Wonk Wednesday: How we can support domestic manufacturing and fight climate change by investing in industrial transformation
The following post is authored by Ian Wells, BlueGreen Alliance Policy Advisor.
As the U.S. takes necessary steps to both promote an economic recovery and mitigate climate change, two efforts must advance hand in hand: supporting domestic manufacturing and reducing emissions from the industrial sector.
Manufacturing matters. The sector employs 11 million American workers, contributes at least $2 trillion a year to the gross domestic product, accounts for more than two-thirds of private sector research and development, and plays a central role in the balance of U.S. imports and exports. It also has the proven ability to provide pathways into the middle class for millions of workers and families by creating high-skill, high-wage jobs, but it has not always lived up to that promise.
At the base of our manufacturing economy, production of energy-intensive materials, like steel, aluminum, and cement in particular are essential to producing the materials and components needed for clean technology and infrastructure—and, more generally, for modern life.
At the same time, the industrial sector represents a large and growing share of U.S. greenhouse gas emissions. The industrial sector is a leading source of U.S. emissions, and emissions from the sector are projected to increase through mid-century. Yet when industrial production is offshored, adverse pollution and labor impacts only increase.
Both our economic and climate needs are urgent. With the right action in our manufacturing and industrial sectors, we can both grow and sustain good jobs and build a healthy environment.
Industrial transformation is critical to both help manufacturers remain competitive and reduce greenhouse gas emissions.
Transforming energy intensive industries to produce essential materials with far lower emissions can ensure that action on climate change doesn’t drive jobs or pollution overseas. Done right, industrial transformation can also help roll back economic inequality and reverse the slide in wages, benefits, and workers’ rights that has undermined workers and their communities for decades.
It is an issue of global economic competitiveness. Prioritizing investments in modernizing basic industry will not only reduce greenhouse gas emissions, but it will create and retain good jobs. A significant proportion of industrial emission reductions can be achieved by reducing energy waste, which saves money that manufacturers can invest in their workforce or capital improvements. New jobs will also be created in the installation of energy efficiency technologies. Additionally, U.S. manufacturers’ ability to produce clean technologies and to use cleaner processes will allow them to adapt to a global economy in which market demand is shifting to favor low-carbon products.
Other nations are going first in modernizing heavy industry. They are demonstrating cutting edge, low-carbon processes for producing energy-intensive basic materials and fuels. If the United States hopes to compete and to lead, we need to invest in transforming our manufacturing and industrial sectors at the same or greater scale and pace.
The Biden administration is setting the right tone on investments to boost manufacturing and cut industrial emissions.
The American Jobs Plan proposes significant support for domestic manufacturing and promotes policies to reduce industrial emissions, all with an eye toward creating good jobs.
In total, the plan proposes $480 billion in support specifically for the manufacturing sector through a $180 billion investment in research and development and $300 billion to retool and revitalize American manufacturers and small businesses.
This includes $35 billion in research, development, and demonstration (RD&D) needed “to achieve technology breakthroughs that address the climate crisis and position America as the global leader in clean energy technology and clean energy jobs.” The plan also calls for extending the 48C tax credit program, and proposes major additional support to fill supply chain gaps and to facilitate expansion and retooling of American manufacturing to build the technologies of the future. And the plan’s overarching focus on Buy America would also help support domestic manufacturing.
The plan also includes important investments in industrial decarbonization including support for carbon capture and storage (CCS) and hydrogen RD&D, and for investment in 15 decarbonized hydrogen demonstration projects and the establishment of 10 pioneer facilities that demonstrate carbon capture retrofits for large steel, cement, and chemical production facilities, as part of a program to “build next generation industries in distressed communities.” To create a demand pull, the American Jobs Plan also calls for the federal government to purchase low carbon materials in construction projects related to Veterans Affairs hospitals and federal buildings.
Now is the time to go all-in to modernize and transform our industrial base.
The administration is calling for holistic necessary action to strengthen clean technology manufacturing and supply chains. Its call for investment in “pioneer” industrial facilities should be the cornerstone of a similar comprehensive commitment to reinvestment to transform our energy-intensive industrial base. This must include deployment of advanced, efficient and cutting edge technology and processes across industry that both cut emissions and safeguard domestic jobs and competitiveness.
