Project development is particularly challenging in “frontier” environments where alternative technologies, conflicting laws and agencies, and uncertain benefits or risks constrain the knowledge or decisions of participants.  Carbon capture and storage (“CCS”) projects by means of geologic sequestration are pursued in such an environment.  In these circumstances, entrepreneurs can seek to employ two distinct types of tools:  the game-changer, being an improvement to the status quo for all those similarly situated, generally achieved through collective or governmental action; and the finesse, being an individualized pursuit of an extraordinary project that is minimally affected by a given legal, business or technological obstacle.  These techniques are illustrated in the case of CCS as to ownership of property rights, carbon dioxide (“CO2”) transportation economics, liability for stored CO2 following the closure of injection wells, inter-agency and federal-state conflicts, competing technologies, and uncertain economic or legal incentives.  The finesse and the game-changer should also be useful concepts for creative solutions in other applications.

India has been famous for arguing that it (and the rest of the developing world) should incur no expense in controlling emissions that cause climate change. The west caused the problem and it should clean it up. That argument is increasingly untenable — both in the fundamental arithmetic of climate change, which is a problem that is impossible to solve without developing country participation, and in the political reality that important western partners will increasingly demand more of India and other developing countries. India’s own public is also demanding more.

The Indian government has outlined a broad plan for what could be done, but the plan still lacks a strategy to inform which efforts offer the most leverage on warming emissions and which are most credible because they align with India’s own interests.

This paper offers a framework for that strategy. It suggests that a large number of options to control warming gases are in India’s own self-interest, and with three case studies it suggests that leverage on emissions could amount to several hundred million tonnes of CO2 annually over the next decade and an even larger quantity by 2030. (For comparison, the Kyoto Protocol has caused worldwide emission reductions of, at most, a couple hundred million tonnes of CO2 per year.) We suggest in addition to identifying self-interest — which is the key concept in the burgeoning literature on “co-benefits” of climate change policy — that it is also important to examine where India and outsiders (e.g., technology providers and donors) have leverage.

One reason that strategies offered to date have remained abstract and difficult to implement is that they are not rooted in a clear understanding of where the Government of India is able to deliver on its promises (and where Indian firms have access to the needed technology and practices). Many ideas are interesting in theory but do not align with the administrative and technological capabilities of the Indian context. As the rest of the world contemplates how to engage with India on the task of controlling emissions it must craft deals that reflect India’s interests, capabilities and leverage on emissions. These deals will not be simple to craft, but there are many precedents for such arrangements in other areas of international cooperation, such as in accession agreements to the WTO.

Coal is the major primary energy which fuels economic growth in China. The original Soviet-style institutions of the coal sector were adopted after the People's Republic of China was founded in 1949. But since the end of 1970s there have been major changes: a market system was introduced to the coal sector and the Major State Coalmines were transferred from central to local governments. This paper explains these market-oriented and decentralizing trends and explores their implications for the electric power sector, now the largest single consumer of coal.

The argument of this paper is that the market-oriented and decentralizing reforms in the coal sector were influenced by the changes in state energy investment priority as well as the relationship between the central and local governments in the context of broader reforms within China’s economy. However, these market-oriented and decentralizing reforms have not equally influenced the electric power sector. Since coal is the primary input into Chinese power generation, and power sector reform falls behind coal sector reform, the tension between the power and coal sectors is unavoidable and has raised concerns about electricity shortages.

India has been famous for arguing that it (and the rest of the developing world) should incur no expense in controlling emissions that cause climate change.  The west caused the problem and it should clean it up.  That argument is increasingly untenable-both in the fundamental arithmetic of climate change, which is a problem that is impossible to solve without developing country participation, and in the political reality that important western partners will increasingly demand more of India and other developing countries. India's own public is also demanding more. 

The Indian government has outlined a broad plan for what could be done, but the plan still lacks a strategy to inform which efforts offer the most leverage on warming emissions and which are most credible because they align with India's own interests.  This paper offers a framework for that strategy.  It suggests that a large number of options to control warming gases are in India's own self-interest, and with three case studies it suggests that leverage on emissions could amount to several hundred million tonnes of CO2 annually over the next decade and an even larger quantity by 2030.  (For comparison, the Kyoto Protocol has caused worldwide emission reductions of, at most, a couple hundred million tonnes of CO2 per year.)  We suggest in addition to identifying self-interest, which is the key concept in the burgeoning literature on "co-benefits" of climate change policy, that it is also important to examine where India and outsiders (e.g., technology providers and donors) have leverage. 

