Thread by @70sBachchan

Laws are like Sausages. Best not to see how they are made. @tedfertik & I dug into how IRA was made & what we found about US political economy

How did the worlds largest oil & gas producer do green investments? Hint: China
Watch:

https://twitter.com/MkBlyth/status/1620480860121362432

2/ BigOil usually kills climate bills. It made the GOP into political arm of fossil fuel industry.

For IRA, The GOP lobbied Exxon to oppose the Inflation Reduction Act!

BigOil's response? No thanks, Manchin got us what we wanted. What were they?⬇️

3/ IRA buys off the big bosses in sectors blocking climate action: Fossil Fuels, Autos, Real estate, Meat. It gives them carrots ie revenue streams

It also unleashes a powerful new set of green interest groups. Will they be existential threat to FARM?

4/Polluters & green insurgents make competing bets on future US energy mix
“All deals rely on 2 competing visions of the value of an asset. Buyers & Sellers, Bulls & Bears. In IRA's case, that asset is the composition of America’s future political economy”

5/ "In the future we may look back on Manchin’s pivot in July 2022 as the moment at which the green capitalist coalition in the US had finally gathered sufficient strength to overcome at least the most dogged defense of the energy status quo"-@adam_tooze adamtooze.substack.com/p/chartbook-13…

6/ Senator Wyden & Manchin's deal for IRA: No stick, only carrots. .“Spending on innovation, not eliminating”

As long as it lowers emissions, it get massive carrots. So solar & wind, but also carbon capture, hydrogen, nuclear. Read @ddayen for more: prospect.org/politics/how-p…

7/ IRA Design principle #1: Pain-Free private sector investment

Problem: Green technology is highly capital intensive. It’s expensive upfront, and then it’s free to run.

Solution: IRA Showers grants, tax credits, loans on any entity doing green projects

8/ IRA Design principle #2: Bottomless mimosas!

Problem: Deficit hawks -Biden, Yellen, Manchin - imposed a spending limit. But to cut CO2 pollution we need public investment to deploy, invest, manufacture, buy green goods

Solution: Uncapped Tax Credits

9/ Don't take our word for bottomless mimosas in IRA.

Credit Suisse too thinks CBO lowballed use of green tax credits by 2-8 times!! IRA much bigger than $370 billion.

With schools, local governments, NGOs now eligible Progressives must organize to win
google.com/url?sa=t&rct=j…

10/ IRA bottomless mimosas also solve chicken-&-egg problem. Ppl don't get green applicances coz they are more expensive than gas furnaces/cars. And manufacturers don't make them because little demand. So they don't get cheaper

Solution: 30% off investment & purchase (ITC/25D)

11/ For producers, IRA tax credits are a gift who get bigger market with consumer subsidies & higher IRR w investment subsidies
- Auto companies who get EV
-BigOil who get subsidies for hydrogen/CCS
-Agribusiness who get paid to make biofuel for planes & corn ethanol for cars

12/ IRA design principle #3: Compensate losers.

Problem: Stranded Assets of energy transition. What happens to over 3000 coal,gas power plants, which are less economically competitive vs renewables?

Solution:$250 billion DOE loan fund to retool&remediate!canarymedia.com/articles/clima…

12/ We mention in our talk how Dept of Energy is secret engine of #EnergyTransition. IRA supercharges its authority to put full faith & credit of US govt behind pvt projects for the public good
Jigar Shah on Odd Lots @tracyalloway
podcasts.apple.com/us/podcast/odd…

https://twitter.com/TheStalwart/status/1582355524720660481

13/ DOE's $250b in loan authority is least know bit of IRA!
"infrastructure financing could create up to 3 million new jobs. That's fully one third of the 9 million jobs IRA creates over next decade, according to a new @BGAlliance analysis"- @leee_harris

https://twitter.com/leee_harris/status/1554449934274990080

14/ IRA design principle #5: Make in America

Yes we must confront fossil capitalism. But to cut CO2 focus on *stock* of fossil-burning machines.

