McCain's Worthy Energy Prize Proposal

National Review Online: Prizes Are A Powerful Way To Encourage Innovation

(National Review Online)  This column was written by Jonathan H. Adler.

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Speaking Monday at Fresno State University in California, Sen. John McCain put forward what may be the most promising and important energy-policy proposal of the campaign: a $300 million prize for the development of advanced battery technology. “In the quest for alternatives to oil, our government has thrown around enough money subsidizing special interests and excusing failure,” he noted. Yet rather than have Washington pick winners and losers from within the energy industry, McCain suggested that the government should reward innovation and actual achievement. “From now on, we will encourage heroic efforts in engineering, and we will reward the greatest success.”

As outlined by McCain, the prize would be paid to the first innovator to develop a battery technology that “leapfrogs” existing electric car and plug-in hybrid technology, in terms of size, capacity, power, and cost. The aim is a battery technology that's capable of powering motor vehicles at 30 percent of current costs. This would be a significant technical breakthrough, greatly enhancing the ability of battery-powered vehicles to compete in the marketplace.

Government-sponsored prizes for innovation are based upon the same principle as the patent system: Encourage innovation by rewarding inventors and entrepreneurs with the promise of super-competitive returns. A patent provides such a reward by giving the innovator a temporary monopoly for his invention. A prize goes one step further by placing a bounty on a particular type of innovation, increasing incentives for potential investors.

Another virtue of government prizes is that tax-payer dollars only get spent if the prize goals are met. Traditional subsidies, on the other hand, are paid out up front. Doled out in accord with politically determined criteria, and often awarded to the most politically connected firms, traditional subsidies often fail to generate anything approaching a positive economic return.

Past and present experience shows that prizes are a powerful way to encourage investment in technological innovation. The British empire used prizes to spur innovation in navigation. While governments rarely use prizes anymore (because politicians prefer to give out goodies themselves), private foundations have gotten into the act. The X-Prize Foundation offered the “Ansari X-Prize,” a $10 million reward for the development of a reusable, manned spacecraft, which was awarded in 2004. The winning inventors fulfilled the X-Prize qualifications and proved spaceflight can be more economical than NASA. The $10 million prize also spurred an estimated $100 million in private research on spaceflight technologies. Just imagine how much private research a $300 million prize could unleash.

The proposal of prize for battery innovation is a welcome departure from the traditional stale roster of energy policy measures. Sen. Barack Obama has proposed more aggressive regulatory measures on climate change, but he’s also a big booster of corn-based ethanol. There is a consensus among energy and environmental experts against the broader use of corn-based ethanol, but Obama seems committed to it. The Illinois senator and his campaign have strong ties to the corn-based ethanol lobby, as reported in the New York Times. Subsidizing the fuel “ultimately helps our national security,” Obama implausibly claimed in a recent speech. McCain, in contrast, has criticized ethanol subsidies and tariffs on ethanol imports.

While McCain’s prize proposal and hostility to corn-based is important, his energy policy is hardly perfect. In addition to the inconsistencies I noted last week, McCain is urging stricter enforcement of federal automobile fuel-economy standards and continued (albeit less corn-friendly) subsidies for alcohol-based fuels. He lambastes existing subsidies and tax credits as “the handiwork of lobbyists,” but is proposing a new “zero-emission” vehicle tax credit of its own. Despite these flaws, the Arizona senator deserves credit for embracing an energy prize. Promising a direct reward for innovation is the most innovative energy idea to come from a politician in quite some time.

[energywiz]

I have the invention that guarantees energy independence now. My invention is an on-site, on-vehicle unit that produces energy free of perpetual cost to consumers. The invention is a non-fuel device that emits no toxic fumes and is not related to wind, solar, ocean wave movement, coal, natural gas, bio-fuel, water, or nuclear power. I am in search of a buyer for the exclusive rights for the commercial development, mass production, and mass distribution of my invention. The price is negotiable. Contact: Manuel Velazquez at e-mail [e-mail].

[joyous88]

which idiot is saying vote for hillary?

she is not in the race ,stupid.

you must have voted for bush, DUMB!

[it_oldtimer]

If congress doesn''t decide on some way to cut the damned speculators out of the oil market soon you''d better be getting ready for $10-15 gas - not just $5 gas.

[noloyalisti]

How can the NRO use worthy and McCain in the same sentence. This war-monger has a pathetic environmental record, voted in lockstep with the bush neo con men almost 100% and doesn''t support the troops. Is he still running for pResidential office currently help by the war criminal bushoccio?

[wilmojo1]

We as American''s might as well get ready for $5.00 a gallon gasoline. Because it''ll take 20 years for the technology to become cheap enough for the average person to be able to afford it. [e-mail]

[it_oldtimer]

What a joke.

Anybody taking up this "challenge" will still have to fork out their OWN money first, to develop this new battery, and then HOPE that they win the prize and recoup their costs afterward.

The potential value of a much-improved battery is so much greater than the paltry $300 M being offered that the "encouragement" value itself is really just a paltry joke.

This just shows what silly gimmicks McCain''s pathetic "solutions" really are.

[noloyalisti]

This is just typical corporatist mentality. If someone comes up with a battery like that, they won''t need a piddly $300 million, their idea will be worth billions. Besides, we already have automotive technology corporations. We just need to get McBush''s oil buddies to stop blocking the technilogy.

By the way TruUSA is a right wing Limbaugh lover who is trying their desperate strategy of Operation Chaos to split the vote.

[irliberal]

All this talk about "McSame thinks this" or "McSame thinks that" is rather pointless. It''s quite obvious now that there''s no way in heck that the American people are going to vote HIM into office so what is the point of the article?

[joyous88]

McCain stole this idea from NASA,

he is just one more version of GW Bush, McSame,

and he will steal the election if he can get away with it, just like McBush Bush did

if you want four more of the same you are nuts

[seafang]

What a crock of BS. The periodic table of the elements is well known and very well understood, and there isn''t any more efficient chemistry than we already know about.
And besides that, the more efficient a battery chemistry is; energy wise, the more obnoxious it is from a safety and pollution point of view.

Existing Lithium batteries are about the end of the road except fo small cosmetic improvements that might be made.

The cheapest, safest, most compact energy battery by far; it''s no contest; is GASOLINE.

Get used to it and quit having wet dreams.