Climate-tech innovation and reshoring help America in the global battle for manufacturing supremacy, and in building the economic power that comes from technological superiority, even in Donald Trump’s “don’t believe in climate change” era. Congress has just passed a tax-and-spending bill that, among other things, eviscerates the Inflation Reduction Act (IRA), Joe Biden’s flagship climate law, but this is no time to dismiss climate tech as a tree-hugging virtue. On the contrary, it is one of the most important levers of geopolitical influence. Power will accrue to those who can produce critical energy and industrial commodities at competitive prices. I call this the “Chindia price”, a cost point at which China, India and others adopt the technologies behind these because they are the cheapest without subsidy.
China’s dominance in solar manufacturing is a stark example of the economic prowess conferred by these crucial climate markets. China’s clean-energy sector (primarily solar, energy storage and electric vehicles) contributed about $1.6trn, or roughly 9%, to China’s $18trn economy in 2023. Perhaps more important, China’s ownership of over four-fifths of global solar manufacturing means that it has twice the share of the solar-hardware market as the entire OPEC+ cartel has in petroleum.
I believe that the climate tech that matters involves only about a dozen technologies. Among these, only those that match or beat fossil fuels on price are currently worth pursuing. By scaling and exporting them, America can increase its manufacturing prowess, cement its techno-economic lead and blunt China’s industrial advantage. The rationale for scaling does not, in other words, depend on whether or not you believe in climate change.
America can recover its lost lead in manufacturing technology for cement and steel, and become the leader in dispatchable (ie, producible on demand) energy like fusion and advanced geothermal technologies, particularly “super hot” geothermal, or SHG. In my judgment as a long-standing climate investor, these breakthroughs will be at or near economic viability well within a decade. (Full disclosure: I have invested in many of these promising technologies, both winners and losers.)
American fusion startups are making rapid progress. Instead of wasting tens of billions of dollars on the ITER fusion project, a boondoggle collaboration among 35 countries, American public efforts should focus on initial deployments of clearly superior American technologies. Instead of shuttering coal plants, we might soon be in a position to swap their boilers and turbines for fusion boilers when they come up for replacement. Emissions would plummet, assets would stay productive—and the transition could take place at the pace of scheduled maintenance. American fusion startups like Realta, Helion and Commonwealth Fusion Systems can power the planet.
Similarly, SHG could increase energy production dramatically by tapping into the 400°C-plus heat miles beneath the Earth’s surface. This approach holds out the promise of producing clean power at a cost competitive with natural gas. Private capital is already supporting drilling. The government’s role should be to offer offtake (long-term purchase) contracts, so projects can get financed. These technologies will not require subsidies once scaled.
Full article available in The Economist.