Must replace 1 BILLION machines. US wants to get jobs making them. @GriffithSaul

https://twitter.com/70sBachchan/status/1430734466025070600

15/ Problem: How to get Swing states & GOP to support green industrial policy?
Solution: Make in America
-Wind & solar jobs are mostly in red states
-Big landowners, farming coalitions get rents from wind & solar leasing
-South is no longer the Bible Belt—it’s the Battery Belt.

16/ Problem: How to get political LOCK-IN on IRA's green policy? How to bulletproof against future GOP?

Republican states are seeing major benefits from its investments in clean energy despite vociferous protests by their governors
politico.com/news/2022/08/1…

https://twitter.com/70sBachchan/status/1331298082261233665

17/ "Kemp is the leading figure in a group of R governors who are luring EV companies with huge state incentives —& help from the IRA.

Dem federal policy+GOP state policy+foreign manufacturing $ = an oddly effective clean-energy alliance" -@alexanderburns
politico.com/news/magazine/…

18/ Problem: Democrats have lost black, hispanic & working class voters across cities

Solution:
Biden's #Justice40 exec order directs 40% of investment to disadvantaged communities
More IRA tax credits to green projects in disadvantaged areas
Green banks
eelp.law.harvard.edu/wp-content/upl…

19/ IRA in one sentence: America cares about where manufacturing happens.

Doesn't matter how many batteries the EU makes or how cheap Chinese EVs are. IRA tells them basically “Thanks. We want none of it. All the batteries are going to be homegrown”

20/ IRA Make in America discriminates foreign-made. Either EU makes its carrots bigger or manufacturers go to US. "the Inflation Reduction Act means America is now the most attractive invstment envt for several critical industries"

https://twitter.com/70sBachchan/status/1602331259275194368

21/ In tomorrow's State of the Union speech, Biden will call the Inflation Reduction Act transformative, popular, job-creating, cost-lowering, world-historic victory against climate change

@tedfertik and I gave a critical assessment at Brown ht @MkBlyth

22/ One of the FARM sectors I laid out at the start - fossil fuels, autos, real estate, meat — one was ignored by IRA.

Last 3 decades of housing cycle built up enormous flood and fire risk, with growth of risky homes in California, in the floodplains of Texas and Florida etc.

23/ For my money, this is the mother of all sunk-cost, stranded-asset, entrenched-constituency climate problems. You think oil and gas is expensive to buy out? Try American housing.

https://twitter.com/70sBachchan/status/1334002932451303426

24/ For my money, this is the mother of all sunk-cost, stranded-asset, entrenched-constituency climate problems. You think fossil is expensive to buy out? Try US real estate

Pitched battles in every county is perhaps why resilience was left out of IRA politico.com/news/2020/11/3…

25/ Is our interest-driven story ignoring ideology?

There's a deepening culture war around the energy transition: Take your hands off my burgers, oil & cars. So, just don’t say ‘climate change.’ Say energy independence. Jobs. Savings. And people sign up

https://twitter.com/70sBachchan/status/1545476797801922560

26/@NateMJensen Q "What is unanswered here is how effective will these policies be in pushing a green transition?Are these just rents to big companies? Subsidies to companies that are already the biggest polluters? Or will this speed up the transition?"
A⬇️

https://twitter.com/JesseJenkins/status/1555218082632572928

27/ Our talk didn't get into *how* much carbon IRA cuts. Lots of great modelling estimates emissions impact:
Check out @JesseJenkins REPEAT, @rhodium_group, & @EnergyInnovLLC ' s analysis for how much the climate deal will cut US emissions by 2030
Seminar: rff.org/events/rff-liv…

28/ Tonight at state of the union speech, Biden will claim Inflation reduction act is world-historic. That it is Popular, cost-lowering, jobs-creating, rich-taxing #SOTU

Our presentation at Brown looks under the hood
slides <tinyurl.com/IRATimTed>

29/ Kyrsten Sinema and Joe Manchin sitting on Republican side of the room. Never forget what they took away from you. #SOTU

Childcare, Paid family leave, elder care, free community college, Universal pre-K....

