Typical energy transitions unfold over 50 to 100 years. The urgency of the climate challenge means that humanity doesn’t have that kind of time. While market developments in renewables and electric vehicles are favorable, even those developments will not transform the energy landscape without concerted government policy. The Biden Administration is trying to re-shape the American economy to support this transformation through incentives that were included in the landmark Inflation Reduction Act (IRA). One year into the passage of the IRA and billions of dollars in investment in battery plants and EV production has poured into the United States. Will this investment really help save the plant and create quality American jobs?
There has been a bevy of activity to invest in building a domestic battery manufacturing industry in the United States to supply the growing market for electric vehicles. Companies announced more than $73 billion in investments in the United States in electric vehicle plants, battery plants, and battery recycling in 2022 alone. Most of these investments, which are backed by federal tax incentives, are located near existing automobile production facilities and supply chains in the American South and the Midwest, particularly in Republican-led states with right-to-work laws. The strategy is also intended to transform the calculations of politicians representing the emerging “Battery Belt,” to make them more supportive of the clean energy transition and less likely to roll back the legislation.
In February 2023, we convened leading scholars to explore the political dynamics of the clean energy transition in the United States and around the world in Go Green Fast, a workshop hosted by the University of Texas-Austin. The workshop was accompanied by 14 videos and 17 memos interrogating different dimensions of the clean energy transition, including how the Inflation Reduction Act was passed and whether it will work, how to ensure the transition is just for workers and affected communities, should the U.S. decouple supply chains from China, and more.
Two key observations stand out. First, all those manufacturing facilities around the United States will need trained workers. As one of our participants Jonas Nahm of SAIS Johns Hopkins pointed out, without complementary workforce development policies, efforts to build up a domestic manufacturing sector in clean energy technologies may fall short.
Second, the economies and supply chains of U.S. and China on clean energy are so deeply intertwined that it would be almost impossible to decouple the two countries’ economies by cutting off trade and investment in technologies like batteries and solar panels. As another of our participants Joanna Lewis of Georgetown University noted, removing China from solar panel supply chains would require an increase of wafer production capacity by 5000% elsewhere.
This observation is why the conversation has evolved from de-coupling to de-risking. National Security Advisor Jake Sullivan made that case in a recent speech at the Brookings Institution suggesting that the United States will pursue more selective efforts to source raw materials and supplies from domestic sources and friendly countries. That implies a recognition that the United States cannot go it alone on producing what it needs for the clean energy economy, and that a sizable percentage, at least in the short run, will come from China.
As our workshop participants noted, that will require some important efforts to smooth how implementation of the Inflation Reduction Act and other policies applies to U.S. allies in Europe and Asia, who have felt that these policies unfairly penalize them. At the same time, it will require the United States to narrow the areas of the clean technology supply chain where dependence on Chinese imports or investment is unacceptable from a national security perspective.
Threading that course and at the same time incentivizing a robust domestic manufacturing sector is the challenge of our times as the Biden administration seeks to reset the U.S. and global economy by extension on a sustainable course. The promise of new manufacturing investment in green energy is even exceeding some of the loftiest expectations. However, the hope of Republican buy-in through investment is uncertain. Renewable energy rich states such as Texas have seen backlashes against renewables. But, as the new plants get built, we will have to see if the Biden administration’s bets pay off.