Between the Green New Deal and Business-as-Almost-Usual: A Clean Energy Stimulus That Suits the Circumstances

In response to a bipartisan request by the House Science, Space, and Technology Committee, ITIF this week suggested 16 steps the federal government could take to stimulate clean energy and manufacturing if today’s public health emergency turns into a prolonged economic downturn. Our proposals range from reshoring manufacturing supply chains to building stronger partnerships between federal agencies and “hard tech” start-ups, to investing in large-scale energy and industrial demonstration projects, and beyond.

We offer these ideas with humility and without pretense of comprehensiveness. No one can predict the course of the virus with certainty nor economic conditions after the crisis has passed. No one knows how long this initial “induced coma” (to which Paul Krugman likens the shelter-in-place economy) will last nor how well the economy will bounce back from it, much less how quickly medical treatments and vaccines will be developed that would allow something like a return to pre-COVID-19 normalcy. What we need above all right now is the flexibility to effectively manage the next surprise and to lay a no-regrets foundation for policies that will be helpful no matter what happens.

One shocking revelation has been the United States’ dependence on imports of vital supplies. Neither our domestic manufacturing base, desiccated by years of offshoring, nor our trade relationships, embrittled by protectionism, have been up to the task set by the virus. Our proposals call for building up programs such as the Manufacturing Extension Partnership and Manufacturing USA to help reverse these trends, including supporting small- and medium-sized manufacturers that contribute to regionsal economies across the country.

We also recommend measures that would enable these companies to become more innovative by drawing more effectively on expertise and equipment at federal laboratories and federally funded research universities, such as innovation vouchers and lab-embedded entrepreneurship. A more innovative supply chain will be more flexible and resilient, better able to handle not only the uncertainties of the post-COVID era, but also the challenges thrown up by international competitors and rapidly evolving digital technologies. The United States is well-positioned to compete globally in software-dependent sectors, as Zoom’s COVID crisis boom exemplifies. But the intrinsic challenges that face American companies working in the world of atoms rather than bits—such as longer, more expensive development and scale-up cycles—may well be deepened by the crisis.

Finally, many have remarked on the parallels between the pandemic and climate change. Both are global in scope and involve unrelenting natural processes with disastrous human consequences. Some have argued that these parallels warrant a stimulus-on-steroids that would transform the energy system and the economy more broadly. We disagree. The clear and present danger of the virus to the health of our selves, families, and communities has led the public to accept temporary economic hardship to avoid an even worse outcome. But a willingness to swallow this bitter pill does not mean one seeks a new way of life, the still-abstract and long-term threat of climate change notwithstanding. Any attempt to impose such a radical shift would likely provoke a backlash even more intense than the Tea Party uprising that followed the much milder response to the financial crisis a decade ago.

On the other hand, an approach that aims merely to push through bills on the cusp of passage before the crisis struck is not ambitious enough. Our recommendations to invest in electric vehicle infrastructure, energy storage, battery manufacturing, and large-scale demonstration projects move well beyond that emergent status quo. These policies would lead to the employment of many laid-off workers and “crowd in” private investments that will sustain economic activity after the stimulus wears off. Importantly, they would also help expand support for the durable and even-more-ambitious clean energy and climate policies that we will need in the decades to come.

There is plenty of room on the broad middle path between an overbearing Green New Deal and business-as-almost-usual. A no-regrets climate stimulus should stretch outside the Science Committee’s jurisdiction (to which we have limited our recommendations) to include tax, trade, transportation, and agriculture policies. Such a stimulus package would suit the uncertain circumstances that confront us.