However, implementing agencies, localities, and civil society are now finding that unusual bedfellows can lead to difficult trade-offs, especially when it comes to balancing national security and economic security objectives with the accelerating timeline needed to meet climate and environmental targets.Ĭhina is at the heart of these trade-offs. The coalescing around the IRA of groups advocating for domestic labor and manufacturing, energy and national security, and climate was a political revolution for climate policy that enabled the broad law to pass. The overlapping goals reflect the domestic politics surrounding the IRA and other relevant laws, such as the Bipartisan Infrastructure Law (BIL). These objectives are broad and subject to interpretation, further complicating the law’s implementation. manufacturing, strengthening national security through supply chain resilience, and accelerating the energy transition. The IRA’s deployment of industrial policy tools targets at least three distinct policy objectives: revitalizing U.S. Since the IRA became law in August 2022, it has put in motion various bureaucratic and corporate actions that have been reshaping supply chains around the world. The IRA is the most ambitious climate regulation ever passed in the United States, providing incentives to promote the deployment of climate technologies, including renewable energy and electric vehicles (EVs). Nowhere is the nexus between economic, national security, and climate objectives more visible than in the Inflation Reduction Act (IRA). This points to an urgent need to develop a new way of thinking that better integrates trade, and all the political and economic issues that come with it, in the climate policy tool kit. Moreover, the conflation of national security, climate, and economic objectives could lead to unfocused policies, ultimately undermining the deployment of low-carbon technologies. However, increased trade barriers and misallocated investment could undermine the stability of the global trading system. policy, suggesting that de-risking may be working. Increased investment and policy focus on climate is a positive trend, as there is a significant gap in funding for clean energy globally, and some supply chains are shifting in response to U.S. The overlap between decarbonization and supply chain resiliency, the strengthening of domestic manufacturing, and national security has fueled the adoption of green industrial policy tools. The climate agenda has become inextricable from economic policy and, increasingly, geopolitics. Evaluating Trade-offs in Climate and Trade Policy climate strategy when it comes to trade and international relations and how to integrate climate strategy with the Inflation Reduction Act and green industrial policy efforts. More consideration should be given to the specifics of U.S. As a consequence, the interaction between trade, geopolitics, domestic economic policy, and climate policy demands a new holistic approach from policymakers and civil society to find more politically sustainable and effective policy solutions. In the United States, the rise of the economic-climate agenda and green industrial policy has coincided with growing attention to supply chain resilience, economic security, and a deteriorating U.S.-China relationship.
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