Climate Progress Can Be “Made in the USA”

With the next United Nations climate change conference underway in Sharm el-Sheikh, Egypt, the United States can participate with renewed credibility. In August, U.S. President Joe Biden signed into law the United States’ largest ever investment in tackling the climate crisis. The Inflation Reduction Act mobilizes $374 billion to accelerate the deployment and lower the cost of clean energy technologies necessary to replace fossil fuels.

U.S. domestic action alone, however, will not stave off the worst effects of climate change, which include rising sea levels, heat waves, wildfires, and droughts. Developed countries are responsible for the bulk of historic greenhouse gas emissions. But today, developing countries account for more than half of annual emissions and most emissions growth. Even if the United States and other developed countries implemented the pledges they committed to at the previous UN climate conference, COP26 in Glasgow, the world would remain behind on global climate goals, in part because developing countries cannot affordably access many of the technologies necessary to decarbonize quickly. The Inflation Reduction Act will make most of these technologies—such as meltdown-resistant nuclear reactors and clean hydrogen—cheaper domestically. To bend the global emissions curve, the United States should commit to exporting these innovations to lower the cost for developing nations to transition to clean energy.

ON THE MARKET

The Biden administration has campaigned forcefully for climate action. As the inaugural special presidential envoy for climate, former Secretary of State John Kerry has shuttled between capitals to build momentum for lowering carbon emissions. In his first week in office, Biden issued the Executive Order on Tackling the Climate Crisis at Home and Abroad, which directs all U.S. government departments and agencies engaged in international work to integrate climate considerations into their policy initiatives.

But this new direction in foreign policy has unfolded unevenly in practice and remains disjointed from the domestic climate agenda. That is in part because historically the U.S. government has been bad at helping create domestic markets for the technological innovations it helps fund. Since the United States passed the American Recovery and Reinvestment Act of 2009, the government has ramped up incentives for the development of clean energy industries, such as wind and solar. But it is only with the passage of the Inflation Reduction Act that the government truly invested in expanding domestic clean energy manufacturing capacity. This was long overdue. As journalist Robinson Meyer has pointed out, many clean energy technologies the United States helped create, such as solar panels, were ultimately commercialized by foreign companies. The Chinese government, in particular, used forced technology transfers, intellectual property theft, and legitimate joint ventures to capitalize on U.S.-funded research and development. It then offered state support for manufacturing these products. As a result, China exported back to the United States the very technologies that U.S. technical know-how had created.

The Inflation Reduction Act, as well as the Infrastructure Investment and Jobs Act and CHIPS and Science Act, helps remedy this problem by providing funding for domestic manufacturing and ratcheting up tax credits for projects that contain enough domestic content—for example, U.S.-made steel and iron or critical minerals mined at home. When the United States strengthens international climate action, it grows the global market for climate solutions such as clean hydrogen and electric vehicles, in which the United States already has some competitive advantages. Boosting exports presents an unprecedented opportunity for the United States to become the world’s preferred manufacturing hub for clean technologies.

But simply having ripe conditions for exports does not mean they will take off. Whether U.S. companies are able to export new, innovative technologies depends on U.S. government support, especially given competition from other countries recognizing the same opportunity. And for these policies to endure beyond Biden’s tenure in office, clean energy jobs will likely need to proliferate and pay well. In essence, in order to capture this opportunity to generate economic growth by becoming a clean energy manufacturing leader, the United States should overhaul its commercial diplomacy.

NEW CLIMATE BEDFELLOWS

This will require leadership from the Commerce Department, specifically the International Trade Administration, which has its own foreign service. More than 200 officers, posted within the United States and overseas, are charged with promoting U.S. exports. The Biden administration should expand its ranks and train its employees to prioritize exporting novel green technologies, including long-lasting batteries and carbon removal that can durably sequester emissions from the atmosphere. The Biden administration can use this workforce to market resources to nascent clean technology companies and help them access one of the fastest growing segments of the global economy. Persuading these companies to enter foreign markets quickly will ensure U.S. companies benefit from being early entrants. Such perks will otherwise be ceded to companies from countries that promote their national industries more aggressively.

The Commerce Department can aid the U.S. clean energy sector by showcasing domestic companies and trade associations at international meetings on clean energy and climate, including subsequent UN conferences. There, U.S. government representatives should announce export deals to signal to developing countries that U.S. companies can deliver the technologies required to achieve their clean energy plans. The Commerce Department should also encourage its commercial specialists to join climate working groups and create interagency clean technology teams to capture the opportunities opening up abroad as more countries step up to meet their climate goals.

U.S. governmental policy on climate action and export promotion have operated in silos.

The Commerce Department cannot execute this strategy alone. It must work in concert with other departments, especially ones that are leading the Biden administration’s international climate work but are less engaged in commercial diplomacy. To this end, the White House should develop a clean commercial strategy, akin to the National Security Strategy, that charts the course for the entire federal government. There also needs to be interagency cooperation. The State Department, for example, can regularly send its embassies market analysis conducted by the Commerce Department, including information on updated priority sectors and supply chain segments. For example, U.S. diplomats should be made aware that eastern European countries, wary of relying on Russia for energy, appear to be hungry for U.S. nuclear reactor designs. Similar opportunities will abound—U.S. companies might reap the rewards of the Inflation Reduction Act by exporting green steel to Canada or developing geothermal projects in the Middle East and South Africa. The State Department can also deputize a senior official to champion clean technology diplomacy and convene a one-stop shop for U.S. companies looking to access government resources. Relevant departments and agencies could create similar coordinator positions.

Similarly, the Biden administration should direct its export and development finance agencies to prioritize the same technologies that the Inflation Reduction Act and other new legislation funds. These agencies—which include the U.S. International Development Finance Corporation, the Export-Import Bank, and the U.S. Trade and Development Agency—should embrace flexibility where they can. They should finance projects beyond those that narrowly meet high domestic content requirements, because most nascent technologies will not clear the conventional thresholds when it comes to export support. The domestic content requirements in the Inflation Reduction Act are useful in spurring domestic manufacturing, but making commercial and financial support contingent on similar standards would be limiting for U.S. competitiveness abroad. In the same vein, these agencies should support domestic manufacturing that facilitates clean energy exports that take on higher levels of technological risk. A greater focus on facilitating exports of innovative technologies will better match the recent domestic investments in the next generation of climate solutions.

SELLING THE PLAN

The Biden administration should not expect Congress to endow it with more resources to fight climate change, especially because Republicans are expected to take over the House of Representatives in the midterm elections. Selling clean technology exports as a way to compete with China economically, however, is a message that could garner broad support.

Historically, U.S. governmental policy on climate action and export promotion have operated in silos. Uniting them could create a virtuous cycle in which overseas emissions reductions and domestic job creation go hand in hand. This effort could be politically durable given the bipartisan consensus around economic competitiveness and domestic manufacturing. The world stands to benefit immensely from the Biden administration’s domestic down payment on tackling climate change. The United States should extend its hard-won progress on climate to the world. Without it, the United States may go far in achieving its domestic emission reduction targets, but other countries may fall short of theirs.