(Bloomberg) -- An array of US government tax credits, loan guarantees and research are unlocking billions in private sector investments that can build a clean energy economy, President Joe Biden’s top economic adviser Lael Brainard will say Tuesday.
The former Fed vice-chair is set to extol the benefits of historic public incentives that are driving spending toward green manufacturing and innovation — helping “to position the United States at the forefront of the industries of the future,” according to her prepared remarks for a launch event of the new MSCI Sustainability Institute during New York Climate Week.
Programs and tax policies in Biden’s sweeping climate, infrastructure and semiconductor laws “have the potential to catalyze a dramatic transformation of our economy toward the sectors, technologies and places where investment will be most productive and is most urgent,” Brainard, director of Biden’s National Economic Council, will say, according to prepared remarks. Biden’s Paris Agreement pledge to at least halve US carbon dioxide emissions below 2005 levels by the end of this decade in many ways hinge on the success of that transformation.
Brainard’s vision — touting climate investment and innovation as intertwined with American economic progress — is central to the White House’s “Bidenomics” pitch that public spending can entice more private investment, creating good jobs, moderating inflation and driving overall growth.
Yet the administration’s message has not fully resonated in many American households. Consumers see still-high prices across the board, deteriorating housing affordability and soaring costs at the gas pump.
A looming government shutdown risk at month's end and the administration’s efforts to address student loans have added to economic worries. Biden's attempts to build a bridge between union workers and the Big Three automakers on negotiations weren't able to ward off a strike that has idled three key manufacturing plants.
Yet climate investment is a bright spot for the administration, which estimates that more than $200 billion has been steered toward clean manufacturing and green technology purchases following enactment of Biden’s signature climate law last year. Brainard casts that as part of a broad “economic transformation” that will require increasing investments and taking risks to support new technologies that will be essential to cutting greenhouse gas emissions and ultimately reaching net zero by mid-century. That could include direct air capture technology to suck carbon dioxide from the atmosphere and the production of clean-burning hydrogen to displace polluting fuels. Doing so will be crucial to limiting global warming to within 1.5C of pre-industrial temperatures.
“President Biden’s policies are designed to be flexible as climate science and technologies evolve and to allow public incentives to be a force multiplier for private capital that will drive the green economy,” she is set to say, according to prepared remarks. “Our approach is government-enabled and private-sector-led. It is the core strength of the dynamic US economy — catalyzing innovation in industries of the future.”
The Inflation Reduction Act is already helping lure more capital to the earliest-stage climate startups, Brainard will say, partly because it provides new options to transfer some tax credits and immediately turn them into cash flow. Credits for clean fuels, hydrogen production and other technologies are already drawing investment. At the same time, loans guaranteed by the Energy Department are helping unlock scale-up capital for the construction of solar and battery manufacturing facilities as well as energy infrastructure.
The support is “giving climate investors the confidence to take smart risks because they know that if they succeed in innovating, there will be resources to support their growth,” Brainard is set to tell the chief executives, portfolio strategists and sustainable finance directors expected at Tuesday’s event.
Brainard, formerly vice chair at the Federal Reserve, was named as Biden's top economic aide in February, succeeding Brian Deese in the role. She was a deputy director of the NEC under President Bill Clinton.
She’s also been outspoken in emphasizing the risk that climate change poses to the financial system, arguing that more work needs to be done to assess and mitigate the damages tied to a warming world and rising carbon pollution.
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