In the race for the White House, former President Donald J. Trump has attacked President Biden’s policy of expanding renewable energy as a “make-China-rich scheme,” since America’s biggest economic rival also controls many of the components needed for electric vehicle batteries, solar panels and other green technology.
However, economists argue that scrapping Biden’s climate policies would ultimately only help China by jeopardizing hundreds of billions of dollars of manufacturing investments already made in the United States and sending that work back to other countries. including China, would be sent.
“If America chooses as a political decision to go back on the green transition, that’s not going to stop the global process, because it’s already happening,” said Stuart PM Mackintosh, economist and author of Climate Crisis Economics. “From a production perspective, all you’re doing is making the Chinese lead in these technologies even greater.”
Mr. Trump, who has called climate change a “hoax,” has taken aim at “every” of Mr. Biden’s policies aimed at weaning the United States off fossil fuels. That includes regulations to encourage electric vehicles and solar and wind power, while cracking down on pollution from coal plants and limiting oil drilling on public lands and in federal waters. The former president has also pledged to withdraw the United States from global agreements to reduce greenhouse gas emissions.
Mr. Biden, who sees global warming as an existential threat, helped Democrats in Congress pass the Inflation Reduction Act of 2022. The law invests at least $370 billion in tax breaks for companies that build wind turbines, solar cells, transformers and batteries used in electric vehicles. It also offers tax breaks to people who install solar panels or buy electric induction cooktops, heat pumps and electric vehicles.
Last month, Trump told a crowd in Wisconsin that he would “end” all new spending subsidies and giveaways under Joe Biden’s massive socialist bills, like the so-called Inflation Reduction Act.
Trump spokeswoman Karoline Leavitt said in a statement that the Inflation Reduction Act “has contributed to the worst inflation in generations.”
But more than a dozen economists, energy experts and business leaders said weakening or repealing the Inflation Reduction Act could undermine American competitiveness in the fast-growing global race to dominate clean energy. “It would be a blow to the manufacturing sector,” said Mark M. Zandi, chief economist at Moody’s Analytics. “China would certainly benefit from it.”
In the first quarter of 2024, investments in clean energy and transportation reached a record high of $71 billion, according to data from the Clean investment monitor, a joint project between the Rhodium Group and the Center for Energy and Environmental Policy Research at the Massachusetts Institute of Technology.
Companies have announced plans to build or expand 164 manufacturing facilities in the United States, creating about 44,000 jobs to develop things like wind turbines, solar cells, transformers and lithium iron phosphate batteries used in electric vehicles. About a third of the new production is operational or under construction.
In addition to weaning the United States off fossil fuels, the combustion of which is dangerously warming the planet, the IRA is an industrial policy designed to bring manufacturing back to the country from abroad, particularly China, where green technology is heavily subsidized.
China produces about 80 percent of the world’s solar panels (compared to about 2 percent in the United States) and makes more than half of the world’s electric vehicleswind turbines and lithium-ion batteries.
Those numbers haven’t changed significantly since the IRA was signed into law. And Chinese Premier Li Qiang, the country’s second-highest official after Xi Jinping, said in March that the country would accelerate construction of solar farms and wind and hydropower projects.
But Biden administration officials said they believe that by pumping hundreds of billions of dollars into lowering domestic manufacturing costs, they will help bring investment home and create jobs. “We’re hearing from CEOs and investors that they are choosing to locate in the U.S. as a result of the president’s policies,” said Ali Zaidi, Biden’s national adviser on climate change.
It’s hard to say whether the investments now pouring into the United States would have gone to China or Europe without the tax breaks provided by the climate law, economists said. But they agreed there’s strong anecdotal evidence that companies are choosing the U.S. over foreign competitors. Some of the biggest beneficiaries of the new investments are Republican-led states where elected leaders oppose the IRA
“If you want to be a battery player in the Western Hemisphere, you have no choice but to be in the U.S. now,” said Tom Jensen, CEO of Freyr Battery Inc., a Norwegian company that is building a factory in Georgia.
Freyr was planning a new factory in Norway when the IRA came into force. The company quickly changed direction, opting to build its Giga America battery factory southwest of Atlanta, where it will earn between $500 million and $600 million annually in tax benefits once the factory is online, a company spokeswoman said .