To fill this gap, the administration and Congress should build on the Clean Industrial Technologies Act (CITA) passed last year, and provide at least $22 billion over 10 years to target, fund, and execute a program to strengthen and upgrade America’s energy intensive industrial base, through the following key approaches:
- Provide $700 million to the U.S. Department of Energy’s (DOE) Advanced Manufacturing Office (AMO) to enhance technical assistance programs to assist manufacturers and to identify and deploy industrial energy efficiency and decarbonization strategies;
- Provide $600 million over 10 years to AMO to issue grants to small-medium enterprises to deploy combined heat and power (CHP) and other efficiency and decarbonization technology;
- Provide $6 billion over 10 years to fund DOE to issue grants, rebates, or loans for deployment of significant industrial emissions reduction projects at higher emitting industrial facilities;
- Provide $15 billion over 10 years to DOE to issue grants, forgivable loans, or other support for commercial demonstration and full-scale deployment of groundbreaking ultra-low emissions facilities across all key energy intensive manufacturing sectors;
- Provide appropriate funding to DOE’s Office of Fossil Energy for technical assistance and grants to support deployment of CCUS, targeting energy-intensive industries, and to DOE’s Loan Programs Office as a whole to support industrial transformation objectives; and
- Provide $100 million over 10 years in funding to AMO to establish a grant program to provide financial assistance for the development and verification of Environmental Product Declarations (EPDs) for small and medium businesses who participate in the federal procurement process (e.g. manufacturing such as iron, steel, cement, concrete etc.). This should include the use of captured carbon in products and processes as a way to lower the embodied carbon emissions of an industrial good.
Important pieces of legislation have been introduced in the House and Senate that would support deployment of industrial transformation technology. These include CITA, part of the 2020 Energy Act—which authorized spending for RD&D of industrial transformation technologies—as well as the Manufacturing for Our Future Act (MOFA) and the American Jobs in Energy Manufacturing Act of 2021 (AJEM)—which would provide funding for industrial emissions reduction projects as part of broader investments in retooling and expanding domestic manufacturing of clean energy products. Other bills under discussion would fund CCUS infrastructure and other enabling infrastructure.
Additional legislation is needed, however, to fund comprehensive reinvestment, modernization, and emissions reduction across our energy intensive industrial base. Congress needs to ensure coordinated action on industrial transformation and invest at the scale needed to ensure far more rapid technology deployment across the industry, spur plant modernization and upgrades that secure American jobs and invest in communities, and make the necessary impact on industrial emissions.
Congress should ensure that energy-intensive industrial transformation is an area of focus in any national manufacturing or supply chain strategy, (such as contemplated in the Endless Frontier Act) and that key agencies, such as the DOE and the U.S. Department of Commerce have dedicated—and coordinated—initiatives to focus efforts on industrial transformation.
Building on CITA, MOFA and AJEM, additional legislation should not only include significantly enhanced investment to enable technical assistance and deployment of established efficiency and emissions reduction technology across thousands of small and medium sized manufacturers, but sufficient funding for hundreds of higher emitting facilities to undertake larger and more advanced projects to make significant process improvements and emissions reductions.
Finally, and critically, new legislation is needed to fund the establishment of cutting-edge “pioneer” ultra-low emissions processes and facilities across the core energy-intensive sectors including steel, aluminum, cement, and chemical processing. These investments should complement efforts to shore up critical supply chains and align with geographically targeted economic development priorities. This legislation should not only speed the initial deployment of world leading technology across the industrial sector, but drive investment in projects that utilize the labor, community benefit, and environmental impact tools necessary to jumpstart recovery in distressed communities; these projects should demonstrate a new generation of innovative, clean, fair, and equitable industrial development structured through real and thoughtful engagement of communities.
Reducing industrial emissions is a clear win for our climate and our economy. Action congress takes now to upgrade, modernize, and strategically deploy emission reduction technologies across industry—and the production of basic materials—will shape whether or not we are able to secure and maximize the job growth potential and domestic economic gains in the global shift to a far cleaner economy.