Can America Still Lead the Global Energy Transition?

DAN KURTZ-PHELAN

The United States is grappling with two of the biggest challenges that it’s ever faced: the rise of China and the threat of catastrophic climate change. At home, the Biden administration has forged a green industrial policy that could transform the U.S. economy.

But as China threatens to dominate the global market for clean energy, it is not enough to invest domestically, Brian Deese argues in a new Foreign Affairs essay. Deese served as the Director of the National Economic Council under Biden, and during the Obama years he helped lead the auto bailout and negotiate the Paris Climate Agreement. Now, he has a plan for the United States to lead the global energy transition on its own terms.

Brian, thanks so much for joining me today.

BRIAN DEESE

I’m happy to be here.

DAN KURTZ-PHELAN

So I want to start by jumping right to the essay you have in our new issue. It’s called, “The Case for a Clean Energy Marshall Plan.” Rather than going straight to the both admirably concrete and extremely ambitious proposal that is at the center of the piece, I really want to start by getting a sense of the context that prompted you to write this. Maybe another way of putting this is, the problem that you’re trying to solve, in a sense, or maybe the problems that you’re trying to solve.

The first of these that strikes me is related to a piece of legislation that you were very central to forging when you were Director of the National Economic Council in the Biden administration, which was the Inflation Reduction Act, which was really about driving clean energy investment at home. You say in the piece that it’s the world’s largest-ever investment in clean energy technologies. But it did not have the same knock-on effects internationally; it kind of left a missing piece in terms of international action. How do you see the vacuum that was left after the IRA, and what’s the need that you’re trying to fill with a clean energy Marshall Plan in that sense?

BRIAN DEESE

Well, I think there’s two important pieces of context that get to the problem before we get to the solution. The first is the broader geopolitical context, that we have entered a new era defined more by fragmentation than by implementation, and where the competition between the United States and China is a reality and also has to inform how we think about our foreign economic policy, and also our domestic policies as well.

And the second is that the United States has, over the course of the last couple of years, really taken a different approach to building industrial capacity here at home. As you say, the Inflation Reduction Act was a core element to that, alongside the bipartisan infrastructure bill and the bipartisan CHIPS Act that we passed, that really are designed to provide incentives for private investment in clean energy, as well other sectors, to build our innovative capacity, our industrial capacity here at home.

Both of those dynamics create the then challenge, which is, how does the United States actually approach the global issue of climate change and the global energy transition, where a lot of the action, both from an emissions standpoint and from a technology standpoint, is going to happen outside the United States? And as you said, the Inflation Reduction Act has huge potential on that front because at the core of what the Inflation Reduction Act is doing is driving down the deployable cost of clean energy technologies across the board: everything from not just wind and solar, but also storage, long duration storage, geothermal carbon capture, nuclear, drive down those costs. And if those lower costs are then felt by the rest of the world, the emissions impact, the economic impact, could be even greater.

As I reflected on the work that we had done and the work left to do, the core problem is that that dispersion internationally is not self-executing. And as we look at this complicated geopolitical landscape, there’s plenty of reason to believe that it might not happen. And so that was the impetus to say, “How can we in the United States think about how we can help make more likely that we actually see all that progress internationally as well?”

DAN KURTZ-PHELAN

Let me focus on the China piece of this, which has animated a lot of the shift in economic policy that you have been a part of over the last several years. The Chinese dominance of clean energy supply chains, the investment in solar cells and EVs and critical minerals and everything else has become, I think, a source of pretty acute concern to people in the American national security community. You often hear pushback from people more focused on the climate problem, and I think also a lot of everyday observers who might look at this and say, “What’s the problem if China wants to invest huge amounts of its money in flooding the world with cheap solar cells and electric vehicles and everything else? That seems like in some ways a good thing, that we should be trying to complement and build on, rather than a threat.” What do you think that position misses?

