The Decibel - The fight over clean energy jobs in a crucial U.S. swing state

Episode Date: November 5, 2024

The Inflation Reduction Act was passed after a contentious fight in the U.S. Congress, narrowly passing along partisan lines. The bill committed almost US$370-billion in tax credits and spending by the federal government on clean energy projects. It has become one of the Biden administration’s signature legislative wins.And yet, it hasn’t really been mentioned in this year’s presidential campaign. The Globe’s climate policy analyst Adam Radwanski wanted to understand why. So he travelled to Georgia – where a large number of IRA investments have led to a strong clean energy sector – to find out why.Questions? Comments? Ideas? Email us at [e-mail]

One of the defining pieces of legislation under Joe Biden's term as president is the Inflation Reduction Act, also called the IRA. When it passed in 2022, it passed entirely along partisan lines. I think this is one of the most consequential economic disagreements between the two parties in the United States. I mean, we're talking about the current administration spending as much as a trillion dollars U.S. to try to make the United States a clean energy superpower. The impact of this bill has gone beyond building up an industry in America. Its consequences have rippled across borders and into Canada. And that's had a huge effect not just in the U.S., but internationally as well,

where a lot of countries, Canada included, have tried to keep up and follow their lead. And today, the fate of this policy hangs in the balance, as Donald Trump, a big supporter of the oil and gas industry, has vowed to roll it back if he wins. Adam Radwanski is the Globe's climate policy columnist, and he's here to explain how the IRA has transformed the U.S. into a clean energy leader, what it will mean to Canada if it's dismantled, and why it's surprisingly not more of an election issue. I'm Meena Karaman-Wilms, and this is The Decibel from The Globe and Mail.

Adam, great to have you back on the show. Great to be back. So the IRA is meant to build out the U.S.'s clean energy sector. How exactly does this policy do that? It tries to build out clean energy through a massive amount of spending, essentially subsidies. Some of those are for consumers, for things like buying electric vehicles. The bulk of them really are for industry, for things like investing in battery factories, solar factories, hydrogen, carbon capture, decarbonizing the electricity grid.

It does that for industry through a variety of different mechanisms. There's grants and financing mechanisms and all kinds of stuff. But really the biggest thing there is tax credits. It is very heavily skewed to our tax credits, particularly production tax credits, which essentially mean you're not just providing a subsidy for the capital costs of projects, but actually once they're operational, you're effectively for a period after they open, providing a subsidy per unit produced that factory. So it really makes it very inviting to make things that might otherwise not be profitable just yet.

Okay. So there's like the upfront investments, but then also these production credits. So once these things are produced, there's more money coming in then as well. Yes. And that goes into the early 2030s. And how much government spending are we talking about here, Adam? It's hard to say exactly how much government spending, because a lot of the measures are pretty open-ended. Like you don't know exactly how much uptake there'll be on tax credits. But the short answer is a lot. It was originally projected when the bill was passed at around $370 billion US, but subsequent estimates have put it vastly higher than that, in some cases, significantly north of a trillion dollars.

Wow. Okay. So I want to ask you about the name then, because basically what you're saying is this is government stimulus for one industry, for clean tech here. Why is it called the Inflation Reduction Act? I think the name can be chalked up to sort of Washington sausage making. I mean, theoretically, at the time, the administration argued it would help lower costs for people in the long run on things like their energy bills. There's also some other smaller things built into this, not just for climate and clean energy, but for things like healthcare and pharmacare costs. So that's sort of the argument, but really when it was passed a little over two years ago, inflation was a really big deal.

And to get support in Congress for it and in the Senate, it helped to sort of frame it as somehow fighting inflation. So that's what happened. Now, it's worth noting that even Joe Biden has since said that the name was probably a mistake because it's confusing. Okay. That's an interesting point though, that it's kind of dressed up in this way to maybe make people kind of think it does something broader. I don't think it's fooled a lot of people on that. I mean, you can point to a lot of benefits if you're supportive of it. I don't know of anybody who seriously thinks that it has been a major contributor to reducing inflation,

although inflation has gone down. I don't think anybody thinks this is why. So let's look at the ideas behind this here, Adam. This is obviously tied up in America's climate change goals, but there are lots of different ways to tackle emission reductions, right? Why did the US go the route of subsidizing clean tech in this way? Although fighting climate change might be the biggest benefit of this, it's not actually the way that it's been sold entirely. And it's maybe not even the primary political goal.

