100 million dollars in venture capital investment ($37,000 per job). When you compare that figure to the American Recovery and Reinvestment Act stimulus spending, its estimated that it took $235,000 for each job to be created, which is around six times more expensive than venture capital.12 Despite venture capitals effectiveness, the 2008 financial crisis negative effects did not spare private investment in the nascent renewable energy economies worldwide. To be clear, the term clean technologies encompass energy technologies that do not have an adverse affect on our climate and harness our planets renewable energies (i.e. geothermal, solar, wind, biofuels, etc.). Zeroing in on clean technology venture capital, there

9 was a 55% decrease in capital invested at the end of the third quarter of 2010 to 575.6 million dollars, when compared to a year before.13 Furthermore, venture capitalists had to carry investments for longer periods of time and divert more capital to existing investments. California is unique in its ability to quickly adapt to changing technological conditions of our time, and Silicon Valleys willingness to finance these efforts is distinctive. Silicon Valley has always been a region that takes the first step and accurately anticipates future technological change. From semiconductors to software to social media, the valley has been the catalytic source for nascent industries to grow and mature. In recent years, the rise of innovative renewable energy companies is becoming a valuable asset in Silicon Valleys diverse technology portfolio. Overall, California has consistently been in the lead for clean technology venture capital and has attracted considerably more than any other state in every quarter since 2006. One can credit Californias progressive and guinea pig-esque Global Warming Solutions Act (Assembly Bill 32) that was signed into law in 2006. However, California took a major hit in sheer venture capital investment dollars, with a 71% decline to $295 million when compared to a year ago; Massachusetts came in second place and saw a surprising 65% increase in clean technology venture capital invested versus the year before.14 The venture capital infrastructure in Silicon Valley allows investors to adapt to varying technology cycles and anticipate technological evolutions. Conversations with leading Silicon Valley investors provides for a clearer understanding of how and why investment theses developed within the realm of clean technology. Recent investment within clean technology, especially within Silicon Valley, has accelerated for a variety of reasons. Long-run technology cycles wax and wane over time; in regards to energy sources, the next set of innovations were going to come in an area where there had been a historic lack of investment in early technologies. Years ago, the outdated yet prevailing perception of energy was that it was matured and very well understood.15 While venture capitalists identified renewable energy as an industry that had been underinvested, they also keenly noted that its an industry where parallel areas of innovation can be applied (Fezzani 2011). One parent industry worth examining is biotechnology; the

10 methodology and techniques being used to sequence DNA and produce biomedical innovations could be used and applied to energy. As the biofuels industry gained momentum, technologies were adapted to sequence and synthesize molecules to produce gasoline distillate or chemical. 16 Another parent industry venture capitalists point to is semiconductor materials. There was a natural evolution from the semiconductors technologies to a lot of the green energy technologies, such as solar and energy efficient lighting (Harrus 2011). Historically, venture capitalist investments involved microchips and a variety of consumer electronics companies. For example, if you take those technologies and apply them to thin-film solar panels, you end up creating something thats destructive to the solar industry.17 Both biotechnology and semiconductor industries are examples of industrial segways that allowed renewable energy technologies to take root. Moreover, an additional reason for the growth of investment in clean energy industries is the parallel growth in energy demand. Overall, the energy industry has enormous markets that dwarf industries such as information technology. Mass urbanization leads to rise in energy use and demand; the challenge is now how to decouple economic growth from energy usage growth (Nazre 2011). 18 The growth potential of an energy company due to forecasts of leaps in demand is a major factor in investments in todays landscape.19 As a result, progressive investors are turning to sensible renewable energy technologies as areas with exponential growth that has potential to keep pace with demand and wean our addiction away from polluting fossil fuels. In addition, another common trend on why venture capitalists are choosing to invest in clean technology companies now is the timing of commercializing the innovation due to market forces. For example, though solar cells were invented in the 1950s, technology advances for scalability, cost reduction, and complementary legislation were not available until recent decades. When Sunpower and First Solar went public in 2005 and 2006, two of todays largest solar companies, they had around 30 megawatts and 70 megawatts of capacity, respectively. Now, each company has multi-gigawatt capacity, and the generally accepted requirement for solar has risen to more than 150 megawatts of capacity to consider filing for an initial public offering.20