BRIAN DEESE

I think what it misses is that if we’re going to have a secure, sustainable, viable energy transition globally, it’s going to have to be predicated on a global trading system that doesn’t operate at the extremes, where any one country has a complete stranglehold over inputs and extremes in the sense that the actions of one country are actually undercutting innovation, economic opportunity, [and] jobs everywhere else. And so, the theory that says we should just allow China to operate however it wants to—we should not only be resigned to that, but some people would argue embrace that, embrace their non-market practices, embrace the explicit goal of dominating certain industries—I think what that misses is that that presumes that that equilibrium, where China does this and everybody else just accepts that, is either economically or politically stable. I think that what we’ve seen over the last decade is that that’s actually a very unstable equilibrium.

On the one hand, it’s neither feasible nor advisable to then say, “Well, how do we think about extracting China from clean energy supply chains, or any supply chains for that matter? Or how do we create two systems––of a Chinese system and [one for] everybody else as well?” I think that that’s not feasible. So I think part of what we need to do is get into that hard work of saying, “What does it look like to actually diversify without having an aspiration to completely isolate or decouple?” I should say that this is an issue that is most pronounced in the context of clean energy in many cases. You see the examples as very prominent on things like critical minerals or batteries or electrolyzers for hydrogen.

But it’s a broader economic challenge, which is, the Chinese government today is making an explicit decision, [an] economic decision, to say, “We want to generate overcapacity internationally while actually under-investing domestically.” And I would argue that that’s not only an unstable strategy for the global economy, it’s also not a stable strategy for the Chinese economy as well. And you see their mounting economic problems likely leading to a reckoning where they will have to address those issues squarely as well.

But part of my impetus again for trying to think about a realistic but also ambitious framework is to say, “What can a more sustainable equilibrium actually look like where we are taking into account some element of political reality but also economic reality as well?” And I think that as a global community we can do better than that.

DAN KURTZ-PHELAN

I want to come back to some of those big questions about the Chinese economy and the U.S.-China relationship later. But just to go to what I saw as a kind of third problem that you’re trying to address with this proposal, and that’s an energy transition and a path toward net zero that is in some ways progressing beyond what we might’ve hoped a decade ago but that still isn’t quite where we need it to be—as you look at the transition, as you look at the path to net zero, where do you think we’re still falling short as you look ahead, both in what we’ve done and what we need to do going forward?

BRIAN DEESE

Well, the first thing is the good news, which is, as much pessimism as there often is about climate change and around global problems generally, we have over the course of the last couple of years seen extraordinary progress in bringing down the price and increasing deployment of the kinds of clean energy technologies that are going to become necessary if we’re actually going to make this transition in a way that is sufficiently fast to avoid the worst impacts of climate change. I think we have also started to really see in practice that the most viable answers to this problem are less about restricting economic activity and are more about building. We’re going to need massive quantities of clean energy, and build massive new infrastructure to boot. That is all very hard, but that idea of actually building and scaling generates more potential to actually bring private capital in off the sidelines and accelerate the transition by actually making it into an enormous economic opportunity.

I say in the piece that this energy transition globally will be the largest capital formation event in human history, larger than the Industrial Revolution. And I believe that’s true, but it’s true because we’re going to need to build extraordinary amounts of clean energy. So that is the opportunity. The challenge and where we’re falling behind is we’re just not moving nearly fast enough. In the United States, 71 percent increase in investment in clean energy, 400 percent increase in clean energy manufacturing over just the last two years––we are moving fast. And at the same time, we need to move faster here and also see that kind of progress internationally as well.

When you go into an emerging market economy context, a place like India or a place like Brazil, that’s got even greater challenges associated with the physical impacts of climate, fewer resources, we have to be very pragmatic and clear-eyed about the fact that if the technology to accelerate that transition is not cheaper and available in the context that it matters, which is, “Does it work in the conditions that India needs it to work for them?” Then those governments, those political processes are not going to prioritize that. And so we need to have a viable answer to how we get there quicker.

DAN KURTZ-PHELAN

So, as you probably remember, when you and I first spoke about this idea, I was a little skeptical of the use of the Marshall Plan label because it’s often, as we discussed, thrown around in foreign policy discussions as a cheap way of signaling ambition and just the scale of something. But you persuaded me that it really did apply in this case. Why is a Marshall Plan the right model here and how did the specific elements of the plan you lay out here address each of those key problems that you laid out?

