Using Industrial Policy to Reach Paris Agreement Goals

The passage of two major pieces of legislation has made major changes to the industrial policy landscape—the Inflation Reduction Act (IRA), which contains a sweeping set of green industrial policy measures that will move the US nearly 70 percent of the way toward its Paris Agreement goal, and the CHIPS Act, a major public investment in the semiconductor industry. Coupled with President Biden’s executive orders to determine the causes of green energy supply chain bottlenecks, these new laws signal an increased focus on the policy tools that government can use to boost green industries. But to reach the remaining 30 percent of the Paris Agreement target, government must continue to use trade, emergency declarations, and advance market commitments to create the green energy jobs of the future while limiting inflation. 

That’s why today, the Roosevelt Institute released two new issue briefs that outline how current legislation can continue to enact effective green industrial policy while preventing shareholder supremacy:

• “Seven Ways the Executive Branch Can Turbocharge Green Industrial Policy” explores the seven tools the executive branch has at its disposal to enact and enable bold action in moving to carbon-neutral production—from creating carbon clubs with US trading partners, to creating markets for green energy and industry, to using advanced market commitments and equipment transfers under the Defense Production Act. Authors Arnab Datta, senior counsel at Employ America, Ashley George, policy associate at Employ America, Joel Michaels, JD candidate at Yale Law School, and Todd N. Tucker, director of industrial policy and trade at the Roosevelt Institute, explain how government can use near-term tools to stabilize supply and demand imbalances without resorting to blunt instruments like interest rate hikes that throw workers—disproportionately people of color—out of work.  
• “The Need for Corporate Guardrails in US Industrial Policy” lays out the argument that all industrial policy must include “guardrails” to limit damaging corporate practices, as well as initial examples of how guardrails can be implemented. Co-authored by Roosevelt Institute fellows Lenore Palladino and Isabel Estevez, the policy brief explores the key sectors where US industrial policy is focused, including broadband and the electric sector, and then details recent corporate guardrails in the CHIPS and Science Act and IRA (among other laws). The authors conclude by summarizing several types of opportunities for corporate guardrails in future legislation and regulatory policymaking. 

Selected Insights from Authors

“Policymakers engaging in industrial policy must acknowledge the reality that the dominant corporate paradigm of shareholder primacy has been enormously destructive to productive innovation in the US. We have long needed structural reforms to deepen the guardrails that govern corporate behavior through programs that invest public funds into private companies. And now, with the passing of the Inflation Reduction Act, is the time to do just that,” said Palladino.

“CHIPS and the Inflation Reduction Act reimagine the role of government for an era of economic transformation not seen since FDR’s time. Just as importantly, the IRA shifts our industrial policy away from outsourcing to private industry and sets up government to lead on solving today’s most urgent problems. This means that decarbonization progress won’t be derailed by a recession or other economic downturn,” said Tucker.

You can also learn more about these papers in the blog post, “Energy Resilience and Industrial Policy after the Inflation Reduction Act” by Sunny Malhotra, research associate, industrial policy and trade at the Roosevelt Institute.