Cspan, online or listen to the podcast. Learn more about the author featured. Up next, a Panel Discussion on the impact of the Inflation Reduction Act on the u. S. And the world. Topics include Clean Energy Investments and combatting Climate Change. Hosted by the Brookings Institution, this discussion is about an hour. [inaudible conversations] thank you for sticking around for another terrific panel. Let me introduce on the Inflation Reduction Act. In the middle, Samantha Gross for the Climate Initiative and fellow policy at brookings, focusing on Climate Policy and International Cooperation and Net Zero Energy systems and geopoliticals and the Global Energy market. To my far left, Joshua Meltzer is a senior fellow at the Brookings Institution and leads the forum on cooperation in Artificial Intelligence and leads the ums pardon me, usmca Initiative Focuses how the United States, mexico, Canada Agreement can strengthen cooperation in north america. His research focuses on economic relations and the intersection of technology and trade policy. And Ken Lieberthal with the longest bio and deservedly so is a senior at brookings, 2009 to 2016, senior fellow in the policy and Global Economy and development program, from 20092012 served as director of the john l forton china center. President for National Security affairs and asia on the National Security council from 1998 through 2000 and someone that i would constantly call to explain to me what was happening in the world of climate cooperation between the United States and china. Thank you all for being here and for holding this discussion. I am particularly happy to learn from this panel because i have struggled to sort of get my arms around the sort of international aisesment of the ira. Ive covered 11, it will 12 this year, should i stop . [laughter] and you know, for as long as ive been covering this, the Global Community has said America Needs to lead and now that the United States has its first significant and really globally significant climate law, nobody likes the way weve done it. So id love to start with you, for really just a global i think we have a good handle, but id love for you to touch on europe specifically, but how other countries both perceive the ira and you know, and think about what the United States is doing. Thank you, lisa and thanks for being with us here today. I appreciate it. Yeah, when the ira was first passed i spent a lot of time talking to europeans, but also, folks, our friends in asia, particularly, japan, south korea, singapore, and the general consensus that i got, and i paraphrase, was, yeah, were so glad youre doing something serious on climate. And we didnt want it to be like that. Okay. Fine. I think the two things that other countries and the europeans in particular were most frustrated was was first, just the size of the subsidies. I mean, gunther said it earlier today, this isnt just the largest climate bill weve ever seen in the United States, this is the largest investment in climate and green energy in transition that the world has ever seen, and i think it was frankly kind of intimidating. We are the Worlds Largest economy, but when we look at europe, they dont have the ability to do it the way we do. The European Union isnt a taxing authority. It cant use its tax code to provide benefits to investments. And so, that has to be done at the individual country level and the individual countries have different abilities to act in that way. So, its a really difficult thing for europe to replicate. And so, thats one important reason why the europeans looked at it and frustrated the way it went down. I had a lot of conversations with them about politically, why it happened the way it did. We could talk about that, if you want. But that was one source of frustration. The second source was the protection aspects of it and i think that john podesta touched on those two. Those protection aspects werent aimed at our friends and allies in europe or asia, they were aimed at china as i look at my friend and colleague ken. Theres an understanding that china is an important leader in the green energy technologies, everything from solar panels, to batteries, to electric vehicles, to Critical Minerals and theres this concern, and i get asked this question more than any other, are we trading dependence on middle east and regimes were concerned about for dependence on china . You know, are we trading one thing for another . The answer to that i think is largely no for a lot of reasons, but thats why you saw these protectionist instincts. In addition to a desire to create these jobs, these industries of the future here, in the United States. Its part of the administrations general policy to grow our economy from the middle class outward. So, both of those were challenging and upsetting to kind of our allies, but for a lot of political reasons. That was the way its going to go down. And ive spent time with that, how we got here, where it is and hopefully we can find room in the middle to relate. All right, so do we trade our dependence on the middle east for dependence on china. Thats the question before we get into the u. S. , china and chinas Climate Policies itself. Ken, id love for you to talk about this as well. The primary republican argument against the ira and Clean Energy Policies is exactly that, right, that we are dependent on china for the china dominates the supply chain. The Clean Energy Policies are making us dependent upon china. We heard john