BRIAN DEESE

I would start by reinforcing your skepticism. I also was quite skeptical and continue to be skeptical about the easy and breezy way of a Marshall Plan for this and a Marshall Plan for that. And I think that in some ways it’s lost its significance as a result. And also I should say, we are not in a new Cold War, in my view, today. The competition between the United States and China is very different. I think those distinctions are important as we think about what a clean energy Marshall Plan for the twenty-first century looks like.

But where the analogy, I think, does a lot of work is in two places. The first is that Marshall and Truman at the time were conceiving of this strategy based less on high-minded views of projecting U.S. leadership abroad and more on the practical realities of the limits of American power in the post–World War II era—as the Iron Curtain was coming down, and as Marshall came back from China on a mission to try to bring China into the fold or keep China from going into the communist fold, and recognizing that the United States faced real limits in terms of what it could do in terms of its foreign economic policy and its extension of power.

And so it was a very pragmatic realization that there’s a complicated fractured world and the United States had to be realistic about its own sources of power, but that one way that the United States could project power was by being a generous ally in showing up to partners and saying, “What is it that you most need to actually build and scale?” And at the time, what Europe most needed was direct support to rebuild its infrastructure, physical infrastructure principally, in the wake of the war.

I think the second key insight from Marshall and Truman was, we can project power by being generous to our allies, but we can make this happen at scale by being unapologetically pro-American in our approach. And so for me, it’s that insight that I think can help us do a lot of work today. We have to be realistic that the United States has to be practical and meet our allies where they are and be genuine and generous in our commitment to help them with this problem. But we also have to be unapologetically pro-American in our approach, not only to convince the American people to commit precious tax dollars to this effort, but also to connect it to our own industrial strategy here at home.

So I think that, to me, that’s the core of the learning, is that the American people are actually prepared, and I believe this today, to do big things, to do historic things to extend their vision beyond our borders. But they need to understand clearly how it’s going to affect their lives, their communities, their livelihoods. And they need to understand that we’re doing this because it is at the core of our economic and national interest.

DAN KURTZ-PHELAN

The piece is admirably specific in getting into the details of where money should go, how it should be deployed, what kinds of new structures we need. Even so, I think you can look at the sense of China really having a head start on a lot of this and be a little bit pessimistic about the ability of the United States to really catch up. One of the things that, as you note in the piece, holds the United States back is just the somewhat constrained ways we invest, the ways we give out money, the ways that we’re prevented from being as free-spending and agile as the Chinese are. Is that a fundamental disadvantage when it comes to countering Chinese influence, or are there ways to just change the structures and the mechanisms that we have in the United States that would allow us to meet Chinese activities in these areas?

BRIAN DEESE

I think there absolutely are, but it will take willingness to actually do business differently than we have. There is a saying that you hear in capitals outside the United States that China shows up with a checkbook and the United States shows up with a checklist. Now, part of that is because we do operate differently. We believe it’s important to reflect standards and norms around anti-corruption and good government, around democratic norms, around labor and the environment. Those are important values. And the American approach has more potential to scale private capital much more quickly because of who we are and what we represent and the networks that we can help to bring to bear.

So I think the American approach is distinct and our goal should not be to mirror the Chinese approach. But we do have to really up our game because there are a lot of ways in which that criticism is fair, that we show up with too little resource and too many elements on our checklist. And so we’re going to have to change that.

So I talk in the piece about the need for a nuclear energy finance authority that has both the scale, the tools, and the nimbleness to actually do that, to say, “Look, we can use different financial tools––debt, equity, loan guarantees, risk insurance––creatively and flexibly to actually get ahead of and help to lead deals in these jurisdictions, not just tail them.”

DAN KURTZ-PHELAN

Another tool that you refer to in the piece is tariffs, in this case specifically carbon tariffs. But this has been, I think, a somewhat surprising, or surprising to many people, part of the Biden economic policy: the continuation of some of the Trump tariffs on China and the reinforcement of some of those or the addition of new tariffs. And in recent months, many of them in some of the sectors that you wrote about in this piece. In the presidential campaign, it’s of course become a disagreement with Trump arguing for even greater tariffs and some applied to China as well as to our allies, with Vice President Harris defending a more targeted approach. What is the right way of thinking of tariffs as a tool both in the clean energy context and more broadly? How does it not become a slippery slope where you end up protecting any industry that asks for it? What’s the limiting factor here?