11 Despite clean energys social, health, and environmental benefits, it is important to note that venture capital investors are very bottom-line oriented. Though clean technology installations do have net positive effects on carbon dioxide abatement, venture capitalists usually do not base investment decisions on moral or ethical criterion. Venture capitalists are looking for opportunities for returns on investment over 5 to 10 years and then hand over the reigns to major bank to bring the company to a successful initial public offering. Generally speaking, time to liquidity in reality is closer to 10 years in venture capital, and prospective companies are looking to have eventual market capitalization of a billion dollars or more. Its also important to note that return profiles do need to be roughly the same across industries for venture capitalists. Another tenant of venture capitalists investment theses is the differentiation aspect needed in start-up companies. For many VC firms to consider pulling the trigger, the value proposition of the products a company wants to bring to market needs to have roughly more than a 25% advantage in some sense: increased productivity/efficiency, lower costs, time savings, energy usage, etc. (Green 2011). These investments are also supposed to be risky; looking at a graphical representation in Appendix 3, venture capitals role in the food chain is to de-risk technologies on their journey from laboratory to market.21 Thus, the business model of these companies needs to be game changing and impacting while creating barriers to entry. Having technological barriers-to-entry also minimizes the potential for competitors. Nancy Pfund from DBL Investors elaborated on her firms early investment in Tesla Motors as an example. In the case of Tesla, the firm was betting on electric vehicles; similar to other clean technologies, electric vehicles have very high initial capital costs as well as infrastructure roadblocks. However, electric vehicles are predicted to be a high growth area, and the model that Tesla was bringing to the table was a no-sacrifice no-compromise model. The notion that could drive an attractive sports car to be green was an attractive attribute for Teslas early stage investment. Tesla has the potential to mainstream expensive electric sports cars, while using that revenue to help build R&D and develop cheaper cars going forward.22 In summary, understanding the different variables that go into venture capital investors equation is crucial, as venture capital is a strong indicator of the overall clean tech economys trajectory.

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Policy Requisites at the State and Federal Levels After California enacted more stringent energy efficiency standards in the 1970s, the state moved off the national trend path of electricity demand by reducing per capita requirements to 40% below the national average. Energy policies are extremely important, as they provide secure backdrops for existence of markets and buttress fledgling renewable energy industries. Energy policies can also generate multiplier effects that lead to growth in other industries. Interestingly enough, there has been a spillover effect of the monetary savings from these energy efficiency measures. California households have had the luxury of redirecting their discretionary income away from their energy bills and towards other goods and services. Its estimated that households have saved $56 billion from 1972-2006, and households additional expenditures have created around 1.5 million full-time equivalent jobs. Though these numbers may not entirely be caused by Californias energy efficient standards, the statistics do underline that CARBs unique policies resulted in an indirect stimulus package for economic growth and employment for the state. 23 In todays world, Californias landmark Global Warming Solutions Act (AB32) has made California a hub for clean technology development complementing other state-enacted energy measures. Similarly, we can aim to quantify the overall economic effects of reaching all of the greenhouse gas reduction targets within AB32; if that turns out to be the case, then Californias gross state product could potentially increase by $76 billion. Household incomes could also increase by up to $48 billion that could indirectly create as many as 403,000 energy or climaterelated jobs.24 Californias AB32 legislation has a number of different contributing components. If we attribute percentage weights to what effect measures within AB32 would add to overall carbon dioxide emission reductions, the largest contributors, the low carbon fuel standard and the renewable standard for electricity (33% from renewables by 2020), would contribute 9.20% and 7.7% respectively. Note that additional policy measures outside of AB32 also have significant contributions to Californias carbon dioxide reductions: the Pavley tailpipe emissions standards

13 add 15.90%, energy efficiency measures add 8.8%, and the renewable portfolio standard (20% from renewables by 2020) tacks on 4.5%, making the aforementioned economic multiplier predictions a lower bound for Californias future economy.25 Though California is progressive in its legislation, what effect does policy have on venture capital investment decision-making in non-emitting technologies? California has taken the lead in policy commitments towards greenhouse gas abatement and clean technology incentives. However, the recurring answer from leading venture capitalists is that investment decisions in companies that require a new piece of legislation or regulatory policy for potential markets are companies not on the radar. Venture capitalists simply cannot invest in business models that heavily rely on regulatory processes as legislative battles are marathons, [and] you do not build a five to eight year plan dependent on legislation (Prabhakar 2011).26 For example, venture capitalists seemingly find it difficult to invest in carbon credit companies, as the longterm growth of the companies is so heavily dependent on short-term policy cycles. The variability of energy policy needs have long-term stability for long-term investments to be made with confidence.27 Nonetheless, venture capitalists are looking for disruptive technologies that can get to a competitive cost point, regardless of government subsidies. But in such capitalintensive industries such as many renewable energy technologies, investors have realized that some sort of push is needed in the form of mandates, subsidies, or government partnerships with energy companies. Policies can undoubtedly be a wind in firms sails but only if the direction of the wind is known. A supportive macroeconomic policy can serve as an accelerator to early clean energy companies growth rate.28 Venture capitalists point to the recent California Solar Initiative, a clear statewide incentive program with step-down subsidies and predetermined allocations of funds over time, as an example of well-crafted policy. However, when it came to the WaxmanMarkey federal climate bill this past year, some believed that it was actually quite hard to navigate. At the end of the day, policies need to do more good than harm; though WaxmanMarkey had the right intentions, some venture capitalists agree that it was not as well crafted as it needed to be to unleash private investment and new technology deployment.29 Properly

