GREEN GROWTH: FROM RELIGION TO REALITY - Sustainia

Chapter 5tion of funds seems to reinforce or amplify what statesare already doing, rather than shifting or constraining.The effects of this support are a double-edged sword.On the one hand, they can be hugely supportive toemerging industries and their markets. Sources in Coloradotell us the stimulus funds received by Colorado wereenormously helpful. They both kickstarted programsthat might have been slow or difficult to start withoutfunding assistance, and provided a rescue for programsthat would otherwise have been vulnerable to cuts duringthe severe recession. Similarly, stimulus funding and loanguarantee programs have likely had a synergistic effectwith venture capital interest in cleantech, turbochargingCalifornia’s cleantech investment wave and helping togrow the market for these technologies. (See Coloradoand California State Case Study reports (Green GrowthLeaders 2011a and 2011b) for further discussion.)However, funding, particularly funding delivered directlyto industry like guaranteed loans, may not be welltargetedand may create large distortive effects by subsidizingthe recipient firm and/or particular technologicalsolutions that are not inherently competitive without thesubsidy. If this effect is large enough, it could swamp ordistort better-targeted state-level policies to shape greenindustry. For instance, one source for this project suggestedthat federal funding has tended to push venturecapital investment in California toward large-scale,capital-intensive areas rather than the smaller, more easilyscaled, lower-capital technologies it is better suitedto (Kenney 2011). Such an effect would apply broadlyacross states, though the level of effect might depend onsuccess in capturing funding.2) Innovation: Federal research investment has createda pool of innovation and new technology. Much asdirect federal funding for industry has done, this resourcepool of emerging technology has served as anaccelerating force for the creation of green industry.If the research pool were biased, with most resourcesdirected toward a particular technology, this couldcreate a de facto influence on the development directionsavailable to states. However, the spread of fundingacross solution categories appears diverse enoughthat this is not an issue (Prabhakar 2011).Research takes place in a variety of units in the federalgovernment and institutions funded by the federalgovernment, often through the Department of Energy,including the national labs, research universities, andthe struggling ARPA-E unit. One less obvious but significanthome for non-fossil fuel energy research anddemonstration is the Department of Defense. Risingfossil fuel prices and the difficulty of protecting massiveliquid fuel supply lines in operations both makethe DoD interested in alternative energy options.Some particular areas the DoD is investing in includegreen aviation fuels, hybrid-electric ground vehiclesand ships as well as alternative energy vehicles, batterystorage, prediction modeling software for renewableresources, insulation technologies, microgrid technologies,solar thermal and portable solar arrays, andgeothermal energy (Hourihan and Stepp 2011). TheDoD can be a particularly important player in technologicalinnovation because it is not just an R&Dfunder. It often also provides an initial purchaser forexpensive prototype or early-stage products, helpingthem bridge the “valley of death” between initial innovationand commercialization. In later stages ofcommercialization, military procurement can helpnew products build scale. The military has providedan initial bridge to commercialization for many UStechnological advancements in the past.3) Failure to coordinate: The fact that national/regionalpolicymaking is not strategically coordinated withstate-level policymaking makes attempts to transformstate-level systems that are linked to national systemsproblematic. This serves as an obstacle to success insome policy areas. This effect is seen, for instance,in the California deregulation story, where Californiastate policy clashed with regional energy marketpolicy, creating problems for successful deregulation(Sweeney 2002). (See the California State Case Studyreport (Green Growth Leaders 2011a) for further discussion.)This has a de facto effect on states’ abilities todeploy certain types of policy measures.4) Freedom to experiment: The federal governmenthas been willing in some cases to actively increase thefreedom of states to incubate policy at the local level.An important example is the waivers received byCalifornia, allowing it to experiment with pollutionregulations more stringent than those imposed by thefederal government. This type of action increases thepotential of states to act as green policy labs.The bottom line is that the federal government providesenabling inputs in the form of funding and research,and creates some distortive effects via funding.But the particular evolution of state green growth stories,and hence the US green growth story collectively, owesmore to state-level conditions, resources, and political/economic history than it does to federal interference. Wetherefore briefly consider the general question of howstate-level policy evolves, before turning to our two indepthcase studies of individual states: California andColorado.4 Green growth policy evolution at thestate level: an exampleAs we have stated, US states, collectively, constitute agreen policy laboratory that allows for the testing ofmany approaches simultaneously – although in a highlyunstructured and uncoordinated way. Strategies chosenby states are shaped by each state’s particular history, politicaland social profile, resource mix, legacy infrastruc-Green Growth: From religion to reality 47