BRIAN DEESE

The right application is to think about at least two governors. The first is targeted to strategic sectors where you have a particular economic rationale connected to either a poor national security interest or a set of activities that China or any other country is deliberately unfair or unlawful in one of those strategic sectors. I think you need to start with a view that the goal is to have this be targeted. And that is a big difference, policy-wise, on this issue. It’s certainly a difference between candidate Harris and candidate Trump. It’s a big disagreement. I think that that is one, really important.

The other, I believe, is that wherever possible, to seek to multilateralize this approach—that the power and the impact of actually working with partners and allies to harmonize approaches has two benefits. One is, in the case of China for example, we’ve seen this very interesting strange bedfellow group of countries over the course of the last year come out and take specific action, for example in the steel industry, against dumping from China: Brazil, Vietnam, Thailand, Indonesia, Chile, Mexico.

And the more that the United States can do to actually work to partner with those countries to harmonize the approach, the greater impact it should have on helping to change Chinese behavior, but also the more opportunity there is to increase trade flows among partners in a trading effort. The term that I think is often not completely understood, of “friendshoring,” should also be understood as, as we’re thinking about the limited but important use of tariffs, we should be seeking to actually increase trade in these sectors among partners who are prepared to partner on harmonized approaches. And I think that that’s particularly true in the clean energy context if our goal is diversification.

The most elegant version of that is to actually have border adjustments that reflect the carbon content of goods. And that’s an area where the EU is moving out in 2025 with an approach on that. There’s a growing interest in the United States to actually give the United States more tools and more capabilities to impose border adjustments. I think that the right way to think about doing that is exactly this: targeted sectors, and in partnership with allies.

DAN KURTZ-PHELAN

I think that there are analogous questions or concerns when it comes to another key tool of U.S. economic competition with China and technological competition; and that’s export controls, which have become very, very central to the U.S. approach. I think Jake Sullivan, the National Security Advisor, talked about a “small yard, high fence” when it comes to what is covered by those restrictions. But I think there’s a legitimate concern that that yard is going to get bigger year by year, and we’ll discover more and more sectors that will credibly have some national security risks or competitive risk to them. What principles do you apply there to prevent the just endless expansion and unpredictable expansion of that sphere?

BRIAN DEESE

Yeah, I think that the use of export controls needs to be very narrowly constrained to those areas where you can draw a clear national security nexus to the technology and the activities involved. I recognize in saying that, that requires judgment and that requires prudent execution across time, but I don’t think that there’s a substitute for that.

DAN KURTZ-PHELAN

Many people have been struck by the fact that, I think one speech in which Jake talked about the small yard, high fence was the speech he gave at Brookings, I believe in 2023, which was one of the really major doctrinal economic addresses of this administration. People have been struck that the National Security Advisor was giving that speech. Does that seem like a notable fact to you, a notable change in the way that national security intersects with economic concerns?

BRIAN DEESE

Look, I think if you step back and you look at the Biden administration’s approach to economic policy, you see a high degree of connectivity between the foreign policy goals, aims, and objectives, and our domestic economic strategy. And I think that you see that from the get-go. A core view that we had coming in early 2021 was that for most of our key foreign policy objectives, we would be in a worse position and it would be much harder to achieve those goals if we did not undertake a very significant effort to invest domestically in our own resilience and our own strength.

DAN KURTZ-PHELAN

Just to linger on the industrial strategies, or the industrial policy part of this, for a moment. You’ve been involved in, I think, a very changing discussion on industrial policy and its role in our economic policy more generally. You worked closely on the auto rescue in the Obama years. You’ve studied the history of industrial policy, successful and not. As you look back at those experiences and that history, what are the lessons about when industrial policies succeed and fail? It’s become both a bigger part of our policy but also a controversial one. How do you see the right role for it and the ways in which it should be implemented so that it avoids some of the pitfalls of past efforts?