14 developed policies can be transitional mechanisms to help get technologies to markets in a timelier manner and can give investors comforting legislative backdrops; however, venture capitalists certainly reiterate that policy cannot be a basis. From a macroeconomic perspective, venture capitalists overwhelmingly agree that legislation like AB32 is absolutely essential to maintain Californias entrepreneurship, innovation, and clean economy future. The controversial Proposition 23, which couldve suspended AB32 until unemployment dropped below 5.5% for a full year, was fortunately defeated in November 2010. If Proposition 23 had passed, it would have sent out a very negative signal to investors. Inconsistencies, such as the suspension of AB32, are undoubtedly the worst types of policies. Nevertheless, its generally agreed that AB32 is not sufficient and clear-cut federal policy is considered necessary to complement what California has in place.

Globalization of the Industry The founding of any start-up, company, or industry must all start with an innovative idea; after all, markets exist to provide solutions. America has built a society that is the most conducive to innovation, and that remains relatively true within the clean technology space. The venture capitalists interviewed for this paper are noticing that real energy breakthroughs are not coming out of the Chinas and Indias of the world. America has an extensive network of institutions and universities that promote values like innovation and entrepreneurship, allowing us to originate the majority of todays clean technology inventions.30 But after numerous conversations with venture capitalists, the good news seems to stop there. Historically speaking, globalization has swept away American manufacturing in many industries, including textiles, consumer electronics, retail, and even automobile assembly. There seems to be two overarching reasons for Western companies to move offices and production to the developing world: ability to produce at a lower cost point and proximity to growing demand from modernizing populations. Multi-national corporations have and will continue to outsource their production facilities and jobs to countries with lower costs while also producing closer to

15 markets. We will see that clean technology manufacturing in the United States is no exception to experiencing this phenomenon. Globalization of clean technology production and worldwide market share is not playing in Americas favor and is seemingly happening at a much faster rate than preceding industries witnessed. Countries like China have the ability to offer low-cost manufacturing as well as plenty of other government subsidies and incentives that the United States cannot even dream about. The simple truth as many venture capitalists observe is that over the past few years, the United States has become a nation of innovation while the commercialization has been exported. Venture capitalists have daily evidence that once innovation and headquarters are set up in Silicon Valley for example, scale-up manufacturing move across the Pacific Ocean (Prabhakar 2011). 31 So why are clean tech companies, incorporated and invented in laboratories on American soil, following the path textiles, automobiles, and other industries have taken at a faster rate? The common answer from venture capitalists is that it starts with the top-down approach respective governments take. One reason is that no one knows what the rules are in America; in China, the opposite is true. China has laid down annual mandates and goals for clean energy targets in a very clear way, and provinces compete amongst each other to attract projects as well as jobs. Things in the United States progress too slowly in regards to climate legislation or energy deployment, so from a business point of view, you cannot wait otherwise you will file bankruptcy!32 In addition, the adoption and implementation rates are much higher in China compared to America for renewable energies as significant sources of energy. If you look at the financial timeline of a company (see Appendix 3), the early stage financing like venture capital gets energy products to a stage when it can be mass-produced and deployed. According to many venture capitalists, the real issue is the deployment of these new energy products.33 Worldwide deployment (asset finance) of renewable energy products totaled $101 billion in 2009, but the main driver of this was China (see Appendix 4).34 Chinas population and cities are urbanizing quickly, and they have the fortunate opportunity to incorporate energy efficient and renewable

16 energy technologies within their infrastructure from the onset. On the other hand, the United States is a mature nation, which makes infusing new technologies within outdated infrastructure much more difficult. Regardless, the establishment of new energy technologies as a viable source of energy is where the United States is lacking, and private capital will not be unleashed to actually install these new energy technologies unless the federal government gets policy right. In order to classify winners and losers, you also have to distinguish the source of invention and the sink of deployment. A prime anecdote to illustrate this pattern can be seen in the case of Alain Harrus from one of Crosslink Capitals portfolio companies: Twin Creeks Technologies. Twin Creeks originally set up headquarters in San Jose, and located a 100-megawatt solar panel manufacturing facility in Senatobia, Mississippi in May 2010. When it came time for further scale-up for the company, Twin Creeks Technologies turned to Malaysia, as the Malaysian government gave an offer Twin Creeks could not resist.35 In December 2010, the executive decision was made for Twin Creeks second 100-megawatt facility which would provide at least 1,000 local jobs to be located in Malaysia. Not surprisingly, Malaysias government has a clearly articulated solar strategy: solar has been targeted within Malaysias Economic Transformation Program as a major source of growth and Malaysia aspires to be the third largest producer of solar cells in the world.36 This type of commitment is what investors such as Mr. Harrus need to make confident investment decisions. And if this is the type of the commitment the United States will not provide, the flow will continue to be from west to east. There are many contributing reasons why domestic investment and job opportunities are lost to more aggressive international players. As the aforementioned example showed, the main attractiveness is available capital, simply put. Venture capitalists note that sovereign funds from governments are impacting decision-making processes. On one hand, Western countries are running deficits and have limited capital restraints; on the other hand, Asian governments are pouring in expansion capital within proven renewable energy companies. As venture capitalists point out, the amount of no-cost capital the Chinese have to spend is overwhelming. The Chinese are ready and waiting to immediately scale-up clean energy technologies on their dime.

