Over the past four years, the United States has invested heavily in energy, semiconductors, manufacturing, and clean industrial production. The first wave of investments has yielded significant changes in the US industrial base — with over $126 billion in investment over the past two years — an early sign of success. But the story of these policies is far from over. As the dust of tax credit guidance and program implementation settles, another wave of investments is coming, all of which require sustained attention to succeed.

The United States’ ongoing green industrial strategy agenda sets out three core objectives that the next administration and Congress will need to continue fulfilling: first, that the clean energy transition will drive economic development; second, that the United States will return to its position as a global manufacturing and innovation powerhouse; and third, that targeted clean energy investments can lift up communities while lowering their cost of living.

Make no mistake, this agenda has bipartisan appeal. Both parties understand the importance of reinvesting in US innovation and manufacturing capacity. Both parties are motivated by building US capacity throughout the value chain for advanced technologies to bolster the US economy and to diversify global supply chains. And both parties have pledged to tackle inflation and bring jobs back to communities hit hard by the forces of globalization and technology transitions.

The agenda has provided real wins for both parties as well. Republican Congressional districts have received an overwhelming share of direct and indirect investment from recent legislation, bolstering US manufacturing capacity and industrial competitiveness in those communities. Democrats overwhelmingly support and have sought to enable the surge in investment, new infrastructure, pro-labor policies, and tailwinds to the green transition.

The IRA, CHIPS, and BIL authorize hundreds of billions of dollars in investment to deliver on these goals, but success is neither pre-ordained, nor impossible. There are a range of ongoing implementation challenges, capacity gaps, and supply chain snags that the federal government must address to protect these investments.

The foundational job of a US green industrial strategy is to harness the clean energy transition to accelerate economic growth. So far this has largely borne out, as massive shifts in electricity and transportation have underpinned economic expansion. But with much of the hard work in the energy transition remaining, sustained attention is key.

Federal action has catalyzed unprecedented momentum. According to the International Energy Agency (IEA), the United States is now on track to cut power sector emissions in half by 2030, with the share of renewable electricity expected to increase to well over a third of total capacity within the decade. Nearly 1.5 million EVs were sold in 2023, more than a 50 percent increase over 2022. Over 312,000 clean energy jobs were added to the US economy from 2020 to 2023 as over $680 billion worth of private investment in clean energy sectors was pumped into the economy. Across electricity, manufacturing, heavy industry, and retail spending, there has been a notable acceleration across numerous sub-sectors and technologies since the passage of these bills (see Exhibit below).

However, to fully capitalize on this opportunity and ensure these investments yield their intended impact, we must create a more stable and conducive environment for clean energy development. Our national strategy must focus on streamlining and accelerating clean buildout by reducing frictions to building, stabilizing supply chains, addressing workforce needs, and creating policy certainty via demand-pull mechanisms for key products. Across electricity generation, EV adoption, heavy industry, and building electrification, the federal government can still do more to encourage adoption through broader incentives and continued infrastructure investment.

To accomplish these goals, the next administration and Congress will therefore need to focus on streamlining permitting and siting processes for strategic industries to reduce barriers to deployment. There is still a need to promote grid modernization and transmission buildout through tactical federal investments and regulatory reform. Continued electric vehicle deployment will require accelerated EV charger installation and a possible expansion of the National Electric Vehicle Infrastructure program, as well as expanded consumer EV incentives under the 30D tax credit. In the industrial sector, there is a clear need for stronger demand signals for emerging clean technological substitutes, such as green hydrogen, near-zero-emissions steel, and sustainable aviation fuels. In electrified building technologies, such as heat pumps and energy-efficiency retrofits, efforts to expand consumer-facing tax credits will need to be prioritized to encourage mass adoption across the country.

Encouragingly, this accelerating energy transition is having powerfully positive impacts across the US economy. Since passage of the IRA in August 2022, the United States has seen a nearly half a trillion dollar investment in clean energy, up 71 percent over the preceding two-year period. To put this in perspective, this represents around one in every twenty dollars’ worth of total private investment across the country over that period — more than double its contribution in the previous two years. In 2023, cleantech manufacturing represented half of all net durable goods manufacturing investment, critical minerals nearly 50 percent of minerals processing investment, and EVs and batteries helped reverse what would have been a year of negative investment growth in vehicle and electronic component manufacturing (see Exhibit below).

