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HOW STATE AND LOCAL GOVERNMENTS CAN SUPPORT CLEAN ENERGY

By William D. Eggers. Executive Director of Deloitte’s Center for Government Insights and the co-author (with Donald Kettl) of Bridgebuilders (Harvard Business Review Press 2023)

Imagine you are at the edge of a cliff, looking at a vast ocean of change. The task at hand is not just to jump across – which may be impossible and end in an alarming dull thud. Instead, the goal is to build a bridge that carries you and your companions to the other side.


This is analogous to the challenge America faces today as it transitions toward a green economy.


We stand at the precipice of a series of unprecedented developments, driven by once-in-a-lifetime investments in renewable energy, sustainable transportation, low-emissions buildings and high-tech domestic manufacturing. The Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and CHIPS have committed more than US $500 billion to bolstering climate resilience and the energy transition.


The goal? To cut greenhouse gas emissions by 40% by 2030. That’s a worthwhile mission, but a challenge this large itself requires a shift in mindset and perspective to “system of systems” thinking. Just as bodily systems work together to sustain life, the systems of government and industry have an opportunity – and, indeed, an obligation – to work together to supply the infrastructure of everyday life: energy, water, waste, transportation.


Transitioning from solo to symphony


The transition to a clean energy economy is reminiscent of the difference between learning how to play the cello at home in your living room and joining an orchestra. The scale of this challenge surpasses the capacity of any single player, and it requires the responsive contributions of the full set of musicians to create the music.


The transition will involve every level of society, and inevitably will be influenced by history, beliefs, and human behaviors. It challenges state and local government leaders to think creatively, and fuse diverse strategies that bring together government, communities, nonprofits, universities, indigenous communities, and industries to pursue a shared vision.


Orchestrating change with new catalytic tools


National policies like the IIJA, CHIPS and Science Act, and the IRA are the sheet music for this symphony. They encourage private investments in green energy projects through tax incentives and loan guarantees. The Inflation Reduction Act of 2022 alone has already attracted over $278 billion in green energy investments, creating nearly 171,000 new jobs.


States, regions and local governments have a pivotal role to play in developing these transition strategies, as the ecosystem integrators, transforming federal policy into on-the-ground change with catalytic tools, such as tax incentives, grants and loans. In this way, the role of government can be that of a dynamic partner, convening stakeholders, catalyzing private investment, and clearing barriers to change.


Fortunately, some states, and local governments are taking this role to heart by focusing on implementation, leveraging funding opportunities, and nurturing a green talent pipeline.


Take California’s Regions Rise Together; initiative, which began in 2019 with dialogue and data analysis. Community leaders were asked by the state to identify economic opportunities, regional solutions, and promising local initiatives. This isn’t a one-size-fits-all approach; it’s a tapestry woven from dialogue and data, leveraging the unique strengths of each region.


Results are already beginning to accrue. In the Bay area, for example, tech companies collaborate with educators to nurture the next generation of engineers for the green economy. And further inland, farmers are using precision agriculture to conserve water.


Meanwhile, with a nation confronted by the need to build an entire electric battery manufacturing supply chain, The Salton Sea region, (surrounding a lake near California’s Mexican border) could play a pivotal role in the creation of a “Lithium Valley. The Salton Sea region’s 11 geothermal plants, which produce the raw materials for turbine power, have the potential to produce more than 3,400 tons of lithium annually, enough to power more than 375 million electric vehicle batteries.


By developing the respective strengths of each of these regions, California is shaping a process that integrates environmental and social goals, and tailors investments to harness the unique strengths of diverse communities across all regions of the state.


Offering a new purpose to the workforce


We can’t forget the workers who will be at the heart of this transition. Governments’ focus on a “just transition,” with robust investments in worker reskilling for the new economy could potentially create 300 million green-collar jobs globally by 2050. In the US, these jobs are already growing 25% faster than the rest.


Consider Texas, a state traditionally known for its production of oil and gas. Today, that state leads the country in wind energy generation and ranks second in solar energy production. The shift towards clean energy there is not just about sustainability; it’s creating jobs and driving economic growth. In 2023, the Texas Comptroller’s office reported that 24 proposed wind energy-related projects could generate more than $50 billion of investment in the sector, which already employs more than 26,000 Texans.


There are multiple more examples of the possibilities of a new energy future, pushed forward with collaboration between government, industry and academia. It’s a symphony we’re all playing in, and one that, with the right conductor and the right timing, can create something powerful.

 

NOTE: This column is adapted from Eggers’s new study:  How states can drive growth on the road to a new energy future. Its contents reflect the sentiments of the author and not necessarily Barrett and Greene, Inc.

 

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