I think what they're largely trying to do in the U.S. through this is to take on China. I mean, China has gotten out to an enormous lead in making clean technologies. And that is of huge concern in the U.S. So this is largely a sort of an onshoring attempt in the sense of trying to bring economic activity back to parts of the United States that were reliant on traditional manufacturing, but saw that dry up in decades past. And particularly appealing, I think, to Joe Biden, who sort of has a certain Rust Belt sensibility to the way he governed. This was seen as a way to bring jobs back to those places from

newer industries. So it really is sort of a rebirth of American manufacturing is the idea. And of course, anything that happens in the U.S. usually affects what we do here in Canada. So let me ask you about that, Adam. What are the consequences of the U.S. adopting this strategy? What have they been for Canada's climate plans? It's not hard to see a correlation between some policies enacted in Canada and what happened in the United States. Since the Inflation Reduction Act came into effect, Canada has responded with

a suite of its own tax credits, their investment tax credits, not production tax credits. But they total projected over $100 billion Canadian, cumulatively. There've also been some attempts to just directly match US incentives for certain projects. So we've seen that with the electric vehicle battery plants that have gone into primarily Ontario, where they didn't necessarily match the exact mechanism and say, we're going to give a tax credit across the board in the same way, but they'll basically say, you would have gotten in the United States X billion dollars for this. We'll just match that in this case. So there really has been an attempt to keep up, not in every sector. There's somewhere Canada's kind of said,

okay, we're not going to do this. Like solar, for instance, there's really been no attempt in Canada to build up a solar industry in the same way. But on stuff like batteries, we're basically trying to keep up by matching where possible. All right, Adam. So you went to Georgia this fall to get a sense of what these IRA investments really look like on the ground. Why did you pick Georgia? Georgia, possibly counterintuitively, and I think maybe surprisingly even to some Americans, is one of the leading states, if not the leading state, for Inflation Reduction Act investment. So projects backed by the IRA. And of course, it's also a key battleground in this election.

It's one of the seven states that is expected to effectively decide the result. One of the swing states, yeah. Can we look at some examples from Georgia? I mean, is there a specific example that shows this policy, I guess, working as it was intended there? Yeah, there's quite a lot. The whole state is actually dotted with them. One of the biggest examples, maybe the biggest example, is by Q-Self, which is a Korean company that is making solar panels in northern Georgia. It's now the biggest sort of solar hub for manufacturing in the United States.

Wow. Okay. So this is actually where we can see this money was invested there. And we actually see this industry kind of building up then in a place that maybe we wouldn't necessarily expect to. It is absolutely not where you'd expect it to. I mean, this is an area that is represented in Congress by Marjorie Taylor Greene, who is maybe one of the furthest right of all members of Congress. So it's not where you would associate. But what it is, is one of these places where there was traditional manufacturing. I mean, the bulk of QCEL's solar investment has been in

a city called Dalton, a small city in Northern Georgia, which used to be a carpeting and flooring manufacturing capital in the US. There's still some of that there, but it has suffered badly. And so this has now sort of changed the nature of that place where it's not the only game in town, but solar has really brought a lot of new opportunity there and in a way that probably people didn't exactly expect beforehand. So like on the ground, what are the kind of changes, I guess, that people are seeing? In some places, you haven't really seen the effects yet because the announcements have been made, but the work hasn't fully started yet. But in places like Dalton, where this big solar complex is, you'll hear people talking about how restaurants that were empty a few years ago are now booming. And it's just it's sort of classic, you know, revitalizing Main Street sort of stuff.

OK, yeah. So it sounds like in some places it's actually had quite a big impact. So Adam, given that this is an important swing state, as you mentioned in this presidential election, did you find that people in Georgia were engaged in debate around the IRA? Like, is it a big issue there? And the importance of clean deck is something they talk about? I have to say, I went down to Georgia thinking that this would be a real hotbed for discussion of the subject. I mean, I thought there was going to be Democrats and allies of all these industries warning that if the Republicans are elected, if Donald Trump wins the election, that all these jobs will be taken away. I wasn't exactly sure how the Republicans would answer, but I thought there

might be a fair amount of culture war stuff against climate-related investments or blaming it for cost of living increases or whatever. There was a little bit of that, but it really wasn't as visceral as I thought it would be. And in some cases, it was a little bit like pulling teeth to actually be able to talk about it. We'll be back after this message. So, Adam, you said that getting people in Georgia to talk about the IRA was like pulling teeth. Why was that? How much time do we have for this? I have many theories about why this is. I think one reason, in terms of the politicians and why the Democrats aren't talking more about it,

is that I think there's a sense that while job creation is welcome, that it's not the biggest economic issue right now for a lot of voters, that they're more worried about cost of living, and that there is some danger of being blamed for driving up cost of living if they talk too much about all the money they're pumping in. I think with industry and why they're not talking about it more, I think they're very wary of getting caught up in the culture wars. I think there's a sense that this being muted for them is probably better, that the less they are directly associated with a democratic policy heading into an election in which it's basically 50-50 who's going to win, the better for them because they don't want to put targets on their back if Donald Trump gets elected.

