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Climate, Energy, and Trump

Climate, Energy, and Trump

Last month the unthinkable happened for the nation’s climate and energy establishment: Donald Trump won the presidential election.

The result appears dire. Scholars, activists, and journalists have been wringing their hands at an anticipated “horror show of policy reversals and seediness,” as my Brookings colleague David Victor put it over at Yale Environment 360.

And the coming damage really could be grievous. As summarizes Vox’s Brad Plumer, Trump’s various statements this year have suggested that the president-elect: “[believes] global warming a Chinese hoax…wants to scrap all the major regulations that President Obama painstakingly put in place in reduce U.S. carbon dioxide emissions, including the Clean Power Plan…wants to get rid of the EPA entirely…wants to repeal all federal spending on clean energy…wants to pull the United States out of the Paris climate deal.” And with the GOP fully in control of Congress, much if not all of this seems doable.

In short, years of belated, painstaking work by the Obama administration and the world community to cobble together sound policies and structures for cleaning up the energy system and limiting global warming to acceptable levels appear threatened. As Plumer and his Vox colleague David Roberts put it, “Unified Republican control of the federal government over the next two years augurs a sea change in U.S. environmental policy like nothing since the late 1960s and ’70s, when America’s landmark environmental laws were first passed.”

And yet, without minimizing the gravity of the current moment, there are several solid (and not just wishful) reasons for maintaining some hope that progress can be maintained on the path of decarbonizing the economy and reducing the most devastating consequences of global warming. In this regard, many of the forces that have been most strongly shaping emissions outcomes in recent years remain beyond Trump’s reach and beyond the rules and stances of the U.S. federal government.

In keeping with that, here are three solid truths about where progress has been coming from thus far that point to genuine sources of consolation about further progress and priorities for the next stage:

States and cities will continue to lead. A first reassuring feature of the current situation is the fact that much of the legal power—and most of the creativity—to clean up the economy and reduce greenhouse gas emissions resides outside Washington, D.C.

To be sure, nations are the most prominent units in international climate negotiations—and rules like this nation’s Clean Power Plan to compel power plants to slash emissions matter enormously. However, states and cities arguably matter just as much because they control so many of the most crucial policy levers that can control emissions. State commissions will continue to regulate investor-owned electric utilities, for example. State legislatures will continue to set and update renewable energy targets and portfolio standards. And cities will continue to manage land-use and transportation systems and enforce energy-efficient building codes. What is more, every sign to date suggests that globally consequential states like California and New York are going to double down on their respective climate policies. A forthcoming Metropolitan Policy Program paper will demonstrate that state-level decisions about fuel sourcing, economic structure, and other factors are delivering significant emissions reductions in dozens of states. The bottom line: Progress can still be made even if Trump begins to dismantle national and global policies and processes.

Technology change and market forces will continue to drive gains. Similarly, much of the nation’s recent progress on emissions reductions resulted from market dynamics, not policy, and will proceed without regard to Donald Trump’s preferences. For example, the largest major carbon advances in the United States over the last decade have resulted from market changes that have resulted from the onset, thanks to technology breakthroughs, of cheap natural gas and cheap renewables. The massive adoption of “hydraulic fracking” has unleashed a gale of cheap, lower-carbon natural gas that has been the main driver of a wholesale switch from coal to natural gas in fueling power plants. This will continue. At the same time, wind and solar power keep getting cheaper, and in some places they are becoming competitive with new fossil-fuel plants. Soon such renewables will become cost-competitive without federal supports. Beyond that, rapid declines in the costs of batteries for electric cars and storage for the grid will likely continue bolstered with innovations in energy efficiency and carbon management software. In short, though it might be slowed, the clean energy revolution is likely “unstoppable” thanks to entrenched tech and market trends, as Joe Romm of Climate Progress remarked last week. The issue then becomes defending, and speeding up, existing momentum and bringing online new technologies, such as conventional and new modular nuclear reactors (Trump seems to support nuclear expansion).

Private finance will continue to drive the transition to a low-carbon economy. Finally, climate-oriented finance is gaining force. To be sure, direct federal investments, subsidies, and frameworks remain critical to support and accelerate favorable state-local and market-tech trends mentioned above. And to the extent those are reduced will be a problem. However, the prevailing consensus is that the bulk of the $10+ trillion that the International Energy Agency estimates will be needed to finance global decarbonization in the next 15 years will consist of private capital. And in fact, creative financing solutions have already been coming online to drive large-scale private and institutional capital flows into clean energy projects. Last year Microsoft founder Bill Gates launched the Breakthrough Energy Coalition, a consortium of billionaires focused on investing billions of private dollars to commercialize new technologies. Additionally, a series of “bottom-up,” public-private, and state-local climate finance initiatives have sprung up to move money into expanding low-carbon solutions. Multiple state green banks are leveraging limited public-sector funds with private-sector capital to provide low-cost and long-term loans to clean energy projects. Bond financing is being deployed as states and localities talk about how they can establish a new clean energy asset class that can easily be traded in capital markets to bring capital into the clean energy sector. And while global private investment has slowed somewhat this year, it remains significant, though it needs to grow. All told, private finance and bottom-up public-private partnerships to finance clean energy are proceeding and hold opportunities for growth.