17 With this upper hand, these governments are able to approach clean energy start-ups and offering irresistible opportunities for growing their business overseas. Venture capitalists also point to the bureaucratic red tape and elongated timeframe companies are forced to work with in the United States as another reason for this loss.37 The success of American government programs has had in the past to catalyze private sectors to develop industries is flatly not working the way it should for clean energy technologies. As a result, the speed of execution for clean energy deployment is roughly 5 to 10 times faster across the world.38 It is because of this broad trend of outsourcing that the United States is disappointingly not as competitive as we can be. To paint a clearer picture, we can take a closer look at the history of the solar industry. Less than a decade ago, China was not a household term for the solar industry. Today, siliconbased photovoltaic solar manufacturing is completely dominated by China. Venture capitalists are keen to notice that China has been exceptional at taking ideas, scaling them at an unconventionally fast pace, and then dominating the industry for the long-term.39 The fascinating part is that the origins of most of these clean technology innovations were not taking place in China. To take this a step further, venture capitalists are surprised at the number of companies that do not get started because of Chinas overall effects in these industries. Venture capital investors end up passing on many companies because the conclusion is that once Chinas low-cost structure and energy subsidies take over, the Chinese will eat their lunch (Tong 2011)! 40 If the United States continues to systematically neglect the attention budding clean technology industries require, someone else will end up eating our breakfast and dinner as well.

International Competition The fact of the matter is that in the realm of clean technology in todays world, other governments are simply taking more convincing stances to generate domestic clean energy economies. A successful example that the United States can learn from is in the case of

18 Germanys swift deployment of renewable energy technologies over the past few decades. Europe has decided to directly stimulate technologies by guaranteeing to make up differences between solar cost points versus energy prices from fossil fuels. Theres no doubt that Germany had to work through a battle of institutions to push through legislation. However, the government achieved key legislative victories the Feed-In Law of 1990 and the Renewable Energy Sources Act of 2000 that allowed a rapid expansion of the clean energy market. The Feed-In Law of 1990 was a sign of a breach into an old structure and allowed firms to enter a buoyant industry.41 In a country with relatively low amount of solar irradiation, there had to be ubiquitous desire from various actors in the political landscape at the time for a robust a solar industry (Aslin 2011).42 The German Parliament continually pushed support for policies in favor of renewable energy in the face of severe opposition from nuclear and coal interests an eerily similar and all-too familiar storyline. One can split hairs between the paths Europe and the United States have taken in renewable energy policy incentives; on one hand, direct subsidies for the German solar industry has had significant growth, while the United States indirect credit-based subsidies have stagnated growth potential. The United States took a contrary approach, and moved towards a tax-based credit system for multiple renewable energy technologies. The main flaw with this process is that you need to have taxable profits to benefit from the credit system. With the recent recession, profits dipped, thus there were less taxable profits available. As a result, renewables rates of growth slowed, as they did not raise the share of capital required to utilize these tax credits. 43 If the United States desires to become a significant global player, similar breakthroughs for stronger policies against the gripping control of coal and oil lobbies has proven to be a great place to start. International players are again taking more aggressive steps to make clean energy investment and commitment a priority. In Ernst & Youngs Renewable Energy Country Attractiveness Index, its apparent why China earned the top ranking and jumped ahead the United States in 2010 for the first time. A part of the explanation on why other countries are leaving the United States in the dust is due to the vibes of uncertainty that Congress continues to

19 let reverberate for a prospective federal climate bill. The report also cites the expiration of the Treasurys grant program after 2010, providing a dearth of investment mechanisms in the United States clean energy market. Contrarily, China has set clear clean energy installment provisions that are conducive to investment: 300 gigawatts of hydropower, 100 gigawatts of wind, and 20 gigawatts of solar installed by 2020.44 If we take a look at government spending, an average Department of Energys budget is 25 billion dollars, of which only 3 billion dollars is allocated towards clean energy. However, this is merely 4% and 17% of how much China and South Korea respectively spend annually on clean technology government investment. Looking at clean energy investment relative to countries GDP, the United States ranks 7th despite being the largest economy in the world (see Appendix 5). This past July, China announced a pledge to invest 738 billion dollars over the next decade in clean energy research, infrastructure, technological development, and grid deployment.45 Chinas unwavering commitment shows how relentless and intent the government is on aspiring to dominate the clean energy economy going forward. Overall investment in clean energy in 2009 stood at 162 billion dollars, a decline from 173 billion in 2008. A portion of this was due to the recessions impact on North America and European markets which led to the lack of capital availability. Most importantly, the glaring trend in recent years is the shift of focus and balance towards Asia: out of the 119 billion that was invested by private financial sector in clean energy companies or renewable energy projects, 40.8 billion took place in Asia and Oceania and exceeded investment amount in the Americas for the first time (see Appendix 6). 46 Over the years, another consequence of this lackluster commitment in the United States has resulted in a startling 6.4 billion clean energy trade deficit.47 If America continues to choose the path of divergence with the rest of the worlds course, well be left behind.

