1. The R&D Mission of the Proposed CICS Presentation at The CPUC Workshop on the Proposed California Institute for Climate Solutions December 12, 2007 John P. Weyant, In Collaboration With Jeffrey Koseff, James Sweeney and Barton H. (Buzz) Thompson Stanford University

2. The R&D Rationale for CICS: Three Arguments for Public Support of R&D Conceptual –Private firms cannot recoup all benefits of their R&D From a societal perspective they under-invest in R&D Thus, public investment can yield potentially large public benefits Empirical –Private rate of return on R&D is about 15-20% per year –Public rate of return on R&D is about 30-40% per year Observational –VCs report shortage of new good clean tech opportunities –Research community reports lack of opportunities to contribute Climate Externalities –Challenges of reducing GHG emissions and responding to CA problems of climate change make climate solutions R&D particularly important. These perspectives motivate additional California public support for climate solutions R&D.

3. Why in California, Why Now? California needs climate solutions R&D –We have unique vulnerabilities and opportunities for adaptation –We need R&D to meet the goals of AB 32 California values creative environmental solutions –Our progressive approach to environmental quality –Our history of global leadership California has the capability to conduct the R&D –Our great universities, colleges, and research institutions –Our entrepreneurial spirit –Progress in related technology areas (nano, bio, info) Extra Bonus –We reap the economic and political benefits of being world leaders

4. Possible Initial Priority Areas: Emissions Mitigation Technology Development Technology Assessment Behavioral Science /Analysis Policy /Regulatory Analysis Energy Efficiency Buildings Transport Industry Electricity generation Water efficiency Electric Power Storage T&D Demand control Energy Supply Solar Biomass Carbon sequestration Agric. and Forestry Livestock Fertilizer Forest Management Energy Use

5. Possible Initial Priority Areas: Climate Change Impacts and Adaptation Impacts Assessment Behavioral Responses Adaptation Technologies and Systems Policy /Regulatory Analysis Air Quality Agric. & Livestock Forestry Water Supply & Floods Equity Fisheries & Oceans Coastal Protection Recreation Ecological Systems Human Heath Wild Fires

6. Two Funding Models for CICS Research and Development Individual Project Grants –May be viewed as more equitable –Harder for CICS leadership to know well a wide array of areas –Harder to insure cohesion and strategic focus –High administrative costs Program Cluster Grants (aka Center Model) –Can still be awarded competitively –Leverage financial and administrative resources of awardees –Easier to insure cohesion and strategic focus

7. Summary We face great challenges related to the operation of our energy systems The technology base upon which almost all of our energy system is built is 50-100 years old. We have the potential here in California to make the changes required. The CICS would be a great asset for us to use in meeting the challenges we face.