Energy

Biden will use the Defense Production Act to build clean energy technologies

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When President Biden was on the campaign trail, he named climate change as one of the top crises facing the country. Once in office, he has taken action on climate through executive orders, including setting a target of cutting U.S. carbon emissions in half by 2030 — the most ambitious in the world. The White House also has tried to pass a $555 billion clean-energy and climate investment package through Congress, although it is stalled in the Senate.

Now, Axios reports that Sen. Joe Manchin III (D-W.Va.) — whose earlier objections ended the last attempt at passing climate investments — is again discussing the stalled package with Senate Majority Leader Charles E. Schumer (D-N.Y.). And while Congress negotiates over legislation, the Biden administration is taking further executive action on climate change. On Monday, it used the Defense Production Act (DPA) to support domestic manufacturing of clean-energy technologies, and it invoked emergency powers to end a Commerce Department investigation that was creating uncertainty in the solar industry. Here is what these different actions mean.

Biden invoked the Defense Production Act

The DPA, passed in 1950, allows the president to direct economic activity to support U.S. national defense. Biden previously invoked its authority twice this year to support domestic manufacturing of critical minerals for batteries and for infant formula.

Monday’s announcement supports investment in domestic manufacturing for five clean-energy technologies: solar energy, heat pumps, building insulation, clean hydrogen, and critical grid components. Traditionally, DPA funds have gone through the Department of Defense. Given the technical focus on energy security, for the first time, these funds will flow through the Department of Energy.

These investments may help increase domestic uptake of heat pump technology in particular. Compared to other countries, the United States has lagged in the production of heat pumps, which can both heat and cool a home without using fossil fuels. But demand for heat pumps is growing rapidly, even in colder parts of the United States including Maine and Alaska. Besides cutting carbon pollution and supporting energy independence, heat pumps save American households money on energy bills. One estimate suggests that installing heat pumps in 104 million households would save them a combined $37 billion annually.

Given European fuel shortages after Russia’s invasion of Ukraine, heat pump and insulation manufacturing in the United States also could be used to support Europe’s energy needs. Insulation, in particular, is lightweight and easy to ship.

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Biden also froze new solar tariffs

The president also announced a two-year freeze on new solar tariffs, resolving significant uncertainty plaguing the American solar industry. Using emergency powers under the Tariff Act, for the first time, the president has declared national emergencies related to climate change.

In April, the Commerce Department began a trade investigation after one small solar manufacturer filed a petition. The petition sought new penalties on solar panel imports from several Southeast Asian countries, claiming that these countries were providing a workaround that allowed Chinese manufacturers to avoid tariffs. This created wide uncertainty in the U.S. solar industry, because Commerce Department tariffs can be retroactive and the costs of the fines could have been very high. This uncertainty led to a shortage of solar panels, delaying numerous projects. Some utility companies even announced that they would delay their closing of coal plants.

The freeze on new solar tariffs allows the investigation to continue but removes the potential for new tariffs for the next two years, creating financial certainty for the industry. This will make it easier for solar power to grow, supporting the administration’s goal of cleaning the electricity system of carbon emissions by 2035.

Less intuitively, it also will help workers in the existing U.S. solar industry. Around 200,000 of the 230,000 existing jobs in solar are in installation, sales, and maintenance — all of which typically rely on imported solar panels. In addition, 90 percent of U.S. solar manufacturers usually rely on imported solar panels, focusing on building other components such as racks or inverters. This explains why many American solar manufacturers vocally supported the president’s actions.

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The Senate still may act on climate change

The administration’s broader climate agenda involves $555 billion of clean-energy and climate investments, which probably are necessary to meet Biden’s commitment to reduce U.S. carbon pollution by 50 to 52 percent by 2030. Although the climate investments passed the House in November 2021, the legislation can pass the Senate only if 50 senators agree to pass it via budget reconciliation, a procedural approach that forestalls filibustering. Of course, the Senate is split 50-50 between Republicans and the Democratic caucus, which includes two independents. Manchin, the main Democratic holdout from the previous package, recently expressed support for a more limited reconciliation bill that would be focused on counter-inflationary measures and would include clean-energy and climate investments.

Over the past several months, Manchin convened a bipartisan group of senators to discuss an energy policy package. Senators reported that finding common ground was difficult. At the same time, negotiations over a counter-inflationary reconciliation bill have picked up again, and Manchin indicated publicly that climate and energy investments could be part of this effort. Republican senators also have told the media that Manchin has voiced an openness to pursuing reconciliation-based energy policy.

If a reconciliation deal that includes climate investments emerges in the coming weeks, the United States may start moving toward Biden’s climate goals. That, in turn, could help spur international efforts to address the climate crisis.

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Leah C. Stokes (@leahstokes) is an associate professor at the University of California at Santa Barbara and the author of “Short Circuiting Policy: Interest Groups and the Battle Over Clean Energy and Climate Policy in the American States” (Oxford University Press, 2020). She also is an adviser at Rewiring America and Evergreen Action.

Disclosure: In her nonacademic advisory roles, Stokes has written in favor of using the Defense Production Act for climate action. This article draws on her academic research to explain the policy and its potential consequences.



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