Conclusions & Recommendations

20 The overall goal of this paper was to give a qualitative analysis of the status quo and future prospects of Americas domestic clean energy economy. To summarize, taking a snapshot of past parallels, such as the effects of energy prices after the oil embargo in 1973 and DARPAs transformational inventions, are important to give historical context to the issues we face today. This paper also answered a variety of questions of the variables in decision-making processes for clean technology investments. Utilizing interviews with leading venture capitalists provided valuable insight on how far weve come and, more importantly, how far we need to go. The mixture of anecdotal examples and political targets from these plugged-in investors shed light on the reality of Americas dwindling share in the global renewable energy market and the necessary goals America needs to aspire for. Having this synthesis of background research and front-line evidence from venture capitalists has shown that in order to be taken seriously, our state and our country need to realize our disadvantages and respond by a) maintaining our edge in high-level innovation through increasing government and private research, b) developing advanced policies to foster a thriving domestic clean energy manufacturing economy, and c) committing to install renewable energy technologies to make it a relevant source of our nations derived energy. These changes need to happen sooner rather than later for America to receive the direct and indirect benefits of a thriving national clean energy economy. Though the lack of consistent policy consensus at the federal level has dragged on, there still is a window of opportunity for America to assert its rightful position as a global clean energy leader. Generally speaking, venture capitalists incorporate how international firms and governments act in regards to clean energy commitment within their investment strategies. But when the playing field is not level, things get a lot harder; Asian countries are taking Western technologies, leveraging their governments ability to finance investments, applying multiple innovative iterations on the product, and bringing them to market much more quickly. Despite this disadvantage, it is not in Americas nature to roll over and play dead. What America needs is a set of policy requisites and benchmarks for the country to develop a competitive advantage.

21 The first recommendation venture capitalists have is to remain competitive in innovation and play to our strengths. What California and Silicon Valley does so well is to take a technology or idea, apply expertise, leverage financing options, and come out with a product thats faster, better, and/or cheaper than it was before. And just as China can replicate our technologies, we must be ready for a response. Consumers around the globe not classify cheaper Chinese products as substitutes for higher quality American products. The positive aspect of globalization is that it welcomes competition. 48 The iterative nature of innovation, especially when it comes to maturing new energy technologies, is something American companies, investors, and policymakers need to anticipate. Just as we saw European countries encounters with low-income countries like China, American clean energy companies better be ready with second, third and fourth acts of technologies to remain cutting-edge. Solaria, a company that takes solar panels and put glass over them making them 2x-3x more efficient, are the types of answers that will can make overseas products merely inputs in companies supply chains.49 America needs to take pride in its long history supporting innovation at all levels. Not every technology will pan out, but the probability of failure has never and should never hold our innovation power back. Another recommendation generally received is the need for the federal government to provide ample financing mechanisms to deal with the various valleys of death. Venture capitalists job is to de-risk technologies on their way to market, but there are some technologies that the private sector frankly does not have the ability to finance. There are the various valleys of death that prevent young companies move along their path of development (see Appendix 3). The first valley of death is the lack of traditional venture capital; this funding is needed but not available for researchers to develop their innovations. The second valley of death is when it comes time for a company to reach efficient scale. Within this valley, you see companies lost on their way from lab bench to pilot scale and then to commercial manufacturing scale. Having additional government programs to financially link the innovationmanufacturing-deployment chain will ensure Americas global leadership. 50