BRIAN DEESE

Well, first, America’s history with having industrial strategies is long. In fact, most of our history is that it’s the exception rather than the rule when we have moved away from that. You go over the course of history, whether it’s Lincoln and the transcontinental railroad or Eisenhower and the interstate highway system, and the core elements that led to the space race, which was really about providing public incentives to build industrial capacity against a big national mission. So I think that that’s number one, is this is something that has a deeply-rooted tradition in the United States.

The second is that we should be humble and careful in understanding that, like other policies, you can make mistakes in losing focus around what [you] are trying to accomplish and achieve. That’s why for me it’s an important distinction between having an industrial strategy, which I define broadly as saying, “Pick broad sectors of our economy where we believe that, left to its own devices, the private market will under-invest consistent with what we think is necessary for our economic national security goals,” and then try to provide as best we can stable, long-term incentives, public incentives, to encourage private investment in that context. I think that’s broadly what we have done across these big three areas in the United States—of clean energy infrastructure, including new infrastructure, digital infrastructure, broadband, and then semiconductors obviously, the chips element of this.

The more narrowly defined industrial policy is usually defined when the government itself is picking specific companies and picking them out to say, “We need you to succeed and win.” And there are real risks associated with that, but we need to as a country recognize where those risks are necessary because we believe that national goal is sufficiently important. I think semiconductors is a good example. Our semiconductor program is an industrial policy in that sense that there are a limited number of chip makers globally that have the scale and the capability to do what we want, which is to build domestic capability, particularly in leading-edge semiconductors. So we have no choice, unless we want the government to do it all, we have no choice other than to pick a small handful of those companies. And in those cases, I think it’s incredibly important that the government stays focused on defining clear goals and operating prudently against those goals and constantly recalibrating to say, “Do we need to pivot this effort to reflect the realities that you are trying to encourage private investment?” And they operate in different time horizons with different objectives.

DAN KURTZ-PHELAN

You wrote a piece in 2017 in Foreign Affairs called “Paris Isn’t Burning” about why the Paris Agreement, which you’d been part of negotiating during the Obama years, would survive even if Trump formally withdrew. Essentially, the political and economic and technological drivers would not be changed. The train had already left the station in some sense. To the extent that proved to be true, are you similarly sanguine about the progress of some of the initiatives and technological drivers and infrastructure efforts that you’ve been part of in the last few years, that those would persist even under a Trump administration, that the dynamics are similarly already established in a way that makes them somewhat insulated from political changes?

BRIAN DEESE

It’s a great question. I think that, if I reflect back, I was probably too optimistic in my view of how durable the Paris framework could be to the United States abandoning it and really seeking to undermine it during that time period. In fact, it is right that the Paris Agreement survived and the United States is now back in a party, but I think that the damage that was done during that period was quite significant to U.S. credibility, but also to the U.S. ability to be a partner, particularly in some of these areas where we don’t have a clear technological advantage. And so I think we lost real time and that when people say, “Well, isn’t this challenging because China is ahead of the United States in a number of places?”—part of the answer to that is, yeah, because we stepped ourselves off the playing field for a period of time.

So I think I was probably over-optimistic in that space. That said, the risk of making that mistake again—I think that actually the approach that is in place today is more durable for two reasons. One, it is first and foremost grounded in core U.S. economic interests, and the IRA, coupled with the infrastructure bill, is driving very serious economic gains, tangible gains, across the United States in communities across the country, not for nothing, but significantly more in Republican districts than Democratic districts. And more importantly economically, in places that traditionally have been left out of prior expansions, places that are in the flyover states outside of the coasts of this country that are lower income, lower education levels. That’s where we’re seeing more of this investment go.

So that’s piece one. And piece two is, it’s really driving innovation. We should be excited as a country about where we are on a number of these emerging technologies. And I do believe that alongside AI, clean energy innovation is going to be the big areas of innovation opportunity and innovation competition, and the United States is in the game. We may not be ahead of the game in all cases, but we are now really in the game. And so I am cautious but cautiously optimistic that we will see that continue.

DAN KURTZ-PHELAN

Are you worried about the insane energy demands for AI undercutting some of the progress on climate?