There is no doubt that if the Trump administration accomplishes even a few of its campaign promises our nation’s—and the world’s—present regime for cleaning up the economy will be grievously damaged. Most notably, the loss of key federal policies and frameworks—such as federal rules on the burning of coal; budgets for federal clean energy R&D; or federal tax supports for clean technologies—could disrupt and slow even the most entrenched positive trends. And that is a huge problem given the need for speed in reducing emissions and forestalling dangerous effects of global climate change. According to Roberts, the fight has been lost to prevent dangerous climate change associated with temperature changes of more than two degrees above preindustrial above preindustrial levels, and the focus must turn to at least limiting temperature gains of significantly more than that.

Still, the fact remains that some progress can still be made, and must be made. States and localities will continue to retain broad powers. Technological and market trends will remain in force. And private finance will continue to invest in the market value of clean, cheap solutions. For those wanting to console themselves with productive engagement these are places to look.

Mark Muro is Senior Fellow and Policy Director at the Brookings Institution’s Metropolitan Policy Program. This article orginally appeared here.

Growth of advanced industries which produce shipments of export cargo and import cargo in international trade in the US has slowed over the lat two years.

Economic Inclusion Requires a Robust Advanced Sector

City, metropolitan area, and state leaders across the country continue to look for ways to re-energize the American economy and make it work better for more people. One way they are doing that is by looking to expand the nation’s advanced industries.

As defined and tracked by Brookings over the last few years, the 50 R&D- and STEM (science, technology, engineering, and math)-worker intensive industries that make up the advanced sector are going to be crucial in building a growth economy that works for all.

These high-value industries, ranging from auto manufacturing to high-tech services, play a huge role in developing and applying innovations that drive productivity growth necessary for increased living standards. In addition, the sector promotes inclusive prosperity because it pays well (including to the half of its workforce that lacks a college degree); supports long supply chains; supports local consumer spending; and helps other industries and firms to raise productivity and pay standards.

So how is this critical sector doing? The release of a new Metro Program trend update and interactive data resource sheds some light on what’s been happening in the last two years. What emerges from the update is a mixed picture of progress and drift. Momentum continues in the manufacturing sub-sector, but the energy sector has slumped. And though high-tech services are booming, in aggregate the advanced industries growth base narrowed.

On the up side, continued growth of the sector—notwithstanding weak business investment, global headwinds for exports, and overall sluggishness of the expansion—gives cause for encouragement. Output growth across the 50 industries increased during the last two years even as employment growth remained positive and delivered 600,000 new jobs (11 percent of the national job total). Moreover, the truly dynamic and broadly dispersed growth of the advanced services sub-sector bodes well.

Digital technology services are currently the most effective tools available for raising the nation’s productivity, and wages with it. That advanced services grew by nearly four percent a year between 2013 and 2015 to add 500,000 jobs in the recent period (80 percent of the aggregate advanced sector’s job creation) suggests the broad value and momentum of tech.

With that said, though, many of the trends revealed by this update are disquieting. Although half of the nation’s advanced industries gained momentum in the last two years, half lost it, and others among the growing industries were progressing only slowly.

In this regard, the slowing of manufacturing employment growth and the collapse of it in the energy sub-sector means that the advanced sector’s growth base has narrowed. Those slow-downs, combined with last week’s dreary output report from the Commerce Department, raise concerns about the durability of the current expansion. One takeaway: Regional and metropolitan economic development leaders may have less momentum to work with in the most important sector of their local economies going forward. That could complicate securing inclusive growth.

Similarly, the geography of advanced industries’ progress remains uneven. At the state level, momentum accelerated along the west coast and in the northeast (traditionally strong in tech services), and persisted in auto-centric Michigan and the southeast. Energy states struggled.

Across the map of metros, the distribution remained highly variegated. To be sure, most of the nation’s large metropolitan areas in most regions continued to produce advanced industry output and employment growth. All told, 80 of the largest metros experienced some degree of output and employment growth. With that said, output or employment growth was slowing in some 59 locations during the two years. In addition, the metro growth map depicts stark contrasts. Some 23 high-tech, southern, or manufacturing metros clocked annual advanced sector growth rates of four percent or more. By contrast, 14 disparate metros actually lost advanced sector jobs.