30/ Will IRA achieve political "lock-in" by driving investment into nonunion red states
Grnd for skepticism⬇️
"-Greater concentration & organization of fossil interests
-Efforts to make climate a culture war
-Interests fight harder when facing extinction"

https://twitter.com/thomasnhale/status/1622957962011594752

31/ After 2016 US Elites faced a crisis of hegemony in democratic capitalism. At risk was their ability to rule. Threats from

-Left insurgents like Sanders & the Trumpian revolt from non-college educated
-Climate crisis
-China
Their solution? Green industrial policy+Welfarism

32/ Problems? The US is the world's largest producer of oil & gas. It has a welfare system riddled with holes & leaves vulnerable people behind. It never passed a climate bill due to the power of Big Oil & fossil-dependent states. We have not had industrial policy in generations.

33/ The failures of the neoliberal era, ratcheted up by Covid and Trump, brought our political system to the brink. Bidenomics, labor and grassroots movements pushing and shaping it from the left, sought to alter this trajectory, and climate action was at the center of it.

34/ How did the left's coalition with Biden and aim to transform the US economy fare in its confrontation with the US political system? What can we learn about the political economy of the United States from this pivotal case?

Our presentation: youtube.com/live/WQ-K2PTsN…

35/ $1000 Billion+ Laws Dems passed in last 2 years - IRA, IIJA, CHIPS, have one vision
Make US economy grow from the bottom up & middle out
Cut CO2 with jobs & justice
Cut dependence on China

Economist's series on if US becomes green & rich or big & mean tinyurl.com/3k7tber8

36/GOP industrial policy wins from IRA:
-Wind & solar jobs are mostly in red states & counties.
-landowners & farming coalitions get big rents from leases
-South is no longer the Bible Belt—it’s the Battery Belt

Great tracker ht @_jay_turner @JonahFurman charged-the-book.com/na-ev-supply-c…

37/ Q&A of our IRA talk focused on the politics of energy transition.
Manchin's veto vote means no sticks on IRA. That makes it impossible to hit the brakes on fossil fuel. But it does stamp green accelerator. Now must build new political coalitions for high-investment regime

38/ Green New Deal in 2018 was a movement-led demand for big green invstmnt & taxing the rich
1. Starts out as a fringe idea
2. Pushed relentlessly by committed activists
3. Taken up by some politicians
4. Embraced by a broader section of party leadership
5 President takes credit

We are going to do a AMA about our IRA talk Sunday 10am EST. Please share any questions/criticism you have in this thread, and we'll do our best to answer it or find someone who does.

Bidenomics and Climate action: The case of the Inflation reduction act

Thanks! Had to step up our game for crack climate political economy crew around Brown with Blyth,
@triofrancos, @danieldrisc, @JeffDColgan, @alicelepissier, @TimmonsRoberts,@jonasnahm whose work informed IRA
Our slides are here: <tinyurl.com/IRATimTed>

https://twitter.com/BJMbraun/status/1623761871655383040

39/ Inflation Reduction act has no sticks because Manchin & other Dem senators from oil and gas states stopped it.

It does not eliminate any fossil fuel subsidies. It expands them. The US approved the most oil and gas expansion of any country in 2022!!
priceofoil.org/2022/11/16/inv…

40/ Which technologies will your tax dollars boost with the Inflation Reduction act subsidies?

Well, follow the money. Most goes to
Renewables, then Electric vehicles, then electric heat > nuclear > sustainable materials > hydrogen > CCS
ht @NatBullard nathanielbullard.com/presentations

Why did I call the IRA's uncapped tax credits BOTTOMLESS MIMOSAS in talk?

"The Biden administration estimates the IRA will allocate $370 billion to clean energy, but depending on take-up, the actual tab could leave that figure in the dust" @robinsonmeyer
about.bnef.com/blog/localizin…

41/ For decades the neoliberal project has stripped state capacity. Now it can't coordinate new investment. ht @BuddyYakov

@MazzucatoM on outsourcing to consultants like McKinsey. "Governments must invest in internal expertise and build public capacity"
prospect.org/economy/2023-0…

42/ Problem: Stagnation & US productivity falling.