22 The American Recovery and Reinvestment Act helped address some of these issues. The Department of Energy was allocated $36.7 billion dollars, which was a 5x increase of the conventional base budget. In addition to stimulating technological development, the secondary goal of this money was to draw private capital off the sidelines. Every project the government invests in requires complementary private capital; as a consequence, the Department of Energys $36.7 billion in ARRA spending drove more than $100 billion total in clean energy projects. More efforts like this are critical, as they instill confidence in investors and lay foundations for successful future initial public offerings. 51 In order to escape from these detrimental valleys of death, the government should not waver on using taxpayer dollars or divert subsidies for polluting energy sources. Using public money to ensure the longevity of these transformational technologies will reduce negative climate and environmental externalities, eventually lower costs for cleaner forms of energy, and ensure employment and additional investment within our borders. When it comes to politics, the unfortunate prospect is that federal climate legislation or the likelihood of a carbon tax or cap-and-trade has been put on the backburner, especially after the recent failure of the Waxman-Markey Bill. The price and policy signals seen after the oil embargo of 1973 is something we unfortunately cannot wait around for in todays policy landscape. Trying to compete with oil and coal lobbyists that garner enormous subsidies is something that will take a long time, time that we realistically do not have. Venture capitalists give various short-term estimates, ranging from 5-15 years, which will tell us who dominant player(s) in the new energy technology markets will be. The biggest stigma with implementing renewable energy technologies again comes down to one thing: levelized cost of electricity. Instead of pushing to rid oil and coal subsidies or pulling for clean energy feed-in tariffs that are not likely, another way to drive clean energy costs down through policy measures is by heavily funding research. As we saw earlier, DARPA efforts led to the formation of GPS systems, Internet, and other society-changing technologies. President Obama did establish the Advanced Research Projects Agency for Energy (ARPA-E), which was intentionally modeled after DARPA. ARPA-

23 E is not about incremental innovations, but about major leaps forward for high-risk concepts with high-payoff potential. ARPA-E was only allocated $400 million through ARRA, and originally received 3,700 concept papers. After a rigorous screening process, the agency decided to fund 37 of these projects for a total of $151 million, but there were many projects left unfinanced.52 ARPA-E is starting to bridge the gap of laboratory stage technologies becoming real-world technologies. Venture capitalists cannot sufficiently invest in technologies with risks this high, and this is where ARPA-E eliminates a valley of death. More research investments like this, which are politically agnostic, are needed to progress transformational technologies to see the light of day. As we examined earlier, Germanys exponential renewable energy growth was a result of a penetration of the then status quo that resulted with the emergence of Germany as a global renewable energy leader. The stronghold that coal and oil has on policy is hard to break through, and so leveraging the power of the market for pricing carbon and externalities may not feasible in the short-term. Thus, our politicians have to foresee that investments in research innovations do not payoff within a political cycle. We have to move past the quarter-by-quarter profit maximizing mentality and look at the results of these investments for the long-term. Developing research policies to create accessibility of venture capitalists to start-up technologies is an underfunded and ignored solution. The prevailing myth today is that clean energy sources are almost ready to completely replace fossil fuels; the consensus from the interviewed venture capitalists is that this notion is false. What we really need is an exponential, military-like deployment on research and installations to compete with the rest of the world and drive down costs. Historically speaking, federally funded research has had the ability to drive down costs: Pentagon research in the 1950s drove microchip prices down from around $1,000 per chip to $20 per chip.53 Brookings Institution and the American Enterprise Institute recently released a joint proposal to increase federal funds for clean energy research to $25 billion per year. This type of funding will eliminate a multitude of valleys of death and bring more transformational technologies from lab to market, and will keep innovation and manufacturing on our soil.54 As this paper just explored,

24 our path towards a clean energy future here in America faces many hurdles to clear. California has clearly taken the lead with legislation such as AB32, but venture capitalists believe that AB32 is not sufficient without federal supplements. Though Californias role in the past has been an indicator for the country to follow, California is not a large enough market for venture capitalists to solely rely on; other states and the federal government need to enact clear measures to buttress various clean energy technologies. The status quo is making apparent that other Asian countries are vying for dominance, and clean technology companies are locating potential American jobs and products in other areas of the world. This trend needs to be reversed quickly as the rate of change is happening more rapidly within the clean technology industry than in the past. The above analysis is distinct in its combination of specific industry parallels of the past with common themes from interviews with established venture capitalists. Depending on venture capitalists thoughts, as a basis for investigation, is reliable; as a result of these interviews, this paper shed light on where America truly stands in the global clean energy competition. In the eyes of most venture capitalists, America still remains the most innovative country in the world. New technologies are not coming in the same volume from other countries, but there are expectations that this can change. Investing heavily in research that will in turn promote education in the sciences and engineering, can produce the next wave of our countrys renewable energy leaders; as President Obama said in his 2011 State of the Union speech, Its not just the winner of the Super Bowl who deserves to be celebrated, but the winner of the science fair. To conclude, our society needs to accept the political realities we face and work on alternative solutions in order to win the clean energy future. From a number of different angles, our country can unleash our private sectors potential to generate a thriving clean energy economy here at home, but the current state of uncertainty is frankly allowing clean energy jobs, manufacturing, and deployment to drift overseas. Unlike any other research paper, these quality interviews showed that if the government provides sufficient financial mechanisms, policy incentives, and research commitments, venture capitalists would have more confidence to absorb

25 risk, invest earlier, and scale-up clean energy technologies in America. Furthermore, if we can sufficiently realize globalizations current adverse affects on our clean energy markets capability while breaking through infrastructure barriers, we can steer our economys trajectory towards a more favorable destination. This can be done if we leverage our governments ability to jumpstart our renewable energy industries through finance mechanisms, policy commitments, and transformational research projects. As with similar situations in our nations industrial past, these catalytic actions will result in a strong nationwide clean energy economy going forward.

