Briefings, Reports

The political economy of US green industrial planning

Building state capacity for deep decarbonization

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President Joe Biden attends a Domestic Policy Council briefing in the Roosevelt Room of the White House.
President Joe Biden attends a Domestic Policy Council briefing in the Roosevelt Room of the White House. Official White House Photo by Adam Schultz on Flickr.

Multiple avenues for US decarbonization have been institutionally throttled in recent weeks. However, the nascent return of US industrial or supply chain planning offers potential vehicles to deliver decarbonization. This briefing outlines the opportunities this moment provides to embed deep decarbonization, as well as the risks.

Summary

  • (Green) Industrial planning has emerged as a strategic priority in key nodes of the US government. Most striking is the recent invocation of the Defense Production Act (DPA) for clean energy. There are opportunities, if fraught, to institutionalize key capacities to deliver deep decarbonization. 
  • Decarbonization at pace and scale necessitates state-led macroeconomic planning. This includes undertaking critical public projects, steering and coordinating private investment, and managing macroeconomic conditions. The Biden administration’s deployment of the DPA indicates its growing openness to state intervention. 
  • This policy briefing outlines key developments and their politics in the nascent turn towards green industrial planning. The executive is constrained by the limits of its institutional and political–economic powers. Yet, it has sought to make robust interventions to support green production to deliver climate, macroeconomic, and geopolitical aims.  
  • Meanwhile, there is growing bipartisan congressional interest in general industrial planning capacities. Decisive congressional votes likely will not support explicitly green directed or mandated developments. However, they may support institutions and tools that can be deployed towards decarbonization. 
  • Opportunities include building deployable capacities for decarbonization, deepening green political economy inertia, and inaugurating equitable forms of global economic coordination. Risks include stoking geopolitical tensions through over-militarization of the approach, and slow momentum compared to the decarbonization imperative. 

Priority industrial planning capacities

We recommend that policymakers and policy thinkers consider how to build capacity in these three priority areas. 

  1. Public financing and asset management: The US currently lacks a robust public financing institution, such as a national development bank. This leaves industrial support limited to ad hoc legislative funding, as opposed to flexible, robust, and proactive financing. Moreover, it is critical that the state can purchase equity and manage assets. This enables it to steer private capital expenditure and mobilize private debt markets to finance public and private investment.  
  2. Supply chain and productive capacity monitoring: The Biden administration mandated a supply chain review which centred green industrial bases. The legislature is poised to develop a supply chain monitoring body. However, there needs to be greater transparency and robust resourcing, supported through global economic cooperation and coordination, to ensure monitoring is comprehensive.  
  3. Formalized sectoral investment targeting and coordination: Although the executive faces institutional limits to its planning powers, one key domain to develop is indicative planning. By setting sectoral investment targets and coordinating producers and investors, the executive can both influence private capital expenditure and inform industrial planning decisions made by actors outside of the executive. 

Read the full briefing here.

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