Clean Energy Investments ARE the Best Way to Drive Economic Recovery
Facing a global recession and record unemployment, as the current pandemic makes work impossible for millions of people, our policy leaders must take bold steps toward revitalizing the economy in the long term once the acute health crisis is over. One of the top realms of stimulus they should invest in is a rapid scale-up of clean energy technologies.
A clean manufacturing boom is one of the most promising avenues for putting people back to work for several reasons. First, it’s easy to do. Governments have many tools readily available — some requiring action from Congress or state legislatures, some able to be implemented by a president or governor alone — to guarantee that markets will exist for these emerging technologies. States can mandate electric vehicles and air source heat pumps in buildings. And they can buy the first batch of them to convert their own cars and buildings early on. The federal government can use large-scale loan guarantees to make it easier for factories to retool themselves to manufacture clean equipment. Public research, development, and demonstration efforts can not only create lab and construction jobs, but also accelerate technologies’ path to commercialization, providing better and cheaper options to scale-up in manufacturing and deployment. Subsidies, carbon prices, other financing mechanisms, other mandates, more public deployment, and partnerships with large companies can also play roles.
Governments must embrace a more active role in technology scale-up, closer to what the U.S. did during the New Deal, WWII, and Apollo Program eras than what we’re accustomed to today. But we have plenty of tools to rapidly grow these new industries.
The second reason clean energy technologies are ripe for economic recovery investments is that they are new technologies. With the exception of solar and wind systems, most clean equipment has never been manufactured at large scale. For one bold investment now, we can create new industries that can grow exponentially and export technologies around the world. This gives governments extra bang for their buck.
And because we haven’t manufactured most clean technologies at large scale, they have a lot of potential to come down in cost. Think of how many electric cars we’ve ever built compared to how many gas cars we’ve ever built. Is it surprising that EVs still cost far more upfront, even though they’re cheaper to operate and maintain? By accelerating the scale-up of such technologies, governments can make them permanently cheaper.
Which brings us to the third reason to pursue a large scale-up of clean equipment: energy is currently a major cost for both families and businesses. In particular, low-income families (who will struggle the most throughout the recession and have the least certainty of jobs to return to) pay a higher percent of their income on energy than wealthier families do. With our current fossil fuel based energy system, there is little promise for significant permanent reductions in energy costs, be it for transportation, heating, or electricity. We’ve been using the same basic technologies for decades or centuries. With emerging technologies that we can bring down dramatically in cost, there is the likelihood of energy becoming cheaper than it is today, as newly affordable clean options outcompete current-cost fossil options. Lowering overall energy costs provides a “bonus” stimulus to the economy by leaving families with more income to spend, and businesses with more revenue to hire (or rehire) employees.
We want to move fast with these investments — the normal pace of purely private innovation would not make most clean energy systems cheaper than current systems for years or decades. But with bold government initiatives to spark a rapid initial scale-up (and, where necessary, coordinate focused research), we can make most of these technologies cheaper than their dirty competitors within a few years. The more boldly governments act, the sooner people will enjoy cheaper energy and the faster new jobs will be created. And more jobs will be created in the states and countries that act first.
The final reason to act on these bold policies and initiatives now is that we have another global crisis playing out over a longer time frame than the pandemic: climate change, which is driven mostly by the very fossil fuels that we could replace with newly affordable clean systems. A fact that is often ignored in U.S. climate change discourse is that two thirds of global emissions come from developing countries, so even if we in the U.S. could pay a bit extra for clean equipment, that equipment will not spread around the world in time unless we make it significantly more affordable. If we do, then we don’t have to ask our own citizens to pay extra, so it’s a win-win. It’s also a way the U.S. can basically solve climate change without waiting for other countries’ policies to materialize.
With all of those factors going for it, perhaps the question isn’t whether we should consider a clean technology scale-up as part of an economic recovery plan, but which governors and legislatures will have the foresight and chutzpah to go big enough and act soon enough with such investments, and reap the manifold rewards.
