FOR decades, US policymakers avoided using two dirty words: industrial policy. America, it was asserted, did not choose winners and losers. That was for the unfettered market to do.
Anything else distorted competition and outcomes. Chicago school US economists warned German industrial policy was wrong-headed; that Japanese industrial might was illusory; that French energy policy choices were ill-advised.
All the while US market distortions, a failure to properly price polluting fossil fuels, corporate short-termism, supported by subsidies and distortive tax treatments, undermined essential climate change policies America and the planet urgently required.
What a difference an effective US president makes. Joe Biden has dramatically changed the policy consensus, spurred the green transition, and embarked upon a dynamic and assertive green industrial policy the likes of which the country has never seen before.
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In 2021, he signed a $1.2 trillion infrastructure investment package, and in 2022 a historic $370 billion-plus plan packed full of climate change incentives and investments.
So, what does this epochal shift potentially mean for Scotland and Europe? The early news is good indeed. Crucially, America is now in the fight for climate and planetary survival.
Gone is Trumpian denialism. In its place, rapid changes to markets and businesses and new opportunities. Fully implemented, the policies will lower US greenhouse gas emissions by 40% by 2030 compared to 2005 levels.
Scotland, Europe, and the world benefits from this step change and green industrial policy, as do countless non-human species potentially saved from extinction. We must take the net-zero pathway that has become open.
Scottish firms and consumers both stand to benefit as this green American shift accelerates. Recently announced US investments in giga factories total $40bn and counting. The Biden administration’s incentives are leading to a proliferation of wind and solar investments, including from European firms such as Vestas, Orsted, EDF and many more.
Today the calculus, with large multi-year incentives, has moved decisively, fundamentally, in favour of renewables.
US incentives for solar, wind, EV manufacturing, battery production, carbon capture and sequestration, long-term energy storage, direct air capture, small modular nuclear reactor, will pay off for America and Scotland, in terms of renewably electrified innovations, technology price drops, and accelerated adoption.
European critics complain about the local content rules and the sheer scale of America’s green incentives are driving investments to the US. This is just sour grapes.
We must have the US in the battle for a liveable sustainable planet. Moreover, the EU, UK, and Scotland are helping lead the green transition today because of their own industrial policies and regulations, incentives, and penalties, designed to change markets and consumer behaviour.
America is finally practising what Europe has been doing for years.
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Instead of whining about the US going green and using its economic might to secure net-zero goals, Scots businesses and leaders should seize the opportunities America’s emerging 50 shades of green will provide.
Already Scotland’s green energy giants are finding investment opportunities in an altered business environment. For instance, Iberdrola and Scottish Power are well placed to apply their industrial expertise to seize American opportunities for growth. Thus, Iberdrola is moving fast with €47bn investments in the green transition, including PNM Resources in New Mexico.
Edinburgh’s established asset managers and investment firms can apply their understanding of environmental, social, and governance (ESG) factors to profit from client demand and align with planetary goals.
In 2022 Scotland’s bankers are leading and leveraging green finance, underpinned by the innovative green finance work by Simon Thompson and the Chartered Banker Institute. Very soon, anyone in finance – in Scotland or America – will have to factor in climate risks, scenarios, measurement, and business plans, or they will fail to deliver for their companies or customers.
Scotland’s highly innovative dynamic and growing green SME sector can pursue export opportunities among the vast market of Gen Z and Millennials in the US, who are climate aware and demanding greener products and solutions as they shift purchasing to fit with personal green and social goals.
Biden’s greening industrial policy is a lifeline to the planet. Today as a result we have an increased chance of survival, of avoiding climate tipping points of no return, of an eventual net-zero future that is still achievable, and a future that need not be dystopian.
We now have the luxury of engaging in debate over the needed redesign of architecture of globalization, to regreen it, regrow it, share it, and remake it. That will be the work of the decades ahead. At least, for now, finally, America is part of the solution.
Stuart PM Mackintosh is executive director of the Group of Thirty and author of Climate Crisis Economics
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