In his race for the White House, former President Donald J. Trump denounced President Biden’s policies to expand renewable energy as a “plan to enrich China,” since America’s biggest economic rival also controls many of the components needed for electric vehicle batteries, solar panels and other green technologies.
But repealing Biden’s climate change policies would put hundreds of billions of dollars of manufacturing investment already in the U.S. at risk and send that investment back to other countries, including China, ultimately helping China, economists say.
“Even if the U.S. were to choose to back away from greening as a political decision, it would not stop a global process that is already underway,” said Stuart P.M. McIntosh, an economist and author of “The Economics of the Climate Crisis.” “From a manufacturing perspective, it would just increase China’s advantage in these technologies.”
Trump, who has called climate change a “hoax,” has criticized “everything” of Biden’s policies aimed at weaning the U.S. off fossil fuels, including regulations aimed at promoting electric vehicles and solar and wind energy, cracking down on pollution from coal-fired power plants and limiting oil drilling on public lands and federal waters. Biden has also pledged to pull the U.S. out of international agreements aimed at reducing greenhouse gas emissions.
Biden, who sees global warming as an existential threat, helped congressional Democrats pass the Inflation-Breaking Act of 2022, which would provide at least $370 billion in tax breaks to companies that make wind turbines, solar cells, transformers and electric vehicle batteries. It also offers tax credits to people who install solar panels and buy electric induction stoves, heat pumps and electric cars.
Trump told a Wisconsin audience last month that he was “ending” all new spending subsidies and benefits that are part of Joe Biden’s giant socialist bill, the so-called Stop Inflation Act.
Trump spokeswoman Caroline Leavitt said in a statement that the Inflation Control Act “contributed to the worst inflation in generations.”
But more than a dozen economists, energy experts and business leaders said weakening or repealing the inflation-fighting law could eradicate American competitiveness in the fast-growing global race for clean-energy dominance. “It would be a blow to manufacturing,” said Mark M. Zandi, chief economist at ratings firm Moody’s Analytics. “China would certainly benefit.”
Clean energy and transportation investments are expected to hit a record high of $71 billion in the first quarter of 2024, according to data from the Clean Investment Monitor., A joint project between the Rhodium Group and the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research.
Companies have announced plans to build or expand 164 manufacturing facilities across the U.S., creating about 44,000 jobs developing products such as wind turbines, solar cells, transformers and the lithium iron phosphate batteries used in electric vehicles. About a third of the new manufacturing facilities are either operational or under construction.
The IRA is an industrial policy designed to not only transition the U.S. away from fossil fuels whose burning is dangerously warming the planet, but also to bring manufacturing back home from overseas countries like China, where green technologies are heavily subsidized.
China produces about 80% of the world’s solar panels (compared to about 2% in the United States), and more than half of the world’s electric cars, wind turbines, and lithium-ion batteries.
Those numbers haven’t changed significantly since the IRA was signed into law. Premier Li Qiang, China’s second-highest ranking official after President Xi Jinping, said in March that he would speed up construction of solar panel farms and wind and hydroelectric projects.
But Biden administration officials said they believe spending hundreds of billions of dollars to lower domestic manufacturing costs could help attract investment and create jobs. “As a result of the president’s policies, we’re hearing from CEOs and investors who are choosing to expand their operations in the United States,” said Ali Zaidi, Biden’s national climate adviser.
Economists say it’s unclear whether the investment now happening in the U.S. would have flowed to China or Europe without the tax credits provided by the climate change law. But they agree there is strong anecdotal evidence that companies are choosing the U.S. over foreign competitors. Notably, some of the biggest beneficiaries of the new investment are Republican-led states with elected leaders who oppose IRAs.
“If you want to do battery business in the Western Hemisphere, you have no choice now but to be in the United States,” said Tom Jensen, CEO of Frey Batteries, a Norwegian company building a factory in Georgia.
Frey was planning a new factory in Norway when the IRA took effect, but the company quickly reversed course and built the GigaAmerica battery plant in southwest Atlanta, which will earn it $500 million to $600 million in tax credits annually once it’s operational, according to a company spokesman.
