Tony Dejak/AP Photo
Solar panels are manufactured on the assembly line at the First Solar manufacturing plant, October 6, 2021, in Walbridge, Ohio.
During the 1999 protests against the World Trade Organization’s Ministerial Conference in Seattle, a multiplicity of labor unions (from the United States and around the world), student groups, environmentalists, NGOs, liberals, socialists, and anarchists protested against free-trade deals and the damage they did to everything from human rights and the environment to living standards and freedom of expression. In a 20-year retrospective on the protests, the AP reported that they “raised awareness of the international trading system and its implications for the environment, labor standards and human rights.”
Twenty-three years later, President Biden signed the Inflation Reduction Act (IRA), which includes $386 billion for climate energy spending and tax breaks. Within the topline figure, more than $50 billion is reserved for clean-energy manufacturing, the largest investment ever of its kind, which according to estimates would create over 900,000 jobs over a ten-year period. Industrial policy, once seen as an iconoclastic measure circulated among policy wonks and industrial union staffers, is now the central pillar for the future of green manufacturing in the United States.
The strict sourcing provisions of the IRA vindicate the labor and human rights demands from the 1999 protests. In a previous era, regardless of the abject labor standards and human rights violations overseas, outsourcing was seen as a net good in the name of efficiency. Even when the offshoring reached places such as the Democratic Republic of Congo, where children mine the cobalt for the lithium-ion batteries of the developed world, or Xinjiang province in China, where the forced labor of Uyghurs turns out polysilicon, a key input for solar panels, Wall Street and financialized U.S. corporations continued to defend the “free trade” doctrine in which such practices were seen as tolerable. Then last year, the Biden administration attempted a crackdown on the imports of Chinese polysilicon. But the Department of Homeland Security warns that the “lack of supply chain visibility” means that ensuring Uyghur forced-labor polysilicon is excluded will require “cooperation across stakeholders, including industry, civil society, and federal agencies,” suggesting that some imports still might make their way through U.S. supply chains. China currently controls 80 percent of the world’s polysilicon supply, nearly half of which comes from Xinjiang.
The logic behind such offshoring has allowed the U.S. to see its total emissions drop since 2005, even as importing clean manufacturing inputs from countries with lower energy standards has heightened the level of emissions in those nations. But the IRA subverts that logic by prioritizing onshore domestic production as well as reducing industrial emissions.
Within the United States, one-third of carbon emissions come from the industrial sector, and before the IRA, that was the only sector in which emissions were expected to rise, even as the U.S. produced the second-cleanest steel in the world. The IRA was written to decouple the growth in domestic manufacturing from the continued growth of emissions, by incentivizing manufacturers to acquire their materials from clean-energy U.S. producers.
Ben Beachy, vice president of manufacturing and industrial policy at the BlueGreen Alliance, explained to the Prospect that onshoring manufacturing to the United States matters because it links progress on climate action with good manufacturing jobs and practices. By broadening the number and type of Americans who benefit from the economic security of green investments, the coalition for communities advocating for climate action has grown larger. Climate action is no longer solely about saving an abstract future. Climate action now is about someone’s next paycheck.
OF THE $50 BILLION INCLUDED in the IRA, $40 billion goes for investments in domestic production.
The IRA estimates that will spur the creation of 900,000 new jobs over a ten-year period. According to the University of Massachusetts Amherst’s Political Economy Research Institute, 250,000 of those would be direct manufacturing jobs, another 290,000 upstream jobs through the creation of rebuilt supply chains, and lastly 380,000 that would come as a result of the increased economic activity of the workers in the newly created jobs.
The $40 billion figure is divided between two types of tax credits: $30 billion for a new production credit that narrowly targets large-scale projects such as solar, wind, battery manufacturing, and critical minerals processing. The remaining $10 billion expands 48C manufacturing tax credits, established under the American Recovery and Reinvestment Act of 2009, which go to new projects once the Department of Energy has decided they meet clean-energy criteria.
Typically, Wall Street investors steer clear of manufacturing investments, both because of the unknown timelines for profitability that many such investments entail, and because of the massive up-front costs for manufacturing. Under the IRA’s new tax credits, however, manufacturers now have an opportunity to get five years of funding without needing Wall Street’s financing. By the estimates of the BlueGreen Alliance, that will translate to creating “560,000 good jobs over the next decade.”
The socioeconomic potential these jobs would bring is significant. According to the Economic Policy Institute, the decline of manufacturing in the U.S. has had its most adverse effects on workers of all races without a college degree. From 1998 to 2020, for example, the number of Black workers in manufacturing dropped by 30.4 percent—a loss of 646,500 jobs. In total, five million manufacturing jobs were lost in that same period.
The loss of such jobs has compounding effects. Black, Hispanic, and Asian American Pacific Islanders in manufacturing earn around 14 to 18 percent more than their non-manufacturing counterparts. For white manufacturing workers, the disparity is larger: They earn 29 percent more than non-manufacturing white workers.
Under the IRA, $4 billion is reserved for targeting communities that have faced the economic consequences of the energy transition. The act’s targeted investments also prioritize swaths of the country that have faced economic disenfranchisement as coal facilities have shut down or are in the process of doing so.
As to cutting industrial emissions, according to the BlueGreen Alliance, the IRA reserves $6 billion for manufacturers to invest in “emissions-reducing upgrades at steel, aluminum, cement, and other energy-intensive industrial facilities,” which would lead to an estimated creation of 120,000 jobs over a five-year period. Those upgrades, the Alliance calculates, translate to cutting nearly 70 million metric tons of global pollution—a reduction that’s equivalent to the effect of running almost 20,000 wind turbines for a year.
Outside of the $50 billion figure is a separate $127 billion set of clean-electricity tax credits that incentivize the use of domestic parts and materials. To qualify for an additional 10 percent in clean-energy tax credits, electricity producers must use domestically produced iron and steel where “U.S. production accounts for roughly half of the value.” These requirements also apply to nonprofits and government entities that wish to use direct-pay options. These funds are categorically different from the $50 billion going to manufacturing. The $127 billion comes in the form of tax credits, while the $50 billion comes as a direct manufacturing investment.
Years from now, Beachy told the Prospect, the IRA could be an inflection point. Before its enactment, climate action was seen as something to be done through private markets, which would take 90 percent of the load while the government did the remaining work. It would happen at the discretion of Wall Street, when Wall Street was taking an unusually long-term view of the future, or just had flashes of beneficence. Such views and flashes, however, were too few and far between to seriously address the climate crisis. The profits of offshoring to where labor was cheap and production was dirty almost invariably eclipsed whatever other concerns Wall Street might have.
Now, a new industrial financier, with very different priorities, has come to town. With the IRA, the government has established the beginnings of a green industrial policy framework. If industry now wants capital for future U.S. manufacturing, it’s public capital that will enable them to create both jobs and a cleaner planet.