The United States is now at the forefront of a global trend toward clean energy, particularly in cleantech manufacturing. Globally, cleantech manufacturing is now a larger sector than steel, and accounted for around 4 percent of global GDP growth in 2023 and a remarkable 10 percent of global investment growth. The United States is the world’s second-largest single market for clean energy investment (see Exhibit below) and its attractive business environment, talented workforce, and now comprehensive green industrial strategy have helped attract billions in foreign direct investment. However, policy instability and a failure to solidify US industries’ competitive strengths could risk the country’s ability to attract billions more.

This investment is also catalyzing job growth. Some of the fastest growth in the economy has been in sectors related to the energy transition, with overall clean energy employment growing twice as fast as the overall labor market and adding nearly 150,000 new jobs in 2023 alone. For example, employment growth in motor vehicles and parts manufacturing (EVs), electric power generation (renewable electricity), and electrical equipment and battery manufacturing (batteries) have all consistently outperformed the economy-wide average, remaining robust in the face of higher interest rates and a cooling labor market.

This investment was the easy part. The federal government’s challenge now is to maintain a framework that enables the powerful market forces that create globally competitive enterprises while looking out for workers and communities.

The “private-sector-led, government-enabled” framework is excellent at mobilizing capital, but guardrails are crucial to avoid the pitfalls that have all too often accompanied large-scale industrial policy, such as political capture and allocative inefficiencies. Effectively driving emerging technologies along cost curves requires sustained discipline.

National and local level decision makers need constant market intelligence and feedback mechanisms between industry and government, to know how the picture (and costs) on the ground are changing. DOE’s liftoff reports are an excellent start. But they also need an accepted framework for the value proposition of each industry — when does domestic production stabilize and accelerate the energy transition? When is it appropriate to import? When should the US focus on higher value-add industries, and when are vertically integrated domestic supply chains critical for energy security?

These are questions about values, tactics, and using limited resources well. The next administration should continue to advance strategic governance mechanisms to the implementation of its ongoing green industrial strategy, such as industry-specific public-private roundtables, a White House Competitiveness Council, or a US version of Europe’s recent Draghi Report that lays out a clear vision and next steps for sustained attention to economic competitiveness and the clean transition. Such structures will help US policymakers and industry alike to address competitiveness concerns efficiently, pivot away from dead ends when necessary, and double down on opportunities when available.

If delivering economic growth through decarbonization weren’t enough, the United States has placed an enormous bet on clean energy technologies as a major part of the road back to America’s position at the height of global manufacturing and innovation. To achieve this goal, the United States must complete not only with China — today’s largest source of clean energy manufactured imports and the world’s foremost innovator in many clean energy technologies — but also increasingly with many other countries around the world that see the same competitiveness opportunities and need for diversification as the United States.

It is sometimes assumed that competition is necessarily a zero-sum game; that any increase in US market share must necessarily come at the expense of other countries or the pace of clean energy deployment. This view is short-sighted. Over the medium term, individual investments to strengthen a given country’s capacity will yield greater competition in the market, leading to faster technology innovation, improved price stability, and greater product differentiation. Instead of competing over the size of the slice, competition increases the size of the pie.

Today, however, overconcentration of many clean energy supply chains (see Exhibit below), especially in China, represents a strategic vulnerability. Large-scale Chinese investment has been critical to bringing down the costs of key clean energy technologies, bringing forward the economic tipping points where they beat fossil counterparts on cost. However, China’s position in these supply chains could prove devastating to clean energy deployment in the event of a shock to China’s economic or geopolitical position.

This idea is known as “N-1 resiliency,” or a system’s ability to function after the failure of a single component. With China’s overwhelming market share, the global clean energy system remains a long way from such resiliency. US efforts to “reshore,” “friendshore,” and “nearshore” clean energy supply chains are necessary to ensure such resilience.

