Trumping Innovation

by Joseph Tomain

March 21, 2017

Yale economist William Baumol has written extensively on the connection between innovation and economic productivity. He has demonstrated that the United States has long been committed to promoting innovation, and through innovation, virtuous circles of economic growth are created. Unfortunately, the current administration appears committed to curtailing, even stopping, that growth.

The president's first budget has many targets. One, though, directly contradicts Baumol's research and, more problematically, directly contradicts the U.S. Constitution. From the Founding, it has been a fundamental principal of the United States "To promote the Progress of Science and useful Arts." Art. I, §8, cl.8. But the Trump 2018 budget imposes severe – some congressional Republicans call them draconian – reductions in these areas. Among the most drastic is the greater than 30 percent sledgehammer applied to the Environmental Protection Agency (EPA) and the elimination of the highly successful Advanced Research Projects Agency-Energy (ARPA-E).

Housed in the Department of Energy, ARPA-E was created by the George W. Bush administration in 2007 and was first funded in 2009 with an initial allocation of $400 million, and since then, the agency has provided more than $1.5 billion in funding dozens of programs totaling over 580 projects. ARPA-E funds early-stage energy technologies, demonstrations projects, and provides funding and other resources for commercial deployment. Target areas include energy storage, electric vehicles, alternative transportation fuels, "clean" coal, advanced nuclear power, and the smart grid, among many others. 

Through organizations known as Energy Innovation Hubs and Energy Frontier Research Centers, ARPA-E creates consortia comprised of academic institutions, private firms, businesses, nonprofits, and federal and state government agencies. Public and private partnership is essential to their operation and success. Most notably, while ARPA-E engages in basic scientific and technological research, its long-term focus is on the commercialization and marketability of a wide range of innovative energy technologies. Remember, innovation is directly tied to economic growth; it is also directly tied to job creation.

ARPA-E uses both performance metrics and cost metrics to assess the success of their investments. Projects that do not meet performance milestones are terminated. Importantly, the agency's cost metrics provide solid evidence that its public-private investments have generated concrete and positive results. Most notable, they have been able to significantly leverage government funding. For example, 56 project teams have formed new companies, 68 have partnered with other government agencies to continue their technology development, and 74 teams have raised more than $1.8 billion in funding from the private sector to bring their technologies to market. 

In February, ARPA-E published a second volume reporting on project outcomes. The report groups projects according to areas such as transportation fuels, electric power generation and distribution, and building transportation and industrial efficiency. The report lists 25 projects and for each discusses technical challenges, innovation demonstrations, and pathways to economic development. Additionally, each snapshot identifies the intellectual property and publications generated by each project. A project team led by Dioxide Materials, for example, is engaged in converting carbon dioxide to transportation fuels. Fuel production from carbon dioxide can serve a global market with the largest potential for reducing carbon emissions, and the project is entering the demonstration stage. Another example is a project led by the Ford Motor Company for high-precision testing of batteries for electric vehicles and ...

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