House Committee Meeting on Climate: Lots of Incentives, But Less on Manufacturing

If President Joe Biden’s comment about climate change being about jobs has any pull outside of the White House, Congress is going to have to be more proactive on the job creation and protection part of the government’s post-fossil fuel push for the U.S. economy.

Thursday’s House Select Committee on the Climate Crisis, titled  “Financing Climate Solutions & Job Creation” was largely about financial incentives and more government programs to help pay for companies along the supply chain to retool for electric vehicles, for example. This is important, of course, because many small to midsized manufacturers, currently making equipment for gasoline-powered vehicles, will be out of the market in less than a generation if EV cars replace the combustion engine. It takes hundreds of fewer parts to make a battery-powered vehicle.

On the manufacturing side of the debate, witness Zoe Lipman, Director of Manufacturing and Advanced Transportation at the BlueGreen Alliance was arguably the star of the show.

Zoe Lipman

“America is a good investment,” she said. “Working people across the country are counting on Congress to see that.”

Lipman said in her opening testimony that the U.S. ran the risk of losing its leadership role as a world auto innovator. Sure China is the leading automotive market today in both sales and manufacturing, but the Chinese did not invent the automobile. They are, however, quickly inventing and producing the electric car. Chinese battery makers led by BYD and CATL are second-tier manufacturers, quickly moving up the value chain with powerful, long-range batteries that will eventually compete with LG Chem and Panasonic batteries.

Tesla is the biggest American battery maker, with GM and other smaller players bringing up the rear. They are much smaller than the Asian makers, however.

Batteries are the new combustion engine.

“It is critical that we take action now to position the United States as a leading market for the most advanced vehicles, while at the same time making serious investments to strengthen advanced vehicle manufacturing, to bring electric vehicle technology and components manufacturing here and into today’s factories. If done right, the shift to EVs will not only play a critical role in addressing climate change, but it can strengthen domestic manufacturing and supply chains, secure and grow good jobs, and help reverse decades-long declines in jobs quality and access to middle-class careers for manufacturing workers and workers of color.” — Zoe Lipman, director, BlueGreen Alliance

CPA’s proprietary Job Quality Index has shown that Black and Hispanic workers lag far behind their contemporaries as they tend to be stuck in service sector jobs.

Worth noting, while the Black population is roughly 13% of the overall U.S. population, they constitute around 17% of the automotive workforce, according to the Bureau of Labor Statistics. This is a key sector for the Black middle class in this country. To wipe it out would do irreversible harm to areas of Michigan and Ohio that have historically relied on automotive manufacturing to maintain its tax base, and grow its middle class.

Committee Chairwoman Kathy Castor (D-FL14) started the hearing by praising her recent test drive of the Ford F-150 Lightning, the battery-powered pick up now being built in their new Rogue Electric Vehicle Center in Dearborn, Michigan. The batteries are by SK Innovation.

“I drove the Ford Lightning,” she said. “These are good American-made vehicles. We have got to win the global EV competition. I have all the faith in the world in our auto workers and those all along the automotive supply chain,” she said, moving on to discuss tax credits so consumers can buy the $39,974 base-priced vehicle so Ford can build more of them in Dearborn.

Given the amount of money Ford has pumped into its Rogue Center ($700 million worth), it looks likely that Ford intends to make its electric trucks in the U.S. for a long time to come.

Meanwhile, however, gasoline-powered trucks are increasingly being built in Mexico and coming into the country duty-free thanks to the USMCA deal. The Chevy Silverado and the GMC Sierra, for example, at made at a GM facility currently in dispute with labor unions.

Whether or not the long-term future is for EVs to be made in the U.S., or eventually just shipped to Mexico like the Silverado, is a mystery. But as long as the big car makers know they can make vehicles cheaper and ship them here at a 0% tariff rate, the future of U.S. automotive doesn’t look green. It looks bleak. In fact, it would be the end of the U.S. as an automotive manufacturer, with the domestic labor force mainly employing sales and marketing professionals, car designers, and software engineers.

Lipman also praised Ford’s Rogue Center, saying it was a good example of  “what we want to see the future look like.”

Rep. Suzanne Bonamici (D-OR1) said she wanted the hearing to focus on job creation. She was especially concerned for people who will be driven out of fossil fuel industry jobs, saying that she had coal miners in her family. “I know it is important to transition to a clean energy economy, but we need to make workers a priority. There is a concern among people in the fossil fuels business that they are going to be stuck with lower-paying jobs in this transition. Our climate policies recommend Buy American requirements,” she said.

Tax credits and other incentives do not have the proven track record of keeping jobs here, nor is there any literature showing they have managed to increase the domestic manufacturing share of a particular product line. Tariffs have brought the American solar industry back to life. It also kept pick-up truck production here due to a roughly 25% tariff.

Many of Biden’s policies targeting domestic manufacturers, like his recent Executive Order 14005 titled “Ensuring the Future is Made in America by All of America’s Workers” have been roundly criticized by the big business establishment in this country, led by the Business Roundtable.

They will continue to pick this particular EO apart, to ensure – for instance – that the only jobs that matter in Biden’s greening of the American economy are construction projects of Chinese imported solar panels and wind turbines, along with the professional services jobs.

The Business Roundtable supports cheaper imports for Biden’s clean energy revolution, citing a boon to the services industry.

It is imperative for Congress’ newly stated goal of supply chain resiliency that domestic manufacturing be the main beneficiary of this policy push and not globalist corporations benefiting from tax, labor, and regulatory arbitrage elsewhere. Tariffs have been the best way, measurably. Solar is a case in point, with two new companies setting up shop to make solar panels in the U.S. instead of Asia. This would be unheard of without solar tariffs.

Moreover, Committee ranking member Garret Graves (R-LA6) warned that going green in the U.S. at warp speed won’t exactly eliminate carbon from the atmosphere. He blamed global supply chains for that, singling out China.

“There is nothing we can do exclusively in the U.S. that will lower global emissions. There is no trajectory that we are on right now that will change the future unless there is a change in global emissions. China alone emits more C02 than all of Europe and the U.S.,” he said.

The Rhodium Group, which sent a staffer to be a witness on Thursday, did a study showing China’s C02 emissions were greater than the developed economies combined.

There is a reason for that. Those same developed economies have outsourced manufacturing to China, and corporations have been happy to build there where manufacturers aren’t hamstrung by tough environmental rules and can – in essence – throw plastic waste residue down a river without penalty.

Graves warned that if companies here see their energy costs rise, or become less stable due to forced power outages, as often occurs in California during fire season, they may relocate overseas. It won’t save the planet.

Castor closed the hearing by saying, “We need to tap American ingenuity to solve the climate crisis. We research, we develop, we deploy and we sell to the rest of the world. We need tax credits and creative Fed financing policies to get us there.”

CPA believes we need much more than just tax credits and government loans. Those loans may end up being thrown at companies that have no chance of success if being forced to compete with $5 an hour auto workers, and solar manufacturers that can source inputs from companies using forced labor from western China.