One reason that strategies offered to date have remained abstract and difficult to implement is that they are not rooted in a clear understanding of where the Government of India is able to deliver on its promises (and where Indian firms have access to the needed technology and practices).  Many ideas are interesting in theory but do not align with the administrative and technological capabilities of the Indian context.  As the rest of the world contemplates how to engage with India on the task of controlling emissions it must craft deals that reflect India's interests, capabilities and leverage on emissions.  These deals will not be simple to craft, but there are many precedents for such arrangements in other areas of international cooperation, such as in accession agreements to the WTO.

One effect of the new Obama administration's global charm is that America could be let out of the environmental doghouse. The Obama plan to restart the economy is stuffed full of green incentives, and the new president has earned global cheers for his promise to cut the gases that cause global warming. But hope and change are not easy to implement in Washington, and the first big disappointment is likely to come later this year when the world's governments gather in Copenhagen to replace the aging and ineffective Kyoto treaty.

On climate issues America is less a nation than 50 different states, moving wildly at different speeds.

Pundits have been talking down the Copenhagen summit on the theory that the current financial crisis makes 2009 a tough time for governments to focus on costly and distant global goals like protecting the planet. In reality, the greenish tinge on nearly every economic recovery plan, even China's, show that this crisis offers green opportunity. The real reason Copenhagen will be a disappointment is that the new Obama administration can't lead until it first learns what it can actually implement at home. And delivering greenery in the American political system is harder than it looks-even when the same left-leaning party controls both the White House and Congress.

On environmental issues, America is barely a nation. Under a single flag it uneasily accommodates a host of states pushing greenery at wildly different speeds. In the 1970s and 1980s, this multispeed environmentalism propelled America to a leadership position. The key was truly bipartisan legislation, which allowed Washington to craft a coherent national approach. In fact, most of the major U.S. environmental laws did not arise solely from the environmental left but were forged by centrist Republican administrations working closely with centrist and left-leaning Democrats. Republican President Nixon created America's pathbreaking clean air and water regulations; Republican George H.W. Bush updated the air rules to tackle acid rain and other pernicious long-distance pollutants. In his more moderate second term, Ronald Reagan was America's champion of the ozone layer and helped spearhead a treaty-probably the world's most effective international environmental agreement-that earned bipartisan support at home and also pushed reluctant Europeans to regulate the pollutants.

Ever since the middle 1990s-about the time that the U.S. government was shut down due to a partisan budget dispute-such broad coalitions supporting greenery have been rare. In the vacuum of any serious federal policy, for nearly a decade the greener coastal states devised their own rules to cut warming gases. The United States as a whole let its green leadership lapse. (At the same time, the project to create a single European economy has shifted authority in environmental matters from individual member states into the hands of central policymakers in Brussels, where a coterie of hyperrich and very green countries have set the agenda. Europe, long a laggard on environmental issues, is now the world leader.)

The normal multispeed script was playing out on global warming as the Obama administration took power. Industry, worried about the specter of a patchwork of regulations, has lobbied for a coherent national strategy. But the Obama administration's first major policy on global-warming policy went in precisely the opposite direction: he reversed the Bush administration's decision that blocked California from adopting its own strict rules on automobile efficiency.

Today's challenge, which won't be solved by Copenhagen, is for Obama to stitch these many state environmental efforts together. That's no easy task. Global-warming regulation will probably have a larger impact on the nation's economy than any other environmental program in history, and any plan will have to allow enough room for some states to move quickly while also satisfying industry's well-founded need for harmony. Obama's Democratic Party controls both the White House and Congress, but that does not guarantee success. It will be difficult to craft a national policy that earns broad and bipartisan support while also taking the big bite out of the emissions that the rest of the world is hoping Obama will promise to the Copenhagen treaty. The difficulties aren't just in dragging along wary conservative Republicans. In fact, the most important skepticism about an aggressive national strategy has been from a coalition of centrist Democrats who fear the impact on jobs and economic growth.

