The New Geography of US Clean Energy Manufacturing.

"Solar Panels at Topaz Solar 1."
2014 Sarah Swenty/USFWS.
Public Domain.
via Wikimedia Commons.

In today's New York Times, Jim Tankersley and Brad Plumer review the impact of President Biden's climate law, finding it is driving more investment in American clean energy manufacturing than initially expected. This surge in investments in battery factories, wind and solar farms, and electric vehicle plants could lead to a significant reduction in fossil fuel emissions. However, the increased economic activity centered around green technology is also driving up costs for taxpayers who are subsidizing these investments.

The article prompted me to think about Paul Krugman's theory of New Economic Geography, and how the investments driven by Biden's climate law are reshaping the spatial distribution of economic activities in the United States. Companies are flocking to areas with abundant land, lower costs, and non-unionized labor, potentially turning these regions into new hubs of clean energy manufacturing. These emerging hubs could experience agglomeration effects, with firms and workers in the same industry clustering together, benefiting from localized knowledge spillovers, specialized suppliers, and a larger labor pool. Interestingly, the growth of clean energy projects in red states also highlights the potential for the law to bridge the gap between traditionally fossil fuel-dependent regions and the emerging green economy, fostering more balanced and sustainable regional development.

Moreover, the article brought to mind Brad DeLong's theory of communities of engineering expertise, and the importance of government investment in creating such communities that drive technological progress and economic growth. By providing substantial tax breaks and incentives for clean energy projects, the Biden administration is fostering an environment that attracts both domestic and international companies to invest in the United States. These investments can lead to the development of localized clusters of expertise in clean energy technologies, which, according to DeLong, are essential for driving innovation and maintaining a competitive edge in the global market.

As more companies, such as South Korean solar company Hanwha Qcells, establish factories and research centers in the United States, the spillover effects can create a virtuous cycle of innovation, job creation, and economic growth. This cycle ultimately reinforces the country's position as a leader in the clean energy sector. While the rising cost estimates have caused some controversy among lawmakers, the long-term benefits of fostering a clean energy economy should not be overlooked.

The increased investments in clean energy manufacturing as a result of Biden's climate law have significant implications for the United States' economic landscape and its fight against climate change. Krugman and DeLong emphasize the role of government intervention in shaping regional development and fostering communities of expertise that drive innovation and growth in the clean energy sector. The economic and geographical implications of these investments may thus be essential to continuing the United States' transition toward a greener economy, as the community of stakeholders continues to expand.