Government and private sector can fight climate change together
Heat waves. Drought. Sea level rise. Record hurricane seasons. Intense cold snaps. Water shortages. The frequency and ferocity of these events prove that climate change is the defining crisis of our time – a crisis caused by half a century of laissez-faire attitudes towards the environment. Indeed, after passively waiting for the markets to solve our most pressing problems, we now see that the “invisible hand” is woefully insufficient.
Meeting this moment does not require a battle between capitalism or socialism or free markets or no markets. Instead, green industrial policy, like the Cut Inflation Act and Illinois Climate and Fair Jobs Act, or CEJA, will build a more robust and inclusive economy while saving our planet.
In short, industrial policy is a public-private partnership in which a government employs a coordinated strategy that uses fiscal policy, incentives, public purchasing power, research grants, and state-owned enterprises to encourage economic development. Often all at once, and when done well, it works simultaneously on the supply and demand side. For examples, look no further than satellite technology, the internet, and the COVID-19 vaccine.
Today, Illinois is uniquely positioned to show the world how thoughtful industrial policy can fight climate change and create good middle-class jobs.
Case in point: Thanks to Governor JB Pritzker, Illinois has invested heavily in vehicle electrification through the REV Act – giving manufacturers like Rivian and Lion Electric financial incentives to produce electric cars and create jobs in our state while providing consumers with tax incentives to purchase these vehicles. This is a state industrial policy in action and win-win: it encourages companies to produce electric vehicles; helps consumers buy locally made cars, which improves manufacturers’ bottom lines; and reduces carbon emissions at the same time.
Building on the REV Act, a recent Illinois Task Force on the Future of Work proposed policy solutions across sectors to modernize the state’s economy. Specifically, the report highlighted CEJA, the main national law signed by Pritzker last year, for its potential to shape industrial policy through powerful collaborations between the public and private sectors.
CEJA is remarkable in that it brings together all the tools available to the state in a toolbox to drive a clean energy transition. It uses regulatory power to shut down fossil fuel plants, public policy to establish a transitional fund for fossil fuel workers; tax incentives and credits to bring more solar, wind and other clean energy projects online; and designates the Illinois Finance Authority as a climate bank to finance clean energy projects. And thanks to the leadership of President Joe Biden, the Cut Inflation Act could energize climate banks like the IFA with seed funding and billions in loan guarantees.
But there is more. CEJA is also committing funds to help launch small businesses through an entrepreneur incubation program that will create real pathways to wealth and job creation in historically underrepresented urban and rural communities.
The goal? Achieve a 100% carbon-free electricity sector by 2045 while building a more inclusive and equitable economy.
CEJA is a case study in modern industrial policy for solving complex challenges through an inclusive market-based approach. But industrial policy should not only work for the climate. For example, state policymakers could launch a state-run real estate developer to spur production of affordable housing or create a robust care economy in the state using tax incentives, credits, and other mechanisms. policies for universal child care, a more powerful child tax credit and a public option for health care. Also, Illinois could follow the lead of the state of California and produce insulin and other essential drugs.
While the US Senate’s passage of the Cut Inflation Act deserves praise, key elements that would have benefited tens of millions of Americans have been left behind due to partisan interests and whims of a Democratic senator. Universal paid vacations, child care, Medicare dental and vision coverage, more child tax credits, social housing and more may seem like distant dreams. Yet these transformational solutions are possible in Illinois if policymakers harness industrial policy.
Our window for these essential social programs has closed for now at the federal level, so states like Illinois should step up to lead the way. Our state has all the building blocks to achieve this: a governor with vision, cutting-edge research institutes, robust transportation and logistics infrastructure, and most importantly, the talent to tackle these issues. CEJA is only the beginning of what is possible.
Now let’s get to work.
Kady McFadden is a political consultant and former assistant manager of the Sierra Club whose work was instrumental in passing the Climate and Employment Equity Act. Ameya Pawar, a former Chicago city councilman, is a director and senior advisor at a commercial real estate development company. Both participated in the state task force on the future of work and corresponding report.
Submit a letter of no more than 400 words to the editor here or email [email protected].