The United States has progressed significantly over the past three years in diversifying some of these supply chains. For example, the federal government has transformed the battery manufacturing landscape by encouraging over $100 billion in new investments. These efforts included a first month executive order, a 100-day strategy, a one-year strategy, and a national blueprint, followed by a pair of historic bills (including battery grants, loans, tax credits, and demand-pull measures) targeting every segment of the battery supply chain. Combined with targeted tariffs, the total package drove results.

Despite projected ten-fold growth in demand, these investments position the United States to achieve self-sufficiency in key battery components — cells, cathodes, and modules — by 2030. The manufacturing capacity for upstream materials like anodes, separators, and electrolytes is also expanding rapidly, with projections showing robust domestic production to meet a substantial portion of US needs.

Over the next four years, US policymakers should build on the impressive collection of manufacturing incentives and institutions to position these industries to compete domestically, to cultivate opportunities to be exporters on the global stage, and to partner with other countries to build durable and competitive industries and supply chains. Efforts to strengthen our hand could include expanding and updating the Advanced Manufacturing Production Tax Credit to include next generation technologies like geothermal turbines and next-generation electrolyzers, restoring full expensing of equipment for small manufacturers, providing additional funding to DOE’s Battery Materials Processing and Battery Manufacturing and Recycling Programs, bolstering the capacity of the ManufacturingUSA network, reauthorizing and expanding US Export-Import Bank, and exploring options to establish a US sovereign wealth fund as well as a critical minerals price stability mechanism.

If the United Staes is to truly be competitive in emerging manufacturing industries, it cannot simply look to existing technologies, but must be at the forefront of research, design, and demonstration. In many of the largest clean energy sectors — such as solar, wind, and batteries — the United States is too far behind to catch up through sheer public investment alone and will instead need to find ways to leapfrog the competition through novel technologies and innovative business practices. While the United States remains a leader in clean energy RD&D in absolute terms, it is falling behind in clean energy patents and its pace of new innovation (see Exhibits below).

There also remain a plethora of clean energy technologies, from sectors like cement, steel, and aviation, that are still in development and offer promising avenues for American innovators and entrepreneurs to gain a first-mover advantage and lead from the front. Indeed, according to the IEA, about 35 percent of the CO₂ emissions reductions needed in a net-zero scenario by 2050 come from technologies that have not reached commercial scale.

Most of the key pieces to reestablishing the US lead in global cleantech innovation were contained in BIL and CHIPS, such as the new Office of Clean Energy Demonstrations, the Regional Innovation Engines, expansion of the Advanced Research Project Agency–Energy, and additional funding for DOE’s basic research programs. However, Congress has so far failed to appropriate the full authorizations available to these initiatives. The United States also needs to develop a clearer strategy and tools to tie together our domestic programs and strategies with how we partner to deploy US-invented clean energy technologies abroad. This means tying concrete objectives to certain clean energy deployment and partnership opportunities, strengthening existing institutions like the Development Finance Corporation or Export Import Bank, and considering what new investment tools and institutions are necessary to support and expand the new industries being created.

These grand strategic goals of decarbonization, macroeconomic growth, and manufacturing competitiveness matter little to the average American unless the impacts are felt in their daily lives. The final goal of green industrial strategy is that investments in our energy, transportation, industrial, and buildings sectors can lift up communities — particularly those that have been left behind in previous technology transitions — and translate into cost-of-living improvements for American families and workers. In short, people need to feel the benefits in their homes and in their neighborhoods, and not just in the aggregate statistics.

An important and often overlooked feature of the federal government’s green industrial strategy agenda has been to incorporate “place-based economics” at its heart. Whether it’s the Justice40 initiative’s promise to direct 40 percent of the benefits of climate spending to hard-hit regions, the electricity tax credits’ 10 percent “energy communities” bonus for former coal communities, the hydrogen and direct air capture hubs, or the Regional Innovation Engines, there has been a concerted effort to bring jobs, investment, and opportunities to the places that have been disproportionately affected by technology transitions, global transformations, and environmental degradation.