One key to success will be crafting a deal with China and other developing countries to show that they, too, are making an effort. But serious efforts on that front are still in their infancy.

The big challenge for Copenhagen will be to find a way to allow negotiations to stretch beyond the unrealistic 2009 deadline while still keeping momentum. America's slowness in getting serious about global warming should be welcome because it is a contrast to its rushed behavior in negotiating the Kyoto treaty. At Kyoto, Bill Clinton's administration promised deep cuts in emissions without any plan for selling them at home, which is why the Bush administration could so easily abandon the treaty. Repeating that mistake would be a lot worse than waiting a bit for America to craft real leadership. If that's why Copenhagen falls short of the mark, then that's good news-real greenery, rather than fakery.

Carbon capture and storage (CCS) is a promising technology that might allow for significant reductions in CO2 emissions. But at present CCS is very expensive and its performance is highly uncertain at the scale of commercial power plants. Such challenges to deployment, though, are not new to students of technological change. Several successful technologies, including energy technologies, have faced similar challenges as CCS faces now. In this paper we draw lessons for the CCS industry from the history of other energy technologies that, as with CCS today, were risky and expensive early in their commercial development. Specifically, we analyze the development of the US nuclear-power industry, the US SO2-scrubber industry, and the global LNG industry.

We focus on three major questions in the development of these analogous industries. First, we consider the creation of the initial market to prove the technology: how and by whom was the initial niche market for these industries created? Second, we look at how risk-reduction strategies for path-breaking projects allowed the technology to evolve into a form so that it could capture a wider market and diffuse broadly into service. Third, we explore the "learning curves" that describe the cost reduction as these technologies started to capture significant market share.

Our findings suggest that directly applying to CCS the conventional wisdom that is prevalent regarding the deployment and diffusion of technologies can be very misleading. The conventional wisdom may be summarized as: "Technologies are best deployed if left in the hands of private players"; "Don't pick technology winners" or "Technology forcing is wrong"; and "Technology costs reduce as its cumulative installed capacity increases". We find that none of these readily applies when thinking about deployment of CCS.

Through analyzing the development the analogous industries, we arrive at three principal observations:  

• First, government played a decisive role in the development of all of these analogous technologies. Much of the early government role was to provide direct backing for R&D work and demonstration projects that validated the technological concepts. For example, the US government directly supported for over two decades most of the basic science and engineering research in both SO2 scrubbers and nuclear power. Most of the demonstration projects were significantly underwritten by government as well; the Japanese government was the principal backer of LNG technology through its promises to buy most of the world's LNG output over many years. Direct government support created the niche opportunities for these technologies.
• Second, diffusion of these technologies beyond the early demonstration and niche projects hinged on the credibility of incentives for industry to invest in commercial-scale projects. In each of the historical cases, government made a shift in its support strategy as the technology diffused more widely. In the early phase (when commercial uncertainties were so high that businesses found it extremely risky to participate in more than small, isolated projects) success in achieving technology diffusion required a direct role for government. But as uncertainties about the technology's performance reduced and operational experience accumulated, direct financial support became less important, and indirect instruments to lower commercial risk rose in prominence. Those instruments included tax breaks, portfolio/performance standards, purchase guarantees, and low-interest-rate loans linked to specific commercial-scale investments. It is conceivable that such incentives could have been supplied by non-governmental institutions, such as large firms or industry associations, but the three analogs point strongly to a governmental role-perhaps because only government action was viewed as credible. (In the United States, many of the key decisions to support new technologies were crafted at the state level, such as through rate base decisions to allow utilities to purchase nuclear plants.)
• Third, the conventional wisdom that experience with technologies inevitably reduces costs does not necessarily hold. Risky and capital-intensive technologies may be particularly vulnerable to diffusion without accompanying reductions in cost. In fact, we find the opposite of the conventional wisdom to be true for nuclear power in the US (1960-1980) and global LNG (1960-1995). Costs increased as cumulative installed capacity increased. A very rapid expansion of nuclear power plants in the US around 1970 led to spiraling costs, as the industry had no chance to pass lessons from one generation of investment to the next-a fact evident, for example, in the failure to standardize design and regulation that would allow firms to exploit economies of scale. For natural gas liquefaction plants, costs stayed high for decades due to a market structure marked by little competition among technology suppliers and the presence of a single dominant customer (Japanese firms organized by the Japanese government) willing to pay a premium for safety and security of supply. The same attributes that allowed LNG to expand rapidly-namely, promises of assured demand made credible by the singular backing of the Japanese state-were also a special liability as the technology struggled to compete in other markets. The experience with SO2 scrubbers was more encouraging-costs declined fairly promptly once industrial-scale investment was under way. But that happened only after sufficient clarity on technological performance and capability of FGD systems had been established. What followed was a strict performance standard-in the form of a government mandate, imposed by environmental regulators-that effectively picked FGD as a technology winner. The guaranteed market for FGD led to serious investment, innovations, and learning-by-doing cost reductions. We do not argue that this technology-forcing approach was economically efficient but merely underscore that rates of diffusion of FGD technology akin to what is imagined for CCS technology today were possible only under this technology-forcing regulatory regime.

