The Political Economy of American Clean Energy Innovation

Abstract

Why have American inventors produced so much technological innovation in clean energy technology while American policymakers' record on climate policy has generally been considered underwhelming? Under what circumstances does the US federal government act to foster technological change and what form do such policies typically take? The central topic of this dissertation is American innovation policy, specifically in the context of clean energy technology. I investigate and theorize the circumstances under which federal institutions engage in innovation policy, provide a novel analysis of such policies in the context of clean energy technology, and investigate the political effects such policy has had over recent decades. Chapter 1 of this dissertation opens by identifying and demonstrating that American inventors remain the most prolific source of technological innovation in clean energy technology. While USPTO patent records suggest that the rest of the world caught up in the 1990s, the percentage of all patents granted to American inventors in key technology areas increased again in the 2000s. I contrast this reality with the prediction of the environmental policy literature’s focus on pollution-pricing as providing key incentives for private actors to innovate. The American state has ostensibly not created a public policy environment conducive to technological innovation in alternative energy technology. I provide a detailed discussion of the specific market failures that are assumed to challenge the creation, development, and diffusion of alternative energy technologies. Further, I discuss different approaches to solving these market failures. I then argue that the American political economy faces a set of enduring institutional barriers to the implementation of innovation policy. In doing so, I make several theoretical and conceptual contributions. I argue that the institutional barriers to federal innovation policy are typically only overcome in the context of enduring socio-economic challenges or war. When federal innovation policy is implemented, it remains subject to ongoing Congressional pressures, which have often halted or curtailed it. I suggest that this institutional structure creates American innovation policy that typically involves dedicated federal agencies with considerable R&D budgets but limited bureaucratic capacity. This results in policy efforts that are highly decentralized, and in which federal agencies primarily play a coordinating role, while major R&D tasks are outsourced to universities and firms. Further, federal innovation policy heavily focuses on providing R&D and funding for desired technologies rather than directly regulating the use of technologies. I draw on four historical cases of federal innovation policy to demonstrate these points. I also provide an account of the role of federal agencies within the contemporary American innovation ecosystem. Chapter 2 proposes that concerns over energy security and demand for alternative energy technology by the Department of Defense (DoD) in the early 2000s have been crucial drivers of American innovation policy related to clean energy technology. In doing so, I document the close connection between military-related research and American clean energy innovation. I show that federal policy related to clean energy has focused on investments in basic science and R&D by the Departments of Energy and Defense, which have often been conducted in close cooperation with private companies and universities. Federal agencies have also conducted public demonstration projects, and DoD has been an important source of demand for clean energy technologies. Yet, federal efforts have overwhelmingly focused on the creation and improvement of new technology. There have been comparatively few dedicated efforts to raise the domestic uptake and diffusion of these technologies. To make this case, Chapter 2 presents two empirical approaches that demonstrate the impact of federal innovation policy in clean energy. Descriptively, I present a network analysis of clean energy patent citations showing that federal agencies are the most important sources of inventions in the US clean energy ecosystem. Here, I also make a methodological contribution, as this is the first network analysis of clean energy patent citations that I am aware of. Further, leveraging records of public-private research cooperation, I show that companies that collaborate with federal agencies increase their subsequent patenting output significantly, providing evidence for the innovation-boosting effect of recent public-private partnerships in this area. In Chapter 3, I broaden the scope of my investigation by testing how federal R&D initiatives have affected different geographic areas across the US. I document evidence of a Matthew effect, as a small number of areas have expanded their advantages in generating new technologies over time. The clean energy R&D push by DOE and DoD in the early 2000s has been strongly focused on a small set of major innovation hubs, substantially raising the geographic inequality in clean energy innovation. Drawing on geo-located patent records in clean energy technology from the USPTO, I show that areas receiving larger amounts of public R&D investments as evidenced by publicly funded patents also show larger numbers of private follow-on innovation. American innovation policy has thus contributed to the uneven contribution to technological innovation of different regions of the country. In Chapter 4, I use the case of the dedicated energy research agency ARPA-E, implemented in 2009, to gain additional empirical traction on the impact of federal R&D investment. I leverage data on the geography of ARPA-E participant organizations to estimate a Difference-in-Differences model with staggered treatment adoption, demonstrating that areas hosting ARPA-E partners have raised their patenting rates in clean energy technology significantly more than comparable areas. I provide novel evidence from an original dataset demonstrating both the effectiveness of ARPA-E, as investigation of how federal initiatives reinforce the innovation advantages of some regions over others. In Chapter 5, I investigate the political effects of the geographical concentration of innovative activity in clean energy in the United States. I create a novel dataset of political campaign donations of entrepreneurs and workers in the clean energy industry. This analysis of the political donation behaviour of clean energy industry insiders is the first to my knowledge. I show that US clean energy entrepreneurs and workers have become increasingly more ideologically aligned with the Democratic party while also being overwhelmingly physically located in innovation clusters. I thus provide new evidence showing that the American clean energy industry has so far been mostly concentrated in high-technology clusters, and that Democrats have politically benefitted from their embrace of climate policy. Yet, the political constituency represented by this industry remains concentrated in a small number of areas, which undermines its political influence.