So this company you mentioned before, QCELS, this is kind of the situation that they would be in then. Yes. I mean, QCELS did engage with me. They did so in a somewhat reticent way. Hyundai, which is another huge company in Georgia, they've got a big EV and battery complex in Southern Georgia. Again, they engage, but when politics came up, they practically hit under the table. I mean, they just wanted no part of this. That was really quite common. And to be honest, occasionally when the microphones are off, And to be honest, occasionally, when the microphones are off, you sort of say, okay, so what's happening here? Why are we not talking more about this? And it was basically an acknowledgement of, we just want to get past November. We don't want to make this more of an issue that's not helpful for us. If you're putting

a positive spin on this, part of the explanation could be that there's maybe something approaching a quiet consensus on some of these issues, not on fighting climate change, which a lot of Republicans and people on the right in the US don't care about at all, but more in particularly in the sense of competing with China, onshoring, creating some economic opportunity from that, et cetera. So I think maybe if you are, again, a company in this space, an advocate for this space, maybe you don't want to push people further into their respective camps on it than you have to, because maybe the hope is this might quietly continue

if we don't make an article of faith totally aligned with Democrats. Did you meet anyone that was actually playing up the benefits of this policy, Adam? if we don't make an article of faith totally aligned with Democrats. Did you meet anyone that was actually playing up the benefits of this policy, Adam? You've talked about how people don't want to address it, but was there anyone who kind of did the opposite? Absolutely, yeah. There are people who will play it.

I mean, some people certainly from companies that are involved there, you know, who will speak at length about how good it is and that they want it to stay. I mean, there was a smaller solar company, for instance, called SolarCycle, which makes solar components out of recycled goods that, you know, the executive from there I spoke to was quite clear that this is important and wants to continue and that, yeah, their current investment might continue regardless at this point, but, you know, future ones would certainly not go forward if this policy doesn't remain in place. There are environmental activists who will very much talk about how helpful it is. And I spoke to a bunch of those. Even they would say, you have to speak about these

things carefully in a place like Georgia, where there's a fair amount of skepticism still about climate change as a policy priority. So, you know, you don't use the word climate that much necessarily. And you say clean, not green, and all these little distinctions people mentioned. And so why aren't the Republicans talking about the IRA more? I guess, what do you make of the fact that Trump hasn't been out there attacking it? I think it fits into the argument that the Republicans make about the Democrats making life more expensive, et cetera, but they don't make it necessarily totally the focal point of that because awareness might not be quite high enough for that.

Probably also, there may be some awareness that it could backfire on them if they are attacking it strongly. And that allows them to be accused of potentially taking jobs away from places, many of which are in Republican districts. You mentioned a little bit earlier that climate change really is not top of mind in this election for a lot of voters. At least that's what it seems to be based on these conversations that you've been having. Why do you think that is? Why is climate change such a low priority in this election? It's strange, isn't it? Because I mean, even during the election, we've seen some natural disasters or extreme weather events, hurricanes that can be tied to some extent to climate change. You'd think that would make a top of mind. I think we know that on the Republican side of things, a lot of folks just don't take the issue seriously. On the Democratic side, in a way, that's a little more surprising

because if you go back to when this legislation was passed a couple of years ago, it was seen at the time as a huge political benefit potentially for the Democrats. Yes, partly on the job creation side, but also they had been under pressure for years to take climate change more seriously. They campaigned previously in sort of the shadow of the Green New Deal discussion of making a generational investment. This is a generational investment that the people were seeking, and yet it hasn't really seemingly captured the imagination, even of a lot of democratic voters. I think some of it is the concern about it being slightly at odds with what people are worried about right now, which is cost of living. Yeah. Because from what you're saying,