As CCS commercialization proceeds, policymakers must remain mindful that cost reduction is not automatic-it can be derailed especially by non-competitive markets, unanticipated shifts in regulation, and unexpected technological challenges. At the same time, there may be some inevitable tradeoffs, at least for a period, between providing credible mechanisms to reduce commercial risk, such as promises of assured demand for early technology providers, and stimulating market competition that can lead to lower costs. History suggests that government-backed assurances are essential to creating the market for capital-intensive technologies; yet those very assurances can also create the context that makes it difficult for investors to feel the pressure of competition that, over successive generations of technology, leads to learning and lower costs.

We are also mindful that our history here-drawn on the experience of three technologies that have been successful in obtaining a substantial market share-is a biased one. By looking at successes we are perhaps overly prone to derive lessons for success when, in fact, most visions for substantial technological change actually fail to get traction.

Effective strategies for managing the dangers of global climate change are proving very difficult to design and implement.  They require governments to undertake a portfolio of costly efforts that yield uncertain benefits far in the future.  That portfolio includes tasks such as putting a price on carbon and devising complementary regulations to encourage firms and individuals to reduce their carbon footprint.  It includes correcting for the tendency for firms to under-invest in the public good of new technologies and knowledge that will be needed for achieving cost-effective and deep cuts in emissions.  And it also includes investments to help societies prepare for a changing climate by adapting to new climates and also readying "geoengineering" systems in case they are needed.  Many of those efforts require international coordination that has proven especially difficult to mobilize and sustain because international institutions are usually weak and thus unable to force collective action.  All these dimensions of climate diplomacy are the subject of my larger book project and a host of complementary research here at the Program on Energy & Sustainable Development.  

By far, the most important yet challenging aspect of international climate policy has been to encourage developing countries to contribute to this portfolio of efforts.  Those nations, so far, have been nearly universal in their refusal to make credible commitments to reduce growth in their emissions of greenhouse gases for two reasons.  First, most put a higher priority on economic growth-even at the expense of distant, global environmental goods.  That's why the developing country governments that have signaled their intention to slow the rise in their emissions have offered policies that differ little from what they would have done anyway to promote economic growth.  Second, the governments of the largest and most rapidly developing countries-such as China and India-actually have little administrative ability to control emissions in many sectors of their economy.  Even if they adopted policies to control emissions it is not clear that firms and local governments would actually follow.  

Effective strategies for managing the dangers of global climate change are proving very difficult to design and implement. They require governments to undertake a portfolio of efforts that are politically challenging because they require large expenditures today for uncertain benefits that accrue far into the future. That portfolio includes tasks such as putting a price on carbon, fixing the tendency for firms to under-invest in the public good of new technologies and knowledge that will be needed for achieving cost-effective and deep cuts in emissions; and preparing for a changing climate through investments in adaptation and climate engineering. Many of those efforts require international coordination that has proven especially difficult to mobilize and sustain because international institutions are usually weak and thus unable to force collective action...."