The Volokh Conspiracy

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Climate Change

Biden Administration Deploys Prizes to Address Climate Change

The Department of Energy has announced a good way to spend some of the funds authorized by the Bipartisan Infrastructure Law.

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The Department of Energy has announced it will spend $3.7 billion to "kick-start America's carbon dioxide removal industry." While most climate policy discussions focus on how to reduce emissions of greenhouse gas emissions, this initiative is focused on how to remove greenhouse gases that are already in the atmosphere.

One of the most promising and significant parts of the announcement is the embrace of technology-inducement prizes. From the release:

  • Direct Air Capture Commercial and Pre-Commercial Prize – DOE's Office of Fossil Energy and Carbon Management (FECM) is announcing the Direct Air Capture Prize for support and prize awards totaling $115 million to promote diverse approaches to direct air capture. The Direct Air Capture Pre-Commercial Prize provides up to $15 million in prizes to incubate and accelerate research and development of breakthrough direct air capture technologies. The Direct Air Capture Commercial Prize provides up to $100 million in prizes to qualified direct air capture facilities for capturing CO2 from the atmosphere. Read the full Direct Air Capture Prize Competitions announcement here.

This represents only a small portion of the relevant funding — and is smaller than I would like — but it is nonetheless good to see some recognition of the power of prizes to induce desired innovation, particularly in the context of climate change.

As longtime readers may know, I have been pushing for climate prizes for some time. In 2011, I published "Eyes on a Climate Prize: Rewarding Energy Innovation to Achieve
Climate Stabilization" in the Harvard Environmental Law Review, in which I argued that technology-inducement prizes are particularly well-suited to problems like climate change. Here is the abstract:

Stabilizing atmospheric concentrations of greenhouse gases at double their pre industrial levels (or lower) will require emission reductions far in excess of what can be achieved at a politically acceptable cost with current or projected levels of technology. Substantial technological innovation is required if the nations of the world are to come anywhere close to proposed emission reduction targets. Neither traditional federal support for research and development of new technologies nor traditional command and-control regulations are likely to spur sufficient innovation. Technology inducement prizes, on the other hand, have the potential to significantly accelerate the rate of technological innovation in the energy sector. This Article outlines the theory and history of the use of inducement prizes to encourage and direct inventive efforts and technological innovation and identifies several comparative advantages inducement prizes have over traditional grants and subsidies for encouraging the invention and development of climate-friendly technologies. While no policy measure guarantees technological innovation, greater reliance on inducement prizes would increase the likelihood of developing and deploying needed technologies in time to alter the world's climate future. Whatever their faults in other contexts, prizes are particularly well suited to the climate policy challenge.

I hope this recent announcement is a sign of more to come.