podesta say all of the figures which im sure you know off the top of your head as well of chinas dominance in Critical Minerals, et cetera. Is there true to this . Well, theres no question that china is pay ahead of us in most of these areas and in dealing with Climate Change. Theyre way ahead of us because years ago, with the big bump up in 2015, but before that, they determined that they had to make enormous investments to deal with their environment and with Climate Change and its impact on the environment, and so theyve ramped that up dramatically. We did not. Now were eight to 10 years later, the chinese have done a tremendous amount in including getting control over entire value chains, and were now jumping in, you know, with both feet. Jumping into something, to a set of issues where in many cases the chinese are ahead of us on technology. They have Production Capacity that we have not built. They have control over supplies that we do not have. And they know how to do it. Theyve put the whole system together. For us to go in and not deal with the chinese, cooperate with them where we can, buy from them or license technology from them when we must, is simply to delay our transition, our capacity to deal with these problems more on our own. I think the u. S. Government, the Biden Administration recognizes very clearly that we have to develop our own capabilities over time, but its going to take time and if we dont seek to learn where the chinese are ahead, learn from them how theyre doing this, license their technology so we understand them better and can build plants here, its simply going to delay our transition. Should we be worried about the near term dependence . I think the chinese are very anxious to export. I think theyre happy to sell us stuff and you know, including batteries that ford dealing with china and to build a battery plant in michigan thats now in trouble politically, they were happy to license the Tech Technology to us and build the batteries. But theyre well able to build here. If you go back a ways, the chinese left ahead in orindustrialization over the last 30 years because they recognized they had to learn from the United States and from the advanced industrial countries so they let us in big time in their financial system, in all aspects of their industrial systems, et cetera, and learned from us. And eventually pulled ahead of us in some areas. Thats the way you get ahead. If youre behind to reinvent the wheel is a very expensive, very long, longterm approach and very likely to leave you falling farther behind as the other folks who are already in the game are moving ahead at a pace, also. So, you know, to say that were being were becoming more dependent on china, im sorry, what should we be doing . If the chinese have capacity to dominate these industries and were just going to sit there and say, well, we cant deal with any of them, were going to have to do it on our own and be fairly protectionist to approach this so even our friends and allies have concerns about how were doing it, i think that multiplies our problem so we need to be nuanced about this and not categorical about it. Can you walk us through how the ira has affected americas trade relationships . Yeah, sure. So its probably worth thanks for having me, its great to be here. Its, you know, were reflecting on why the ira is trying to achieve multiple objectives at the same time. Its got clearly a climate objective, a National Security objective with respect to reducing reliance on Critical Minerals in particular and other technologies from china and its got industrial strategy component to it as well and i think when you have these multiple important complex objectives, youre going to have a variety of unintended consequences domestically and globally and we saw very quickly that there were a range of provisions in the ira which raise a number of trade tensions. The main one, which got a lot of focus initially was access to the tax credit for electric vehicles and requirements for there essentially to be assembly, originally it was actually going to be just the United States, then that was expanded to include canada and mexico, so north american partners, i think, were somewhat relieved by that particular outcome, but very quickly became apparent that the europeans and the japanese, the south koreans, large car producing countries that this was going to be a problem and its clearly a violation of, you know, to require certain amounts of domestic content in order to essentially get access to a tax credit is a is a violation of nondiscrimination, you know, commitment in the wto. So, it was sort of a fairly straight forward, i think, wto issue from strict trade lanes and the way that the ira was drafted essentially if you had a Free Trade Agreement with the United States you could essentially be exempt from this. So the United States, the administration to its credit seemed to i have no insight into the rest of this, but seemed to be somewhat taken by surprise, i think, by the fact that this became a trade problem and the reaction of allies toward it and they moved fairly quickly, i think, to address that so we got the what the socalled Critical Minerals agreement with japan, which is being deemed a Free Trade Agreement under the ira to get around, essentially, that provision and the u. S. And the euro in protracted negotiations to reach a similar deal on that as well. So i think if theres progress on those fronts, sort of those immediate