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Environmental technology policies
Q: EPA put some grant money toward redesigning the internal combustion engine and settled for the catalytic converter. What role does the Agency need to play in promoting technology? Should it be doing research and prescribing, or should it be setting standards and allowing industry the freedom to come up with the answers? The latter is the role it has generally played. Was it the right role, from your perspective?
MR. COSTLE: That's a good question. The early generation of technology was basically clean-up technology. How do you design a scrubber that works? What technology do you impose with a new source performance standard? How do you benchmark new standards against what you know can be done? These are the kind of questions we were facing. Industry always looked at that as a negative enterprise.
Several years after I had left the government, I was told by an official of one large international company that it had developed a ceramic diesel catalyst. It was expensive, but the company expected the price to come down dramatically if the device were adopted industry-wide. And at that time, the auto industry thought that, by the mid-'90s, 15 to 20 percent of the entire U.S. fleet would be diesel, so this development was highly relevant. But the developer was told by its single biggest customer, on of the Big Three automakers, that if the company publicized the availability of this technology, the automaker would never buy another shred of material from it. That was the way the auto industry then played that game.
Today, I think, it would be somewhat different. Industry has, in fact, come a long way. Obviously, the auto industry suffers from a tremendous infrastructure inertia, but I'm not sure the government can design the most efficient cars.
What the government can do is to identify key research issues that are blockages to improved technologies, such as some of the more advanced work in battery design or in wafer design for solar-powered energy panels. Parallels for such government/private industry cooperation exist. The airline industry, in effect, gave rise to engine technologies that made gas-turbine technology for power plants possible. This advance came in the nick of time and probably saved us from a massive coal conversion program. When the independent power producers started selecting technologies, they leaped on this, spurring GE to develop even more advanced engines. So sending the right economic signals is crucial. If you do that, industry will turn more energy and imagination to the job than government can ever mobilize.
Often, though, there may be some fundamental basic R&D issues up front. The Defense Department has been brilliant at identifying these. Certain breakthroughs -- such as the design of nuclear weapons, the space shuttle -- had to be done by government. Along the way, a lot of other developments spun out. Somebody in the private sector would see an interesting practical application for a new ceramic, and the market would change and broaden.
There is clearly a role for federal R&D. I think it has to be focused on cutting-edge issues, on defining the problem. One of the things that we must identify in compiling our check list of desirable technology targets is how to get economic signals right, for example, through the tax code. That will be more effective than having the government spend money to buy a demonstration project. Although I'm not against the government doing that, I think it may be the less effective route. If you can change the economic signals so industry can make money by coming up with a better mousetrap, that's a much quicker way to advance technology.
Q: Should the Administrator be selling the public on the notion of the environment being the moral equivalent of war -- using those kinds of metaphors to mobilize momentum?
MR. COSTLE: Well, you have to ask yourself whether that metaphor will mobilize anything anymore. It didn't really mobilize the energy world that much. What mobilized the energy world more than anything was price decontrol. Letting the price float broke up the cartel. That was a very courageous step that President Carter took. President Reagan finished it, but Carter started it. He opted to let the price float, and to see how much oil would be pumped out of the ground as a result. The oil cartel basically broke up over that. And rising prices also caused people to become more efficient in end-use.
I think government does have a role in promoting technology improvements. For instance, government promotion of efficiency standards for appliances has been a very important contribution. It provides baseline information that keeps the players honest. If government gets the economic signals right and sets national goals, we will unleash the creativity of private enterprise. The next breakthrough in passive solar designs or in fuel cell development is going to come when industry sees a market. The same thing will happen, I think, with hydrogen technology.
There may be some up-front issues of feasibility and practicality, where industry would like to see some initial demonstration. DOE or EPA funding can prime the pump for that development in some of these areas. But in the end, it will take Congress giving a strong policy signal, probably through the tax laws, to encourage this kind of private investment.