The following blog post was authored by Ben Beachy, Vice President for Industrial Policy
On June 6th, President Biden made waves among policy wonks and activists alike by invoking a Korean War-era law to revitalize manufacturing and take on the climate crisis.
Citing authority under the Defense Production Act (DPA), the President gave a legal green light for the federal government to directly purchase five clean energy goods from U.S. manufacturers: solar panel parts, heat pumps, building insulation, green hydrogen inputs, and electric grid components. The move has the potential to create good jobs for manufacturing workers while making clean energy solutions even more accessible and affordable.
Even more, the novel use of DPA spotlighted the versatile law’s untapped potential to help us manufacture the nuts and bolts of the growing clean energy economy.
Wait, What’s the Defense Production Act?
Congress first passed DPA in 1950 to shape industrial production at the onset of the Korean War. Since then, Congress has reauthorized DPA more than 50 times, and presidents have invoked DPA dozens of times for a wide array of purposes related to national security, from building a domestic aluminum industry in the 1950s to addressing the infant formula shortage just last month. At the beginning of the COVID-19 pandemic, the BlueGreen Alliance, along with many allies, called for DPA to be used to manufacture urgently-needed medical supplies.
DPA gives the President a smorgasbord of legal powers to support “national defense,” which the law broadly defines as including “energy production,” “critical infrastructure protection and restoration,” and “emergency preparedness.” The climate crisis clearly poses a dire and growing threat to our security. So too does our reliance on energy sources that are vulnerable to international price shocks—a point that the war in Ukraine has painfully reinforced. That’s why an increasing chorus of policymakers and advocates have been calling on the Biden administration to invoke DPA to boost manufacturing of the goods we need to support a livable climate and a reliable, homegrown supply of affordable clean energy. With his June 6th announcement, President Biden started to answer that call.
Three Ways that DPA Can Boost Clean Manufacturing
DPA is not a singular tool—it’s more like a toolbox. The law includes an array of policy instruments, including the three that follow, for the President to steer industrial production to support climate and energy security.
- Purchasing clean energy goods from U.S. manufacturers: This is the DPA tool that the Biden administration chose to wield in its recent announcement. The law gives the president the authority to purchase “a critical technology item, for Government use or resale” (section 303a). Thanks to Biden’s move, the U.S. Department of Energy (DOE) can now directly purchase solar components, heat pumps, and other clean energy goods from U.S. manufacturers, spurring clean manufacturing job growth and diminishing our reliance on vulnerable and oft-exploitative overseas supply chains to meet our clean energy needs. Under the law, DOE also could resell the solar panels and heat pumps to U.S. businesses and families at a discount, which would help make clean energy more affordable, reducing our dependence on global energy prices we cannot control.
- Offering loans for clean manufacturing: The president can use DPA to offer low-interest loans or loan guarantees to spur manufacturing of critical clean energy goods and the strategic materials that go into them (sections 301 and 302). For example, the administration could extend loans to boost U.S. manufacturing of electric vehicles and batteries. Such loans also could help U.S. aluminum smelters adopt technology to cut emissions while ramping up production of the aluminum needed for electric vehicles, solar panels, and power lines.
- Retooling factories for clean production: DPA gives the president the authority to buy and install equipment in U.S. factories (section 303e). Such equipment could include clean technology to help manufacturers of aluminum or steel reduce pollution and increase efficiency. The Biden administration also could use this authority to retrofit existing factories to produce new goods that support energy security. For example, DOE could convert aging auto assembly lines into the nation’s newest producers of electric vehicles.
Why Does This Matter?
Some may question why we need to use DPA and other tools to onshore manufacturing of clean energy goods like solar panels and heat pumps. Can’t we just import them on the cheap?
Not if you care about energy security, emissions reductions, worker exploitation, or economic and racial equity. Check out our new factsheet that explores six reasons to pull policy levers like DPA to boost growth in clean manufacturing.
In short, we need these levers so that:
- We build dependable supply chains for critical clean energy sectors instead of pinning our hopes on the whims of multinational corporations and monopoly producers overseas;
- We create good, family-sustaining jobs in clean manufacturing instead of relying on imports from countries where solar panels are made with forced labor and high pollution;
- More workers and communities capture the economic gains of clean energy, building support for climate action; and
- Those economic gains are more equitably shared, with particular benefits for Black and low-income workers who’ve been hardest hit by the decline in manufacturing.
How Big of an Impact Can DPA Have?
While President Biden took a significant step toward clean manufacturing growth by invoking DPA, it was just the start. It remains to be seen how well this law delivers on our climate, jobs, and justice goals. Here are three questions that will help determine DPA’s ultimate impact.
Will the government’s use of DPA uphold strong labor and equity standards? According to the DPA announcement, “the Biden-Harris Administration will strongly encourage the use of strong labor standards, including project labor agreements and community benefits agreements that offer wages at or above the prevailing rate and include local hire provisions.” The administration also committed to “strongly encourage projects with environmental justice outcomes that empower the clean energy transition in low-income communities historically overburdened by legacy pollution.”
Such standards will be essential to ensure that the workers who make the clean energy goods for the government’s purchases earn family-sustaining wages and have the right to organize, while the communities near the factories reap economic, environmental, and health benefits. Such benefits should go first and foremost to the communities and workers who have borne the brunt of environmental injustice, deindustrialization, systemic racism, and economic divestment. Though the Biden administration cannot legally “require” manufacturers to uphold all such labor and equity standards to qualify for DPA purchases, DOE could name specific economic, environmental, and racial justice objectives; use existing legal authorities to align DPA purchases with those objectives; and publicly report on the results.
Will DPA have enough funding? Funding levels are currently the main constraint on the scale of DPA’s impact. The DPA Fund is slated to have up to about $1 billion in fiscal year 2023, including about $400 million carried over from last year and a request from Biden for Congress to appropriate over $600 million more. While $1 billion is no chump change, it’s far smaller than the investment needed to meet our clean manufacturing and climate goals.
There are two paths to get more funding for DPA. First, Congress could appropriate more money for the DPA Fund. For example, Congress could add DPA funding to the reconciliation bill that is currently before the Senate, boost DPA’s funding level in the 2023 appropriations bill currently before the House of Representatives, and/or pass subsequent funding bills with DPA investments. Second, President Biden could reallocate U.S. Department of Defense funds to fill the DPA coffer. To do so, he could cite his declaration of an electricity emergency, which was part of the recent DPA announcement, as the legal basis for shuffling funds.
Will the Biden administration continue to use DPA’s many tools? With his announcement, President Biden picked up just one of the many DPA tools that could help spur clean manufacturing. As mentioned, the administration also could use DPA, for example, to extend loans or retrofit factories to support low-emissions manufacturing of clean energy goods and materials. In addition, Biden could leverage DPA to support sectors beyond the five included in this initial announcement, such as wind turbine components and critical clean energy materials like aluminum. There is no legal limit on how many times a president can invoke the law.
The potential for DPA to help boost clean manufacturing is large, multifaceted, and up to policymakers and advocates. Properly deployed, this 72-year-old toolbox could help retool our economy for the clean manufacturing needs of today and tomorrow.