The Economics of Green Industrial Policy

Governments around the world are increasingly turning to “industrial policy” in pursuit of stronger climate action such as the Inflation Reduction Act. These targeted economic measures can build domestic clean energy industries and increase security and resilience. But there are risks to this approach, including higher costs and trade tensions. In the years ahead, policymakers will face a difficult balancing act as they work to expand the availability of low-cost clean energy while boosting their own domestic economies.  What does the shift towards green industrial policy mean for the energy transition? How has this shift manifested in the Biden administration’s approach to climate action? And what new climate policies might be on the horizon? This week host Jason Bordoff talks with Jason Furman about the rise of green industrial policy, the outlook for the Inflation Reduction Act, and how economists think about climate change. Furman is the Aetna professor of the practice of economic policy at Harvard University. He is a former colleague of Jason Bordoff in two different capacities, both in the Obama White House and at the Brookings Institution’s Hamilton Project. Prior to his appointment at Harvard, Furman served as a key economic advisor to President Obama, including as the chair of the Council of Economic Advisors. He played a key role in implementing the major economic policy initiatives of the Obama Administration, including the American Recovery and Reinvestment Act and the Affordable Care Act.