This place-based approach is working. Nearly all high-poverty counties have received funding from either BIL, CHIPS, or IRA; 84 percent of announced clean investments have flowed to counties with college graduation rates below the national average; and the rate of investment in energy communities has more than doubled (see Exhibit below). Data from RMI’s Clean Growth Tool also shows that the majority of these investments are going to communities with the highest economic feasibility to compete in these industries, and what’s more, that this share has increased since passage of the IRA. This makes it all the more likely that federal investments will help create cleantech clusters that benefit from localized productivity spillovers and agglomeration economies, further bolstering the chances that these investments form the foundation of a globally competitive and locally impactful cleantech sector.

However, the United States still faces deep and long-lasting regional inequities that will likely take a generation of continued investment to alleviate. These investments should include building on successful hubs-based initiatives, such as the Build Back Better Regional Challenge, Regional Technology and Innovation Hubs, and clean energy demonstration hubs. Additionally, targeted programs like the 48C Manufacturing Tax Credit should be reviewed, and potentially given a new round of funding if it meets key impact criteria. Congress could also consider adding additional community-based tax credit adders, such as “auto communities” for regions with legacy auto manufacturing industries, or “legacy communities” for those who have traditionally produced iron and steel.

These place-based policies will take time to fully materialize. This is inevitable. But Americans also feel the strain of high prices today. Retail electricity prices usually mirror inflation rates, and as a result, energy prices were increasing by as much as 21 percent year-on-year in August 2022. Household energy spending as a share of income hit a 10-year high that summer, temporarily reversing what has been a long-term decline in average energy burdens (see Exhibit below). However, many low-income households still struggle with energy costs, spending an average of 14 percent of their income on energy, compared to 3 percent nationwide.

Reinvesting in a more resilient and diversified electric grid can help both bring down energy prices overall and reduce the impact of fuel-price shocks most often responsible for that strain. However, misaligned incentives tied to outdated market and regulatory structures mean that actual grid planning and investment practices do not necessarily lead to lower prices and price volatility. Policymakers need systems to trace public dollars across companies to understand if they are deployed effectively and efficiently to put downward pressure on rates.

EV demand may reduce gasoline demand and not only reduce costs for early adopters, but also blunt prices across the transportation sector by increasing the ability for consumers to fuel switch if global events cause prices to soar. RMI was founded during a period of profound and damaging inflation caused by the oil shocks in the 1970s, and EVs offer a future without the threat of long lines at the gas station disrupting economies and family budgets.

Additionally, consumer rebates for efficient appliances, efficiency upgrades, and distributed energy can not only reduce household costs, but also provide broader system benefits that support the entire grid in peak periods. However, these incentives require local, state, and utility engagement to unlock their full potential for American families.

Ensuring that consumers have access and knowledge of the direct tax credits and financing available to evaluate consumer impacts is especially important. And when considering the balance of tariffs, exports, and new demands on the grid, protecting consumer interests is critical to maintaining the momentum for these sets of policies.

The United States stands at a critical juncture in its industrial policy and clean energy transition. Recent legislation has laid the groundwork for transformative change, but success is not guaranteed. To fully capitalize on these investments, ensure America’s competitiveness in the global clean energy market, and improve Americans’ everyday quality of life, we recommend the following strategies:

1. Address implementation challenges and capacity gaps in key cleantech industries.
2. Streamline permitting and siting processes for strategic projects.
3. Create institutional guardrails to protect public dollars and bolster private investment.
4. Enhance supply chain resilience and manufacturing competitiveness by continuing to evolve policy tools and interventions.
5. Double down on energy innovation initiatives and spending.
6. Continue creating and supporting innovation hubs to spread the benefits of green industrial strategy.
7. Ensure benefits flow to consumers through cost reductions and improved access.

By focusing on these priorities, the United States can deliver on the promises of its industrial strategy, accelerate the clean energy transition, and solidify its position as a leader in the industries of the future. This approach will not only drive economic growth and job creation but also contribute significantly to global decarbonization efforts.