Appendices Appendix 1: Energy Prices and Patent Activity

26

Source: David Popp, Induced Innovation and Energy Prices, 55 Appendix 2: Levelized Costs of Electricity by Fuel Source (including subsidies)

27

Source: Third Way

28 Appendix 3: Financing Stages and Commercialization of a Clean Energy Company

Source: Harvard Business School/Mohr-Davidow Ventures

29

Appendix 4: Global Transactions in Sustainable Energy, 2009

Source: Bloomberg New Energy Finance, 2010

30

Appendix 5: Top Countries in Clean Energy Investment, as a % of GDP

Source: Third Way

31

Appendix 6: Total Regional Investment, 2004-2009

Source: Bloomberg New Energy Finance, 2010

32

Acknowledgements Thank you to the following interviewees for taking the time to provide valuable knowledge, which helped develop the direction and substance for my undergraduate thesis paper: Ms. Nancy Pfund, Managing Director, DBL Investors. Mr. Reyad Fezzani, former Chief Executive Officer of BP Solar. Mr. Robert Walsh, Chief Commercial Officer of ZeaChem. Mr. Alain Harrus, Partner, Crosslink Capital. Ms. Arati Prabhakar, Partner, US Venture Partners. Mr. Josh Green, General Partner, Mohr-Davidow Ventures. Mr. Bryant Tong, Managing Partner, Nth Power Investors. Mr. Ajit Nazre, Partner, Kleiner Perkins Caufield & Beyers. Mr. David Aslin, Managing Director, AslinVC. Mr. Martin Lagod, Managing Director, Firelake Capital Management. Mr. Patrick Sheehan, Partner and Founder, Environmental Technologies Fund. Mr. Warren Hogarth, Partner, Sequoia Capital.

33

List of Works Cited 1. Acemoglu, Daron and Joshua Linn. Market Size in Innovation: Theory and Evidence From the Pharmaceutical Industry. Quarterly Journal of Economics. 119(3): 1,049+. Aug. 2004. 2. Anders, Scott J. Proposition 23: An Analysis of Which Scoping Plan Measures could be suspended and for How Long. Energy Policy Initiatives Center, University of San Diego School of Law. Sept. 2010. 3. Aslin, David. Telephone interview. 31 Jan. 2011. 4. Bloom, Nicholas, et al. Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT, and Productivity. National Bureau of Economic Research. Working Paper 16717. Jan. 2011. 5. Cleantech Thriving in California Under AB32, Shows Data. Cleantech Group, LLC Apr. 2005. http://cleantech.com/news/5755/cleantech-thriving-AB32-data. 6. Fezzani, Reyad. Telephone interview. 15 Dec. 2010. 7. Freed, Josh, et al., Creating a Clean Energy Century. The Clean Energy Program, Third Way. Nov. 2010. 8. Global Trends in Sustainable Energy Investment 2010. Bloomberg New Energy Finance 2010. 9. Green, Josh. Telephone interview. 14 Jan. 2011. 10. Harrus, Alain. Personal interview. 17 Dec. 2010. 11. Jacobsson, Staffan and Volkmar Lauber. The Politics and Policy of Energy System Transformation Explaining the German Diffusion of Renewable Energy Technology, Energy Policy, 34.3 (Feb. 2006): 255-276. 12. Lagod, Martin. Telephone interview. 2 Feb. 2011. 13. Leonhardt, David. A Climate Proposal Beyond Cap and Trade. The New York Times 12 Oct. 2010. Http://www.nytimes.com/2010/10/13/business/economy/13leonhardt.html.

34 14. Nazre, Ajit. Telephone interview. 28 Jan. 2011. 15. Nordhaus, Ted and Michael Shellenberger. How to Change the Global Energy Conversation. The Wall Street Journal 29 Nov. 2010. Http://online.wsj.com/article/ SB10001424052748704312504575618972157288244.html?mod=WSJ_topics_obama. 16. Pfund, Nancy. Telephone interview. 11 Nov. 2010. 17. Popp, David. Induced Innovation and Energy Prices. The American Economic Review. 92.1 (March 2002): 160+. 18. Prabhakar, Arati. Telephone interview. 10 Jan. 2011. 19. Renewable Energy Country Attractiveness Indices. Ernst & Young. Issue 26 (Aug. 2010). 20. Roberts, Michael J., et al. U.S. Department of Energy & Recovery Act Funding: Bridging the Valley of Death. Harvard Business School. 29 June 2010. 21. Roland-Host, David. Energy Efficiency, Innovation, and Job Creation in California. Department of Agricultural and Resource Economics, University of California, Berkeley. Oct. 2008. 22. Sheehan, Patrick. Telephone interview. 14 Feb. 2011. 23. Tong, Bryant. Telephone interview. 28 Jan. 2011. 24. U.S. Venture Capital Investment in Cleantech Falls 55% to $575.6 Million in Q3 2010. PR Newswire 1 Nov. 2010. http://www.prnewswire.com/news-releases/us-venturecapital-investment-in-cleantech-falls-55-to-5756-million-in-q3-2010-106434063.html. 25. Walsh, Robert. Telephone interview. 16 Dec. 2010.