Solution:Boost R&D funding in Congress' $200 billion SCIENCE Grants for biotech, climate resilience,green energy, AI, space-NSF,NIST,NOAA,DOE,NASA .

->Growth in non-coastal hubs mckinsey.com/industries/pub…
benjaminreinhardt.com/wddw

43/ Biden Executive actions reverse 80s orthodoxy, "which destroyed antitrust, leading to concentrated markets, raised prices, suppressed wages, stifled innovation, weakened growth, robbing citizens of the liberty to pursue their talents" ht @ddayen
prospect.org/economy/2023-0…

Thanks to everyone for your kind emails/DMs. Really pleased to know so many have shared our talk demystifying Inflation Reduction Act with their friends, colleagues, students.
slides: <tinyurl.com/IRATimTed>

https://twitter.com/WatsonInstitute/status/1625912872751464461

44/ The IRA could be a multibillion-dollar corporate handout. But organizers from rural towns to city centers are fighting to bring these dollars home. We won IRA dollars to staff up GAO and OMB & do strong oversight for a healthier cleaner future.
sierraclub.org/press-releases…

45/ Without public pressure & accountability, IRA funds could get lost in a sea of bureaucracy. And bottomless mimosas could be gulped down by fossil companies.

Activists plan a campaign with Progressive legislators to knock millions of doors @tedfertik supercreator.news/p/exclusive-in…

What does the Cold War, Fiscal Hawks and Bottomless mimosas have to with the IRA? Listen to @tedfertik & I chat with @MkBlyth about Inflation reduction act's domestic and intl effect.

What Mark Blyth Got Wrong About Bidenomics and Climate Change
player.captivate.fm/episode/2e993c…

46/ US brags about industrial policy in IRA making green goods cheaper for others. What are risks to other countries?

Impossible to win trade & IP fights;
They don't have state & fiscal capacity to mimic IRA;
Crony capitalism wins out ht @NavrozDubash
carbonbrief.org/media-reaction…

47/ RT @NiyerClimate @ashna__aggarwal
"The top 12 states that could see the most investment from the IRA are red states with currently carbon-heavy economies.

We are heading towards a collision of culture and cash."
theguardian.com/environment/20…

https://twitter.com/70sBachchan/status/1622938183095795717

48/ "Industrial Policy Without Industrial Unions" Democrats’ new industrial manufacturing plan leaves unions behind, fumbling a moment of relative leverage for organized labor. Great reporting @leee_harris
prospect.org/labor/industri…
cleantechnica.com/2023/02/21/tra…

https://twitter.com/_jay_turner/status/1628414345075122177

49/ "EU debate over the IRA (&its fairly marginal impact on EU EV exports given the price cap on the subsidies...) even as China emerges as a real global threat is another example of a trade policy debate divorced from actual trade flows."
Striking thread:

https://twitter.com/Brad_Setser/status/1630235351594807297?utm_source=substack&utm_medium=email

Americans: infinity IRA tax credits to help firms do clean energy manuf. EU firms come here!

EU: oh yeah, we will slap carbon border tariffs on all your clean steel & aluminum.

Americans: we won't send you any critical minerals.

Deal? @leee_harris
prospect.org/economy/2023-0…

50/ Just a reminder why the US, EU, ROW are racing to catch up with China on green industrial policy

A furious competition for new manufacturing, raw materials and technological innovation is on. No great power wants to risk de-industrialization. ht @IEA iea.org/reports/energy…

51/ This original Blyth and Oatley essay was definitely read by the WH/Congress designers of the Inflation reduction act.
"Death of the Carbon Coaltion: Existing models of U.S. politics are wrong. Here’s how the system really works"
foreignpolicy.com/2021/02/12/car…

https://twitter.com/noah_gordon_/status/1633895114220158980