Electric vehicle manufacturing has seen its biggest boom since the passage of the IRA, which provides a $7,500 discount on the purchase of a new electric vehicle and a $4,000 discount on the purchase of a used one, as long as the car isn’t made with Chinese-made materials.
These refunds have been a particular target for President Trump and Republicans, with Sen. John Barrasso, R-Wyo., and 18 other Republicans introducing legislation to repeal the refunds.
“Electric vehicle tax credits benefit the wealthiest Americans while costing hardworking American taxpayers billions of dollars,” Barrasso said. “Eliminating these tax credits would lock China out of the U.S. market and allow Americans, not Washington, to use their own hard-earned money to buy the cars that are best for them.”
Some Republicans also want to repeal tax credits for wind turbines, solar panels and electric cars in order to extend corporate tax cuts that expire next year. Repealing the Inflation Control Act would require Republican majorities in both the House and the Senate.
Even if it falls short of repeal, the Trump administration could use executive power to delay implementation of certain parts of the law or make it harder for businesses and consumers to access tax benefits and refunds.
Elaine Backberg, a former chief economist at General Motors, said even if Republicans targeted only consumer discounts on electric vehicles and left the manufacturing credits that companies receive untouched, it would “undoubtedly” still hurt U.S. competitiveness.
“The trend right now is that if you put a factory in the U.S. and meet the standards, you can make the car $7,500 cheaper,” said Backberg, now a senior fellow at Harvard University’s Salata Institute for Climate and Sustainability.
Roger Martella, GE Burnova’s chief sustainability and government relations officer, said that without the IRA and the subsequent surge in wind demand in the U.S., the company wouldn’t have hired 200 people and spent $50 million last year to set up a new assembly line for its onshore wind business at its Schenectady, New York, factory. The company has since completed its first 6.1-megawatt wind turbine, the largest ever built in the U.S.
“Those tax credits were the catalyst for the investment,” Martella said. The company has invested nearly $100 million in turbine and grid-related manufacturing and repair capacity in the U.S. since the climate change law was passed, including expanding its Schenectady, onshore wind turbine factory in Pensacola, Florida, and its grid factory in Shreveport, Louisiana.
Martella, who served as general counsel at the Environmental Protection Agency under President George W. Bush, said he was preparing to make the case to Republicans that the law should be preserved because of its positive effects on job creation, energy security and competitiveness.
“We believe these are key priorities for President Trump,” he said. “We’re in the early stages of a decade-long space race for who will lead the energy supply chain in manufacturing and innovation, and these policies really position the United States to lead.”
Ellen Hughes-Cromwick, a former chief economist at the Commerce Department, says companies invest nearly $6 for every dollar they receive in kickbacks. “Frankly, other countries aren’t seeing the same double-digit growth in many of these areas,” says Hughes-Cromwick, now a senior fellow at the center-left think tank Third Way.
Leaders of pro-free market organizations are divided over the impact of repealing the climate change law.
Nick Loris, vice president of public policy at the conservative energy group C3 Solutions, said he believes the subsidies should only be used for things like early-stage research and development of new technologies. He called the $488 billion that has flowed into the U.S. from private companies a “mix of good and bad” and said he worries the tax credits have created a manufacturing bubble that might not survive without the subsidies.
Alex Flint, executive director of the Alliance for Market Solutions, a conservative group that advocates for a carbon tax to combat climate change, also opposes the subsidies, but he said the tax credits create “hope that we’re catching up with China” in clean technologies, and eliminating them would make the U.S. look unreliable.
“Continually providing and terminating subsidies reduces their immediate value and their value for future U.S. policy,” Flint said.
Biden and Trump face off in their first presidential debate on Thursday, likely vying to appear tough on China. Biden, concerned that cheap Chinese imports could undermine U.S. manufacturing, has raised some tariffs on Chinese steel and aluminum products and imposed a 100% tariff on Chinese-made electric vehicles. Trump has proposed a 60% tariff on all goods from China and a 100% tariff on cars made in Mexico by Chinese companies.
