If there was any doubt that we are now locked in a race to lead the global transition to a low-carbon economy, look no further than the speeches of Presidents Joe Biden and Xi Jinping, delivered to their respective legislatures in March, less than a week apart.
While Biden celebrated America’s industrial and technological renaissance with 15 million new jobs and $650 billion of private sector investment, Xi told legislators that China must “win the battle for key core technologies” in a new era of “technological revolution and industrial transformation.”
Both leaders are on the same page, at least when it comes to understanding what is at stake. They see a fundamental revolution of the global economy taking shape, which is now happening hard and fast. And as in any revolution, they know economic and political power are up for grabs.
The not-so-great news for Americans is that, in this race, China has a commanding head start.
While the U.S. embraced its low-carbon transition in earnest only two years ago with Biden’s Inflation Reduction Act, the CHIPS and Science Act and a Bipartisan Infrastructure Law, China has been building its clean tech industries for more than a decade. Last year alone, China invested $890 billion in clean energy sectors, equaling the GDP of Switzerland, and it now produces nearly two-thirds of electric vehicles.
The result is that China has gained strategic control of key supply chains for green and low-carbon growth.
For example, it controls more than 80 percent of the global production chain for solar panels, meaning that manufacturers in other parts of the world are beholden to Chinese companies for key inputs such as polysilicon, wafers and solar cells. China also controls 60 percent of critical minerals, including cobalt, lithium and rare earths vital for the tech industry, EVs and clean energy.
However, this paradigm shift in the global economy is a marathon, not a sprint. That means America can still catch up. To do so, the next administration must double down on the Inflation Reduction Act and other policies that have turbo-charged investment in clean technologies and advanced manufacturing capacity in the US.
The Inflation Reduction Act shows America is serious about economic competitiveness and understands the consequences of depending on supply chains controlled by economic rivals. But the economic policies that are now in place are just the start.
There can be no wavering or mixed signals to American investors and companies, or any doubt about the direction of travel, because the rest of the world is moving forward, and the U.S. cannot afford to be left behind.
Europe, for example, will soon begin applying a levy on imported goods, based on the volume of greenhouse gases emitted during their production. Other regions are sure to follow. And at the last count, more than 40 countries, accounting for half of global GDP, apply some form of carbon pricing.
This should be a wake-up call to all American exporters, particularly those in carbon-intensive sectors. Being high carbon is not a sign of principled political resistance to be applauded. It’s an increasing economic liability. Export markets are at risk of being lost. Jobs and households will suffer.
What should be clear is that this transition to a low-carbon economy is no longer about the urgent need for climate action — although this will be a big benefit, if we do it right. It is about jobs, innovation, markets, national security, and above all, cutthroat economic competition. It is an economic race for the future.
That is why the next administration must do all it can to further expedite a rapid transition to the new economy while prioritizing investments that address the rising vulnerability of communities around the country to climate change.
In addition to reinforcing the Inflation Reduction Act and other existing programs, three areas need urgent attention to win this economic race: a national reckoning of the climate-related risks faced by families, communities and businesses; more comprehensive planning to strengthen communities to become more resilient to climate change and a national focus on investing in and protecting nature and biodiversity.
Global warming is already inflicting significant financial harm to families and communities. Insurance premiums, for example, have skyrocketed for homes in areas that are vulnerable to climate disasters. And major insurers are pulling out of states including Florida and California because of mounting climate-related losses.
The result is that millions of homeowners across the U.S. cannot get insurance or are forced to pay premiums that jeopardize their financial stability. The extent of this issue is only beginning to be fully understood.
In this regard, the decision by the Treasury Department’s Federal Insurance Office to begin collecting detailed, local insurer data nationwide is a welcome and important first step, as it will give policymakers a comprehensive view of how climate-related financial risks are impacting individuals and families across the country. The next administration must not shy away from being clear with the American people about the severity of the mounting crisis.
Knowing how climate risks impact homeowners at the local level will also help communities build preparedness for a world of growing weather extremes. A vulnerable community is not a secure community and cannot be an economically thriving community. Building climate resilience into our national and local infrastructure and zoning codes is the key to building a healthy and competitive economic future.
Lastly, we need to pay greater attention to our still bountiful but rapidly declining natural capital. There is no healthy economy or long-term economic competitiveness without healthy soils, clean air and water and a rich biodiversity. But scientists warn us that our farmland is exhausted, our southern cities could run out of water, and 40 percent of U.S. wildlife and natural habitats are endangered.
The next administration needs to tackle our natural crisis with the same urgency that this administration prioritized climate action. In the same way that we price carbon emissions, we urgently need to do a better job pricing and valuing the services that nature provides so that we can fund critical conservation and stewardship efforts that will nurse our natural ecosystems back to health and position us for long-term sustainable economic growth.
There is much unfinished business to occupy the next administration. The transition to a low-carbon world is the most consequential economic transformation in human history.
America might still win it, but only if we treat it as the economic race of the century. This is not a time to rest on one’s laurels. It’s time to double down.
John Morton is managing director and head of Americas at Pollination, a climate change investment and advisory firm. He is the former climate counselor to Treasury Secretary Janet Yellen and was President Obama’s senior director for Energy and Climate Change at the National Security Council.