trade concerns get resolved. I think theres start of a bigger set of trade issues that comes up, which is the shift to your heavy reliance on tax credits and subsidies more generally to push the green transition. Yeah, its a complex debate because the wto rules and the rules that we generally have on subsidies have always been contentious and theyve always been somewhat economically incoherent. Theres sort of a legal approach to them, which is, you know, really needs to be understood through a political lens as trying to balance a sort of economic view of subsidies with a realization that its politically difficult for countries for large subsidized imports even though you may make a lot of economic sense, theres a lot of political constituents that get upset by this understandably, so their safety valve in trade agreements that allow governments, essentially try to neutralizing impacting the subsidy embedded in the import. But, you know, were now in a world where, you know, the u. S. , eu, china, you know, japan, you know, moving to subsidize the transitions to the clean economy so these increasingly look out of date generally speaking and the final point i want to make is that the the need for subsidies to enable their transition needs will be considered in light of the subsidies that are given for fossil fuels. Its been a lot of work from the oecd and the imf and trying to transition the world out of fossil fuel subsidies being unsuccessful and subsidies are significantly higher today than three years ago, for instance, and also not a level Playing Field when one thinks how do you enable the technologies and allow them to compete with fossil fuels and technologies as well. I want to come back to the subsidies, but i want to turn back to climate as a climate reporter, you know, from where i sit the success of the ira really rises and falls on whether it ultimately cuts emissions and encourages other countries to cut emissions, samantha, were still seeing, you know, raging debates over even the phrase, phase out or phase down and last year it didnt make it in at all. You know, the sort of, you know when we heard all of these years america has to lead the assumption was, other countries would rally, once the United States had really acted on climate. Why is that not happening . Thats an excellent question and, yeah, i feel like some of the debate that were having at the cops and other events and new york climate week a couple of weeks ago, things are we going to phase out or phase down fossil fuels. I have to be honest i find that debate frustrating. The demand for fossil fuels is going up. Whether were arguing to phase out or phase down is the same thing, we need to phase out fossil fuels, lets phase down and stop talking about it and move on to practicalities. One thing thats a good example for the ira, it may be for difficult for others countries for reasons. But things in the ira i think are exemplary and when i talk to folks in European Industry and other parts of the world that they really like, its quite technology neutral. Its focused on emissions, which is the thing that the environment really cares about. For instance, if you look at the hydrogen subsidies, theyre not focused on what color the hydrogen is, whether its made from natural gas or solar energy or any other color and there are tomorrow to count out there, its focus on the emissions associated with it and the subsidy phases in, as the emissions go down. Thats very appealing because it allows folks in industry to go out and do projects that bring the emissions down and not worry whether theyre meeting a specific Technology Standards and allows the technology to change and develop. You see that in our power subsidies as well. Zero carbon power is subsidized. Its not specifically from a specific manufacturer or place. Thats very appealing and so, i think about how the u. S. Is leading. I feel like were leading in policies that allow technology to flourish. Both in the way that were supporting Technology Development as john touched on at the beginning, and also that were quite neutral in the way that our policies support technologies. As long as they take us towards the goal of lower emissions and so thats a leadership part on the part of the u. S. That i real like and i hope is followed. And then what do chinese leaders think of the ira . What do policy makers how do they view our law . I think first of all the chinese leaders were not surprised by the ira or protectionist provisions, especially. They back in the teens looked ahead and said, at some point, the u. S. Is going to try to cut back our development, our rate of development, and is going to regard us as a competitor not as a partner and well take measures to cut us out and build up their own capabilities and our response to that preemptively has got to be were going to develop basically selfreliant systems. And they started doing that. En masse, very much including the array of areas that are directly related to Climate Change and environmental sustainability. So when the ira was passed, its interesting, its not discussed much in china. That hasnt been a big you go looking for articles about the ira in china, that isnt what its about. Its about competition with the United States and how the United States is trying to limit chinas development and so, we were right to go on more selfsufficient path and increasing our focus on being able to do that. So, in a sense, the ira, for xi jinping has been confirmation how