In November, I commended techno-optimistic environmentalists Michael Shellenberger and Ted Nordhaus for pointing out the intellectual exhaustion of traditional ideological environmentalism. Shellenberger and Nordhaus outlined their scathing critique of special-interest environmentalism in their new book, Break Through: From the Death of Environmentalism to the Politics of Possibility (2007). They pointed out that environmentalism's doomsday predictions and limits-to-growth policy recommendations are political dead ends.

In a world in which billions of people remain mired in poverty and lack access to modern sources of energy, a positive environmental program stressing technological innovation and economic growth is far more politically viable. However, Shellenberger and Nordhaus argue that the threat of potentially catastrophic man-made climate change can only be addressed by massive government research and development initiatives that aim to create low-carbon energy supplies. How massive? To the tune of $30 billion per year over the next 10 years.

Now in a new New Republic article Shellenberger and Nordhaus are calling out "conservatives" for not supporting such initiatives. They note:

At the libertarian reason magazine, Ronald Bailey endorsed our critique of nature-centered environmentalism--which sees regulation as the best solution--but then concluded, "Shellenberger's and Nordhaus' naïve trust in wise government bureaucrats guiding technological innovation is problematic, to say the least." For conservatives to be taken seriously, they'll need to ditch their knee-jerk opposition to government intervention in the economy and recognize that government has long played a critical role in investing in transformational technologies.

Conservative? No. Opposition, yes. Knee-jerk, hardly. What transformational technologies do Shellenberger and Nordhaus claim that the federal government has brought about? They point to the railways in the 19th century, the Manhattan Project during World War II, the Interstate highway system in 20th century, the Apollo moon shots, and the Internet. Most of the technologies they cite were subsidized by government for military reasons, not for reasons of technological or commercial development, much less out of concern for the environment.

In 1862, Congress justified passing the Pacific Railroad Act as a way to forestall a secessionist movement in California during the Civil War. The government subsidized the Union Pacific and Central Pacific railroads at $16,000 per mile over an easy grade and up to $48,000 in the mountains. In addition, the government offered substantial land grants along the right-of-way. Despite these government subsidies, both companies were bankrupt in the early 1870s.

As an example of how government subsidies distort incentives, both railroad construction crews worked past each other building an extra 200 miles of parallel rail lines grades (and some parallel tracks) instead of linking up so their companies could earn more subsidy payments and land grants. The fact that government subsidies were not necessary for building a transcontinental railroad was proved when James J. Hill built the highly profitable Great Northern Railway from Minnesota to Seattle completely without them or land grants.

The Manhattan Project was launched because President Franklin Roosevelt feared that the Nazis were developing their own atomic weaponry. The project was a great success in developing the technologies needed to produce atomic bombs. In the 1950s, President Dwight Eisenhower promoted the "Atoms for Peace" program which aimed to develop civilian uses for nuclear technologies. Under the Power Demonstration Reactor Program, private/public partnerships to build power-generating nuclear reactors began. In 1957, the first nuclear large-scale power reactor began operation at Shippingport, Pa. Two years later, the first nuclear power station built completely without government funding was fired up in Illinois. Today, 109 nuclear power plants produce about 16 percent of all the electricity used in the United States. On the other hand, no new nuclear power plants have been ordered in the last 30 years. Since 1972, orders for 117 nuclear plants have been cancelled. The growth of nuclear power stopped because of regulation, not technical issues. It may yet turn out to be a great commercial success and part of the answer to abating greenhouse gas emissions, but only if regulatory issues are resolved.

Even the Interstate highway system was justified on national defense grounds. As a young military officer, Eisenhower had led an army convoy of 300 men from Washington, D.C. to the West Coast in 1919. The convoy took 62 days to cross the country. He was also impressed by the German Autobahn system. So in 1956, Eisenhower championed the National Interstate and Defense Highways Act. The Interstate highway system was originally estimated to take 12 years and cost $25 billion to construct. It actually took 35 years and cost $114 billion (over $800 billion in current dollars). Building the Interstate system remains the largest public works project ever undertaken in the United States. By most accounts, Interstate highways lowered transportation costs and boosted American productivity. On the other hand, subsidizing highway construction doesn't seem to be a good analogy to subsidizing energy research and development.