there's kind of some strategy to them not promoting it in that way. Yes. Having covered climate change for a few years now, and this isn't just the United States, sometimes it's a top issue if there's maybe we're coming off a big disaster of some kind, or frankly, if there's not that much else that is top of mind for people. It's typically, even people who care about it, a secondary, third, fourth, fifth issue. And sometimes it doesn't easily align with the issue of the day. And I think that's the case right now. So Adam, let's talk about the future of the IRA then. Presumably under a Harris administration, the IRA would be safe? It would certainly be safe under Harris administration. The question, I guess, with the Harris administration would be, what kind of follow-up is there to it? I mean, I don't think we should expect a doubling of this or something. It's an awful lot of money, but there are

implementation details to it still to be worked out. There are ways to augment certain aspects of it, particularly when it comes to some of the work to clean up the domestic electricity grid. There's a lot of work to be done just to actually get those projects off the ground. And I think at a certain point, I mean, the next administration will serve until 2028. And I think by the end of that time, there'll probably be some discussion of whether some of these tax credits are extended beyond their current sunsets

in the early 2030s. So obviously a Harris administration will be much more amenable to that than Donald Trump won. Right. So if Trump wins, he says he'll roll it back. I guess how feasible is that if these projects are already kind of up and running? I don't think that a Trump administration could just scrap the entire thing. First of all, some money's already gone out the door.

Some has been committed. And on the tax credits, I think there would be some pushback from other Republicans. That's been the case already where earlier this year, 18 Republican members of Congress signed a letter to the House Speaker that basically called for the tax credits to be maintained. But there is room to shrink from the tax credits in scope, to apply them as narrowly as possible. Some of them could be scrapped in the long run. And I think also just in terms of the signal that would be sent,

businesses like certainty to make investments. And if you're making plans to build a factory, you need to know what the revenues are going to be. And those are fairly clear to an extent when this legislation is in place and is reliable. Just even the question of a lot of it being repealed would probably have a pretty chilling effect on further investment in this space. Okay. Just to finish here then, Adam, we talked a little bit off the top about the ripple effects of this policy.

So what would the dismantling of the IRA or even just kind of rolling back some of those aspects, what would that mean for Canada and really for global climate efforts more broadly? If we're talking about Canada, it's obviously fairly contingent on who's in government federally here. There's a pretty good chance that the Conservatives will be in government at some point during the next administration. So on the tax credits, I think we might see a somewhat similar discussion north of the border to the south of the border. I think there'd be a discussion of rolling them back, but I think that's difficult once industry is relying on them. And if they stayed in place to an extent in the US, I think they'd probably stay in place to an extent here. I also don't think you'd necessarily see subsidies scrapped for things like EV battery plants that are already in the works. I think there's a lot of other stuff, though, where it becomes easier to scrap existing programs.

So there are things like the Canada Instructure Bank, which we had a discussion about not long ago in here, which is relevant as a way of financing a lot of clean energy projects in Canada. The Canada Growth Fund is another one, a $15 billion federal financing agency that is fairly new, that was fairly clearly, at least partly, a response to programs in the United States that help finance climate-friendly projects. I think they're likelier to be scrapped if the United States is also pulling back from these things. Globally, I don't think we would see a complete halt to efforts to fight climate change globally. I mean, China, India, to an extent, other giant countries that are starting to move in a certain direction, or have already, in China's India, to an extent, other giant countries that are starting to move in a certain direction or have already, in China's case, moved a lot in that direction, are not going to reverse course

just because the United States does. And there's an argument that even in the United States and in other parts of the Western world, that the private sector wouldn't necessarily do a 180 on things either, that they've already gone pretty far down this path, that they don't just pivot every time there's a change in government. But I do think it would certainly reduce the compendium pressure on all concerned to invest in clean energy. I mean, we have the United States right now, which used to be a laggard,

especially under Donald Trump in his previous time in office. It's now gone right to the front of the pack in terms of effort. It hasn't caught up yet in terms of actual industry. It hadn't compared to China, but it's certainly taken a leadership role. Seeding that role would obviously make it easier for a lot of other countries to slow down as well. That would have ripple effects globally is what you're saying. It would certainly have some ripple effects. It's not going to stop it in its tracks, but it does mean that the chances of a lot of places both building up

these industries and especially hitting their emissions reduction targets, those obviously are going to suffer if there is a pullback by the United States and its allies in treating clean energy as future economy. Adam, so great to have you here. Thanks for doing this. Great to be back. Thank you. That's it for today. I'm Mainika Raman-Wellms. Our producers are Madeline White, Michal Stein, and Allie Graham. David Crosby edits the show. Adrian Chung is our senior producer,

and Matt Frainer is our managing editor. Thanks so much for listening, and I'll talk to you tomorrow.