Energy policy used to be an area where Democrats and Republicans found common ground. That’s not true anymore. The parties’ energy platforms are polarized by climate change. Democrats call for America to be “be running entirely on clean energy by mid-century,” proposing carbon taxes to reach that goal. Republicans “oppose any carbon tax,” arguing that it “would increase energy prices across the board, hitting hardest at the families who are already struggling to pay their bills.”

The cost of energy is one of the primary drivers of the world economy. Energy accounts for about ~10% of global GDP and even greater percentages of manufacturing costs. Although American (and European) carbon emissions have slowed, they are accelerating elsewhere. We may feel good about recharging our iPhones with renewable electricity, but the devices are still manufactured with the help of Chinese coal.

I recently spoke at the Houston Bar Association about “practical” energy policies that are missing from both platforms. Central to my Reimagine Energy speech was whether a “middle path” exists between the two parties’ positions. In particular, what federal policies could reduce carbon emissions without also increasing energy prices?

The inspiration for my first proposal—federal genius grants for energy innovation—is the John D. and Catherine T. MacArthur Foundation, which annually awards $625,000 to each of ~30 individuals. MacArthur Fellows are selected based on “exceptional creativity, as demonstrated through a track record of significant achievement, and manifest promise for important future advances.” Isn’t science the real answer to climate change? After all, “[e]veryone loves science . . . Republicans and Democrats just love it in different ways and for different reasons” (Roger Pielke Jr., University of Colorado).

Our government already spends ~$2.5 billion annually on energy research and development, mostly through the Department of Energy’s (“DOE”) Office of Energy Efficiency and Renewable Energy. The R&D platform most resembling the MacArthur Fellows is the DOE’s Early Career Research Program. It seeks applicants “early in their careers who have the potential to develop new scientific ideas, promote them, and convince their peers to pursue them as new directions.” Awards are about the same size as the MacArthur grants ($150,000 annually for five years).

That’s about where the similarities end, though. The MacArthur Foundation avoids applications entirely, opting instead for a secretive selection process:

  • Anonymous Nominators. “In order to gather fresh perspectives, we invite throughout the year new nominators . . . serv[ing] confidentially for terms of several months. Nominators are identified for their expertise and familiarity with exceptionally creative people in their respective areas of focus. . . . We also identify people who are recognized leaders in their fields and whose work naturally exposes them to a wide variety of interesting and creative people.”
  • Third Party Nominations. “Nominators write a letter to the program director, usually a page or two, describing the person they are nominating and their reasons for doing so. These letters focus on the quality and creativity of the nominees and their work, and on the likely benefits of the award to the recipient.”
  • Selection by Anonymous Committee. “The Selection Committee consists of approximately 12 people who serve confidentially and are chosen for their breadth of experience, excellent judgment, and curiosity.”

A similar process could be implemented for federal genius grants. The 12-member selection panel would be comprised of six Republicans and six Democrats (each serving two-year terms). Who would appoint them? One option is for the ranking Republican and Democrat on two House of Representatives Committees ([Energy and Commerce] & [Science, Space, and Technology]) to divide the appointments four ways. Each of the 12 panelists can then choose 10 nominators to put forward names for consideration (for a total of 120—the MacArthur Foundation uses ~100 nominators).

The selection panel would periodically review nominations and then award grants based on majority vote, assuring bipartisan support for its decisions. The criteria for award could be similar to that used for MacArthur Fellows: “exceptional creativity, as demonstrated through a track record of significant achievement, and manifest promise for important future advances in energy technology.” Otherwise, there would be no requirements. Entrepreneurs as well as Ph.D. academics would be eligible. Nor would the awards be limited to a renewable focus. Energy innovation of all kinds—including fossil fuels—would be considered.

The next question is whether recipients’ use of funds would be “regulated” by the federal government. This is another area where the MacArthur Foundation offers important lessons. Its Fellowships are awarded with “no strings attached.” The Fellows “are not required to report how they spend the stipend, and the Foundation does not ask. . . . Some uses are expected, such as undertaking research for which traditional sources of funding are unavailable; taking time off from teaching or performing to focus on research or creating new works; and building an organization to support their work. Other uses are less expected but no less important, such as facilitating a successful leadership transition in their current organization and beginning a new enterprise.”

If federal genius grants were similarly untethered, it would mitigate Republican concerns about political manipulation of science: “For far too long, the Department of Energy has attempted to use taxpayer money to drive technologies to the market, crippling the role of entrepreneurs and wasting billions of taxpayer dollars in the process” (Nicolas D. Loris, Heritage Foundation Fellow). Under my Reimagine Energy proposal, the government merely selects and funds talent. The individual decisions of the winners then take over. They can use the funds to advance whatever energy technology they want. As Steve Jobs observed, “people who are doing the work are the moving force. . . . My job is to create a space for them, to clear out the rest of the organization and keep it at bay.”

Innovation has a real chance of solving the predicament of climate change. Carbon taxes do not. Selectively increasing energy costs in a given geography just creates an incentive for bypass and migration. We need look no further than our neighbors to the north. British Columbia adopted a 25-cent per gallon carbon tax. While fossil fuels consumption decreased in BC, border crossings to Washington more than doubled as Canadians made frequent fuel runs to America. Let’s be realistic about energy policy by finding ways to address climate change without incentivizing migration to “carbon tax havens.”

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About the Gaille Energy Blog.  The Gaille Energy Blog discusses issues in the field of energy law, with weekly posts at http://www.gaillelaw.com.  Scott Gaille is a Lecturer in Law at the University of Chicago Law School, an Adjunct Professor in Management at Rice University’s Graduate School of Business, and the author of two books on energy law (Shale Energy Development and International Energy Development).