Electric vehicle manufacturing has seen one of its biggest booms since the IRA was signed into law. The law offers car buyers a rebate of $7,500 when they buy a new electric vehicle, and $4,000 for a used one, as long as the car is not made of Chinese materials.
Those cuts have become a particular target for Mr. Trump and Republicans. Senator John Barrasso, Republican of Wyoming, and 18 other Republicans have introduced legislation to repeal the cuts.
“The electric vehicle tax credit benefits the wealthiest Americans and costs hardworking American taxpayers billions of dollars,” Barrasso said. “By repealing these tax deductions, we keep China out of our markets and allow Americans, not Washington, to use their hard-earned money to buy the vehicles that best suit them.”
Some Republicans also want to eliminate tax breaks for wind turbines, solar panels and electric vehicles in order to renew corporate tax cuts that expire next year. Repeal of the Inflation Reduction Act would require Republican majorities in both the House and Senate.
If the law is not repealed, a Trump administration could use its executive power to delay implementation of certain parts of the law or make it harder for businesses and consumers to take advantage of the tax breaks and refunds.
Elaine Buckberg, former chief economist for General Motors, said that even if Republicans focused only on the consumer rebate for electric vehicles — and left the manufacturing credits companies receive untouched — it would “absolutely” harm American competitiveness.
“Right now there is a real preference to locate your factory in the U.S. and meet the criteria so that your vehicles can be $7,500 less expensive,” said Ms. Buckberg, currently a senior fellow at the Salata Institute for Climate and Sustainability from Harvard University.
Without the IRA and the subsequent surge in demand for wind power in the United States, GE Vernova would never have spent $50 million last year to hire 200 people at its Schenectady, N.Y., factory and set up a new assembly line for its onshore wind business, said Roger Martella, the company’s chief sustainability officer and head of government affairs. It has since completed its first 6.1-megawatt wind turbine, the largest ever produced in the United States.
“These tax benefits are the driving force behind the investment,” Mr Martella said. The company has invested nearly $100 million in turbine and grid-related manufacturing and repair capabilities in the United States since the passage of the climate law, including the Schenectady plant, an onshore wind turbine factory in Pensacola, Florida; and an expansion of the grid factory in Shreveport, Louisiana.
Mr. Martella, who served as general counsel at the Environmental Protection Agency under President George W. Bush, said his company and likely others are preparing to argue to Republicans that the law should be preserved because it has been good for employment, energy security and competitiveness.
“We think these are priorities that are important to a President Trump,” he said. “We are in the early days of a decade-long race in space for who will take the lead in the energy supply chain in terms of manufacturing and innovation, and these policies have really put the U.S. ahead.”
Ellen Hughes-Cromwick, a former chief economist at the U.S. Department of Commerce, noted that companies invest nearly $6 for every dollar they bring in in rebates. “We’re frankly not seeing the same kind of double-digit growth in many of these sectors in other countries,” said Ms. Hughes-Cromwick, now a senior fellow at Third Way, a center-left think tank.
Leaders of organizations that promote free markets were divided over the implications of repealing the climate law.
Nick Loris, the vice president of public policy at C3 Solutions, a conservative-leaning energy group, said he believed grants should only be reserved for things like early-stage research and development of new technologies. He called the $488 billion that has flowed into the United States from private companies a “mixed bag” and said he worries the tax credits have created a manufacturing bubble that might not survive without subsidies.
Alex Flint, executive director of the Alliance for Market Solutions, a conservative group that advocates a carbon tax to combat climate change, also opposes subsidies. But the tax credits have “created hope that we will overtake China” in clean technologies and withdrawing them would make the United States look unreliable, he said.
“Turning subsidies on and off reduces their immediate value and discounts the value of any future US policy,” Mr. Flint said.
Both Biden and Trump are expected to try to outdo each other to appear tough on China on Thursday when they meet for the first presidential debate. Biden has raised some tariffs on steel and aluminum products from China and imposed a 100 percent tariff on Chinese electric vehicles, amid concerns that cheap imports from China could undermine U.S. manufacturing. Trump has proposed imposing a 60 percent tariff on all goods coming from China and a 100 percent tariff on cars made in Mexico by Chinese companies.