Moreover, the metropolitan rich got richer. While the 20 most advanced-sector-intensive metros accounted for 71 percent of the sector’s growth from 2010 to 2013, their share in the last two years grew to 80 percent. Likewise, while 47 large metropolitan areas (just under half of large regions) managed to increase the share of their output derived from advanced industries between 2010 and 2015, 53 actually grew less specialized in advanced industries. These trends mean that while a dynamic shorter list of metropolitan areas continued to make real progress towards an advanced economy that supports inclusive growth, half of the nation’s large metros were actually moving away from that vision. That drift should be deeply troubling for policymakers and city and metropolitan leaders. It means that fewer cities and fewer regions are deepening their participation in the industries that matter most for constructing broadly shared prosperity.

Given that, the new data—mixed as they are—clearly challenges metropolitan and state leaders to weigh a new round of strategies to stimulate, broaden, and sustain advanced industries growth. There is much work to be done to solidify and expand a key portion of the industry base that is going to be necessary to craft an advanced economy that works for all.

Mark Muro, is senior fellow and policy director at the Metropolitan Policy Program of the Brookings Institution. This article originlly appeared here.

GE cites strong universities, digital talent pool, and quality of life has reasons for investing in Rhode Island.

Can the Internet of Things Help Renew Rust Belt Cities?

Gov. Gina Raimondo and others in Rhode Island are over the moon about last week’s announcement that GE Digital is adding 100 jobs in Rhode Island—and rightly so.

It’s been a rough 15 years for the Ocean State. Its economy stalled under its Rust Belt heritage and an influx of Chinese imports in the 2000s damaged its old-line manufacturing industries. More recently, the Great Recession hit hard in Providence.

So, the fact that GE—a storied American brand—has invested in Rhode Island, citing its strong universities, digital talent pool, and quality of life, is a huge vote of confidence and a validation of Gov. Raimondo’s strategy for rebooting the state’s economy, which has focused on attracting investments from global, advanced industry firms. This was the core of our strategy research in Rhode Island, which identified growth areas in the advanced economy and suggested steps to expand the state’s technology and digital capacity.

Yet, there’s more to be said about the Rhode Island win. Beyond the local site-selection coup, the GE announcement speaks to bigger themes about both the direction of the economy and possible ways forward for other older industrial cities.

Rhode Island journalist Ted Nesi got the first part of this right, noting that the GE deal is significant less for the number of the jobs created, but more for “which jobs these are.” In this regard, what is noteworthy about the GE investment is that the jobs are located in the company’s GE Digital unit, billed as the company’s “industrial internet innovator.” In that vein, the 100 software jobs are a tangible demonstration of the growing importance of the much-hyped, sometimes abstract-sounding, but legitimately epochal, Internet of Things (IoT), including the related “industrial internet.”

These terms reflect the rapid fusion of physical and digital business, which is leading to the digitization and interconnection of manufactured physical products—via sensors, software, the mobile internet, and cloud computing—for smarter use, servicing, and management. In GE’s manufacturing space, meanwhile, the rise of the IoT reflects the impact that software and other digital technologies have had on industrial companies, which I have written about here, and which has been explicated here and here by the Michael Porter, the Harvard strategy guru, and Jim Heppelmann, the CEO of the industrial software company PTC.

Analysts at McKinsey & Co. project that the IoT could have an $11 trillion impact on the global economy by 2025. But even now, industrial companies like GE, Philips, Schneider Electric, Cisco, IBM, AT&T, and Intel are pouring billions into accelerating IoT build-out. Given that, GE’s IoT investment in Rhode Island provides one augury of where the advanced economy is heading, especially in regions like New England.

By the same token, the GE hiring in Providence hints at potential ways forward for other older industrial cities. A classic Rust Belt city, Providence possesses both strong university computer science and engineering capabilities (at Brown University and the University of Rhode Island) and a manufacturing heritage. Where those things coexist there may be opportunities. In their new book “The Smartest Places on Earth,” Brookings Trustee Antoine Van Agtmael and Fred Bakker describe how numerous Rust Belt cities have emerged as “hotspots of global innovation,” due to the confluence of manufacturing tradition and university-based technical expertise. For example, Van Agtmael and Bakker detail how Akron, Albany, and Raleigh-Durham have each leveraged and radically updated a local tradition of production, combining materials science, nanotechnology, and other unfolding technologies built up in local universities and research centers. In each case, older manufacturing metros made themselves relevant again by merging a reputation for “making things” with genuine, cutting-edge knowledge in the right disciplines that reflect the huge convergence of the physical and the digital.

That is what Providence has done, at least to a sufficient extent to secure the GE Digital facility. And maybe it is what some other cities can do too.

Mark Muro, a senior fellow and director of policy for the Metropolitan Policy Program at Brookings, manages the program’s public policy analysis and leads key policy research projects. The original article appeared here.