Introduction

The Bush administration's backward-looking energy and environmental policies, coupled with gridlock in Congress, have left the United States ill-equipped to compete with other nations in the booming global market for environmentally clean technologies -- a market projected to be worth $607 billion in 2005. For instance, even though California is the birthplace of wind power, the United States as a whole is stuck in slow motion in utilizing this inexhaustible resource. The U.S. wind power generation capacity of 6,370 megawatts -- enough for approximately 6 million homes -- is dwarfed by Germany's 14,600 megawatts. Similarly, while the United States was once the largest manufacturer of solar photovoltaic (PV) cells -- surpassing Japan's production capacity by an impressive 60 percent in 1996 -- Japan now produces more than twice as many solar cells as America does. And in the transportation sector, Japanese automakers Toyota and Honda recently took top honors for making eight of the 10 most fuel-efficient cars sold in the United States. Germany's Volkswagen makes the other two.

In a companion report to this one, David Rejeski shows how the United States has fallen behind its counterparts in the race for global market share in green technology industries. Rejeski advances a seven-point federal plan to regain U.S. dominance and points out that our lagging position is primarily due to the growing gap between the United States and other advanced nations in approaches to environmental regulation. Although our laws and regulations once were state-of-the-art and emulated in much of the world, Rejeski writes, today, many developed countries are moving toward more modern, flexible, information-rich, and community-focused policies.

The Progressive Policy Institute refers to such modern policy approaches as Second Generation strategies, to distinguish them from the first generation of environmental laws and regulations, which followed a more rigid command-and-control framework. The U.S. approach to environmental regulation and clean technology development continues to follow the increasingly outdated first-generation model. That approach differs from the policies of our trading partners in the developed world in at least seven key respects by:

1. Refusal to cap carbon now;
2. Failure to adopt interim strategies;
3. Declining investments in clean energy science and research;
4. Inadequate coordination among federal agencies;
5. Insufficient capital for the development of clean technologies;
6. Failure to commercialize clean products; and
7. Poor public awareness programs.

The purpose of this policy backgrounder is to compare and contrast clean growth policies in the United States, the European Union (EU), and Japan in order to better understand why other countries are surging ahead of the United States in the quest to capitalize on the global clean technology market.