35

Endnotes

Michael J. Roberts, et al., U.S. Department of Energy & Recovery Act Funding: Bridging the Valley of Death, 2, Harvard Business School, 29 June 2010.
2

David Popp, Induced Innovation and Energy Prices, The American Economic Review, Vol. 92 No. 1, 160+, March 2002.
3

Josh Freed, et al., Creating a Clean Energy Century, 17, The Clean Energy Program, Third Way, Nov. 2010.
4 5 6 7 8

Ibid. 1, at 6. Ibid. 3, at 3. Ibid. 3, at 4. Ibid. 6, at 1,049.

Daron Acemoglu and Joshua Linn, Market Size in Innovation: Theory and Evidence From the Pharmaceutical Industry, Quarterly Journal of Economics, 119(3), 1,049+, Aug. 2004.
9

Ibid. 6, at 1,053.

10

Nicholas Bloom, et al., Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT, and Productivity, 2+, National Bureau of Economic Research, Working Paper 16717, Jan. 2011.
11 12

Ibid. 8, at 15.

Cleantech Thriving in California Under AB32, Shows Data, Cleantech Group, LLC, 5 Apr. 2005. http://cleantech.com/news/5755/cleantech-thriving-AB32-data.
13

U.S. Venture Capital Investment in Cleantech Falls 55% to $575.6 Million in Q3 2010, PR Newswire, 1 Nov. 2010. http://prn.to/cEQwCX.
14 15 16 17 18 19 20 21 22 23

Ibid. 13. Ibid. 15. Ibid. 15. Interview with Mr. Alain Harrus, 17 Dec. 2010. Interview with Mr. Ajit Nazre, 28 Jan. 2011. Interview with Mr. Patrick Sheehan, 14 Feb. 2011. Ibid. 18. Interview with Mr. Josh Green, 14 Jan. 2011. Interview with Ms. Nancy Pfund, 11 Nov. 2010.

David Roland-Host, Energy Efficiency, Innovation, and Job Creation in California, 4, Department of Agricultural and Resource Economics, University of California, Berkeley, Oct. 2008.
24

Ibid. 24, at 35.

25

Scott J. Anders, Proposition 23: An Analysis of Which Scoping Plan Measures Could be Suspended and for How Long, 10, Energy Policy Initiatives Center, University of San Diego School of Law, Sept. 2010.
26 27 28 29 30 31 32 33 34 35 36

Interview with Ms. Arati Prabhakar, 10 Jan. 2011. Ibid. 20. Interview with Mr. David Aslin, 31 Jan. 2011. Interview with Mr. Martin Lagod, 2 Feb. 2011. Ibid. 19. Ibid. 26. Interview with Mr. Robert Walsh, 16 Dec. 2010. Ibid. 26. Global Trends in Sustainable Energy Investment 2010, 12, Bloomberg New Energy Finance, 2010. Ibid. 18.

Twin Creeks Malaysia SDN BHD Ground Breaking Ceremony Press Release, Deputy Prime Ministers Office of Malaysia, 14 Dec. 2010. http://bit.ly/fJz3Hr.
37 38 39 40 41

Interview with Mr. Bryant Tong, 28 Jan. 2011. Ibid. 19. Ibid. 23. Ibid. 41.

Staffan Jacobsson and Volkmar Lauber, The Politics and Policy of Energy System Transformation Explaining the German Diffusion of Renewable Energy Technology, Energy Policy, Issue 3, Vol. 34, p. 255-276, Feb. 2006.
42 43 44 45 46 47 48 49 50 51

Ibid. 29. Ibid. 15. Renewable Energy Country Attractiveness Indices, Ernst & Young, Issue 26, Aug. 2010. Ibid. 3, at 11-13. Ibid. 33, at 21. Ibid. 3, at 7. Ibid. 23. Ibid. 22. Ibid. 1, at 7. Ibid. 1, at 6.

52 53

Ibid. 1, at 7.

Ted Nordhaus and Michael Shellenberger, How to Change the Global Energy Conversation, The Wall Street Journal, 29 Nov. 2010. http://on.wsj.com/eu5qVO.
54

David Leonhardt, A Climate Proposal Beyond Cap and Trade, The New York Times, 12 Oct. 2010. http://www.nytimes.com/2010/10/13/business/economy/13leonhardt.html.