The motivation behind the Apollo moon shot program was largely geopolitical. The Soviets had launched the first artificial satellite in 1957 and orbited the first man around the planet in 1961. As a NASA history explains, "First, and probably most important, the Apollo program was successful in accomplishing the political goals for which it had been created. Kennedy had been dealing with a Cold War crisis in 1961 brought on by several separate factors—the Soviet orbiting of Yuri Gagarin and the disastrous Bay of Pigs invasion only two of them—that Apollo was designed to combat." The Apollo program cost $25.4 billion (about $150 billion in current dollars) to land just 12 astronauts on the moon. It is curious that Shellenberger and Nordhaus cite the Apollo program as an example of transformative technologies since it was basically a technological dead end.

Shellenberger and Nordhaus argue, "The fact that some past public investments in energy failed is no more an argument against public investment than the failure of private firms to deliver cheap, clean energy is an argument against markets. It is true that government has made some lousy investments—but it has also made remarkable ones." In fact, with the possible exception of nuclear power, just where are the "remarkable" government-financed energy production breakthroughs? Consider the case of the Synfuels Corporation, which was authorized to spend up to $88 billion dollars on developing energy sources as alternatives to imported oil. It was supposed to be an energy "Manhattan Project" that would produce the equivalent to 500,000 barrels of oil by 1987. Instead, Congress shut it down in 1986. And that's not to mention one failed public/private partnership after another that were supposed to produce automobiles that run on something besides refined petroleum. Just last week, the Bush Administration pulled the plug on its flagship FutureGen demonstration project for capturing and burying carbon dioxide produced by coal-fired electric power plants.

Shellenberger and Nordhaus of course cite the Defense Advanced Research Projects Agency's (DARPA) famous support for communications technology network research that evolved into the Internet. The ARPANET was established as a way to link the defense research community. In the 1980s, the National Science Foundation funded the NSFNET as a way to increase the linkage among a broader community of scholars. The Internet evolved into an open research and commercial environment. That wasn't the way some technosavants preferred things 20 years ago. Remember the Minitel? Minitels were videotext terminals distributed by the millions by the French national telephone company. "The Minitel craze is one case where government intervention, frequently derided as an obstacle to economic change, seems to have helped technological innovation," declared the Washington Post in December, 1986. By 1992, there were 6 million Minitel terminals offering 1,800 information sources. However, the bottom-up Internet handily beat the top-down Minitel. I suspect that the new government-financed energy research would result in technologies more like Minitel and less like the Internet.

Shellenberger and Nordhaus's techno-optimistic environmentalism is still shackled by old style top-down thinking when it comes to technological development. Energy production, especially electricity generation, is one of the least technologically innovative industrial sectors, not least because it is one of the most heavily regulated sectors. The way forward is to encourage bottom up distributed creativity, not top down bureaucratic management. To give them their due, Shellenberger and Nordhaus recognize that throwing government money at energy research and development does not guarantee success. "To be sure, many of these technologies will fail," they write. "But any venture capitalist will tell you that multiple failures are required to reap a single success, and that you can't win if you don't play." The problem with Manhattan or Apollo Projects is that they were "silver bullet" programs aimed at a single technically difficult goal. The problem of developing low-carbon energy is a far more diffuse problem.

Since the problem is diffuse, a far better strategy would be to encourage venture capitalists and other entrepreneurs to finance new low-carbon energy development, rather than a centralized top-down crash research program directed by Department of Energy bureaucrats. One promising technique is to offer substantial prizes for energy production or utilization breakthroughs. A private example of how such prizes might work is the $10 million Automotive X Prize, which aims to promote the development of production-ready vehicles that get 100 miles per gallon of gas. One can imagine big government-financed prizes for various clean energy technologies such as long-lasting powerful rechargeable batteries, super-efficient solar power systems, or bacteria that eat sewage and excrete gasoline. However, the more narrowly the goal of a prize is defined, the more it will constrain the ingenuity of future innovators. In other words, bureaucrats could so narrowly define prizes that they would be engaging in top-down research management by other means.

Shellenberger and Nordhaus are absolutely right in a major way: People simply will not accept limits to growth. So the question is how best to harness human creativity to address the problem of man-made global warming? The simplest and best way to encourage the development of low-carbon energy technologies is to set a price on carbon emissions. Thousands of inventors and entrepreneurs would then have a huge incentive to develop cheap low-carbon energy technologies. The history of government-financed research and development, especially in the area of energy production, is not at all promising. Although Shellenberger and Nordhaus dismiss setting a price on carbon emissions as "a tired old trope," it's a lot less tired than yet another call for a "new Manhattan Project." What's next, an energy policy that's the "moral equivalent of war"?

Ronald Bailey is reason's science correspondent. His most recent book, Liberation Biology: The Scientific and Moral Case for the Biotech Revolution, is available from Prometheus Books.