Summer Essay 3 of 11: Clean Energy

So this is how I am spending my summer vacation: daily reviews of essays from the current edition of Foreign Affairs as the United States barrels towards the most consequential election in decades, with US global leadership very much on the line.  Looking forward to the conversations this may spark.

Geopolitics and energy policy have been intertwined for centuries. So it should surprise no one that the transition away from carbon-based energy should feature prominently in any statecraft discussion across the ideological spectrum.

Indeed, the first two essays reviewed from the current issue of Foreign Affairs (from traditional conservative thought leaders) both highlighted the strategic value to the United States associated with articulating responsible climate and energy policies.  So today it’s time to shift gears and see what a former Biden official thinks. 

So far, we are 3 for 3 in terms of essays that have referenced energy and climate as crucial to the next foundation for American leadership.

Prof. Brian Deese’s 14-page essay (The Case for a Clean Energy Marshall Plan) sets out a formidable, integrated proposal to establish a framework to support a clean energy industrial policy that would reposition U.S. geoeconomic leadership with the energy transition at its core.  It would build on many of the initiatives already implemented (but not referenced) by the US Treasury Department under the leadership of Secretary Janet Yellen. 

At a high level, the essay makes the same case that Prof. Meade and Secretary Rice make:  leadership regarding the energy transition is good for America and for the globe.  Positioning US leadership on the vanguard of the energy transition also creates the promise for a value proposition that inspires the American electorate to feel good about fiscal outlays flowing abroad.  Prof. Deese has also deftly avoided the polarizing political label that has fallen by the wayside in recent years: Green New Deal.

Prof. Deese defines a “Clean Energy Marshall Plan” as a mechanism to “meet other countries’ development needs while advancing U.S. interests…to speed the adoption of low-cost, zero-carbon solutions, such as the manufacture of batteries, the deployment of nuclear and geothermal energy, and the processing of critical minerals.”  This is not a new idea, exactly.  And implementation would not exactly be an exercise in leadership.  It could just as easily be a catch-up exercise. 

As Prof. Deese notes, the UAE in 2023 pledged to deploy $30bn to support the development of zero-carbon technology. He could also have noted that the EU Commission pledged to deploy €300bn between 2021-2027 using its own version of a European-focused Marshall plan that supports sustainable development abroad through its Global Gateway initiative. 

The essay does not provide an estimate for the total proposed outlay of U.S. taxpayer funds in support of a new global leadership role with the energy transition at its core. Nor does it note that estimates in 2023 for the total annual financing needs required to support the energy transition would be $3.8tr (3.8% of GDP). Each year. It does beg the question of how much the United States might have to spend in order to be considered a global leader.

Prof. Deese is right to point out that the original post-war Marshall Plan was not an exercise in charity that provided unfettered donations for rebuilding economies in Europe.  It sought specifically to “subsidize European demand for U.S. products and services…(and) required European countries to integrate their economies and to remove trade barriers as a means of expanding U.S. exports, promoting capitalism, and warding off communism.”  Even then, it was not an easy decision. He notes that a significant public relations campaign was required to win Congressional support; the winning arguments directly tied Marshall Plan funding to domestic interests. In other words, Prof. Reese implicitly agrees with both Secretary Rice and Prof. Mead that a broad conversation must occur with the American electorate in a positive way about the value and purpose of US leadership internationally.

None of this means that everyone will like Prof. Deese’s recommendations, which include a number of initiatives that will likely trigger stiff resistance from a range of interests and extend well past the original architecture for the Marshall Plan and the Bretton Woods structure. They include:

• Creating a Clean Energy Finance Authority initially capitalized with taxpayer funds but permanently financed from debt and equity issuance. Climate finance would be awarded on a private sector basis, with only 10% of the budget allocated to grant funding.  Space constraints probably prevented Prof. Deese from noting that the United States already has a similar (but sometimes controversial) government-sponsored entity focused on the housing sector:  the Federal National Mortgage Association.  Nor does he mention that such a structure would insulate the entity from the kind of public scrutiny and Congressional accountability associated with the outlay of fiscal resources.
• Creating a Clean Energy Resilience Authority inspired by the Strategic Petroleum Reserve and the U.S. Treasury’s Exchange Stabilization Fund. The goal would be simultaneously to secure national stockpiles AND implement price stabilization activities through open market intervention. At least some of these elements have garnered bipartisan support in an historically divided Congress largely in response to China’s ongoing efforts to secure for itself access to critical minerals.
• Create a Carbon Tariff, in partnership with like-minded partners like the European Union.  The proceeds from the tariff would also be used to capitalize the Clean Energy Finance Authority and the Clean Energy Resilience Authority, potentially bypassing Congressional oversight traditionally executed through the fiscal appropriations process.  Prof. Deese neglects to mention that the EU has already begun implementing its own Carbon Tariff, the UK plans to do so in 2027, and three other advanced economies (Australia, Canada, and Japan) are considering similar import tariffs. For details, see THIS recent World Bank report.
• Expand the WTO mandate expressly to include sustainable development.  Space constraints again probably prevented Prof. Reese from going through the difficult historical record on this from Bretton Woods, the Havana Conference, the GATT, and then the WTO.  Those interested in a deep dive on the history my want to read THIS paper I recently co-authored with a former Treasury colleague. 
• Reform the development banks’ lending mandate to prioritize climate-related projects.
• Require the multilateral Green Climate Fund to allocate some funding to multilateral development climate lending.

All in 14 very well-written pages.

These words will move markets, impact corporate growth and profit trajectories, shift supply chains, and change peoples' lives if they become law, regulation, or policy.

Prof. Deese's essay is not clear on how any of these initiatives would specifically benefit American companies or the labor force on a par with the original Marshall Plan structure.  I defer to professional economists to debate the economic impact of these ideas. The point here is merely to highlight the richness of the policy debate amid a consequential and personality-driven election, not to provide an opinion on the merits of any individual idea.

Nor does the essay indicate how policymakers will win political support that would enable Congressional action on any one or all of the initiatives above.  Of course, this is also why we hold elections.  If the Harris/Walz campaign not only wins but also delivers a sweep of the House and the Senate, policymakers may have a moment akin to the post-war period with a mandate to make major changes. But history shows a major public relations campaign was still required to win Congressional authorization.

So watch this space and remember these ideas from Prof. Deese. You may see them again in 2025. My company's award-winning, patented tech reads broadly in this space. We track, measure, and analyze policy trajectories regarding climate and energy policy (among other issues) daily, automatically, and objectively. If you don't have time to keep up with the policy shifts, reach out. Our company's datafeeds and ML/AI training data can help you, your team, and your AI stay ahead of the curve and connect the dots better no matter what happens next.

Barbara C. Matthews is a globally recognized public policy and quantitative finance leader.  Her track record of successful innovation and leadership spans five continents in both the private and public sectors, including service as the first US Treasury Attache to the EU with the Senate-confirmed diplomatic rank of Minister-Counselor.  She has consistently been the first executive to forge new paths that add lasting value with durable, high-performing teams.  She is currently the Founder and CEO of BCMstrategy, Inc., a company that delivers ML/AI training data and predictive analytics that provide ground-breaking transparency and metrics about government policy globally.  The company uses award-winning, patented technology to measure public policy risks and anticipate related reaction functions. Ms. Matthews is the author of the patent.