BRIAN DEESE

I’m worried about it, but I actually think there’s much more opportunity in here than there is risk, in the following sense. First, the incremental energy demand associated with AI is real but historically modest. It’s only a fraction of what we’ve seen in terms of system-wide electricity demand additions to the grid. It’s just that we haven’t seen that for the last 15 or 20 years. It’s new in this era.

DAN KURTZ-PHELAN

What’s a previous example of that kind of addition?

BRIAN DEESE

Oh, if you look in the 1970s, in the 1980s, and the 1990s, we added significant electricity capacity because we were adding significant electricity demand. The thing that happened in the early 2000s, which is kind of this magical thing, is that we actually succeeded in decoupling economic growth from electricity growth. We got more energy efficient per unit of GDP. And so that thing that people said, “Well, you can never actually grow your economy without growing your emissions or growing your electricity use,” that started to actually break because of clean energy, but also because of efficiency. And that has driven the last 15 or 20 years or so. This is a big enough add to demand that, actually, efficiency is pushing us down, and AI related demand, as well as other electrification, electric vehicles, others, is pushing us up.

I think the opportunity here is to say, “We want to keep our edge in AI technology here, and that means building more in the United States. And we want to accelerate our clean energy innovation. That means building more clean firm capacity here in the United States.” And what I’ve talked about is, we need a national energy policy for AI that says hyperscalers, the big AI companies that are adding these data centers, should add additional clean power. And we as a country should encourage and reward that by having a fast track permitting and siting process and saying, “If you are prepared to actually add clean capacity, whether that is combination of solar and storage, or it’s a more frontier technology like geothermal, or even small nuclear or advanced nuclear, then we should be prepared to have a very serious fast tracking.” This is an opportunity, I think, an impetus to say, “Let’s do a version of permitting reform that really unlocks building that clean capacity here in the United States.” It goes to what we talked about at the beginning, which is we’re going to need to build a massive amount of clean capacity.

And for all of the skepticism about whether we can do that as a country, I think this is an opportunity to say, “Well, what do we need to believe to actually make that happen?” And there’s actually resources and technology that would enable us to do that.

DAN KURTZ-PHELAN

Since we started with the IRA, the Inflation Reduction Act, let me close on that, and really by focusing on the first word of it, on inflation, which has become a huge political issue. If we go back to 2021, 2022, most economists and probably many of your former bosses and predecessors as Director of the National Economic Council were skeptical that it would be possible to bring inflation down from where it was in that post-COVID moment to something closer to the historical norm and the target without a major recession, without a huge surge in unemployment. You all in the administration said that it was possible, and on the economics, you seem to have been more right than wrong. We could see the politics, on the other hand, have been, I think, a little bit nastier on this than most of us would’ve guessed.

As you’ve watched this debate play out and you’ve watched price levels and inflation persist as a political issue and a political liability for the administration and for Vice President Harris, what have you learned about the way Americans interact with this issue and the way that it should be talked about and handled from a policy perspective given the experience of the last few years?

BRIAN DEESE

Look, I think one of my takeaways is that, when the country goes through a historic inflation shock, that’s exactly what it is, it’s a shock, and it affects every family, every business, every household, every community in very real ways, and that the impacts of that will dissipate only as we get distance from the shock itself. And so it doesn’t do anyone any good to try to convince people to feel somehow other than they feel, and that shock continues to persist. And so, it’s important substantively and also politically to continue to do everything that we can to keep bringing costs down across time. So that’s one takeaway that I’ve had.

And the other takeaway I’ve had is, I’ve had the unique opportunity to watch and be part of crisis area economic policymaking a couple of times here in pretty acute crises that were different in important ways. This recovery has been improbable. We have made improbable progress, and so, as much work as we still have to do, I’m grateful that those more dour projections didn’t need to end up being true, and hopeful that we learned those right lessons going forward.

DAN KURTZ-PHELAN

Well, Brian, thank you so much for joining me today. Thank you for both the excellent piece on a clean energy Marshall Plan and also for allowing us to range a little more widely in conversation today. We will look forward to the next piece, and I hope to watch you putting the clean energy Marshall Plan into practice at some point as well.

BRIAN DEESE

Well, thank you. I really appreciate it.