Is the clean energy economy doomed?
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Hello, everyone. I'm Kimberly Adams. Welcome back to Make Me Smart, where none of us is as smart as all of us. And I'm Amy Scott in for Kai Risdahl. It is Tuesday, May 6th.

And today we're checking in on the clean energy transition. We're 100 plus days now into the new Trump administration. And the president's drill baby drill agenda is a sharp turn from Biden's climate policies, especially the landmark clean energy law, the Inflation Reduction Act. So with billions of dollars in funding for clean energy on the line, we're wondering, is all the progress now doomed?

This is such a tangent, but I wonder if the lasting political legacy of Sarah Palin will be Drill Baby's drill. Oh, my goodness. Maybe so. Anyway, the Trump administration has been attempting to claw back some of these funds and Trump's 2026 budget proposal released last week outlines dramatic cuts in climate spending. So we wanted to know more about this and what it could mean for the

clean energy economy, the clean energy transition in the long run. So here to make us smart about this is Christopher Knittel, economics professor and associate dean for climate and sustainability at the MIT Sloan School of Management. Wow, what a title. And welcome to the show, Christopher. Thanks for having me. All right. So big picture, how has the clean energy economy been faring since Trump took office?

Well, like just about every aspect of the economy, I think they're certainly dealing with a lot of uncertainty, whether or not the Inflation Reduction Act tax credits will survive, what will happen with the bipartisan infrastructure bill portions that went to clean energy. So in many ways, they're in a holding pattern until they get a little bit more certainty from the federal government.

So can you talk about where we are in terms of the Trump administration's efforts to claw back the Inflation Reduction Act, these tax credits you mentioned? He has declared an energy emergency intended to increase production of oil. How successful have these efforts been?

Well, this week he came out with his budget. And of course, it won't be the budget that gets ultimately passed. But that effectively phased out all of the tax credits under the Inflation Reduction Act for clean energy. It also zeroed out portions in the bipartisan infrastructure bill that would have went to subsidizing EV charging stations.

And of course, as you mentioned, the drill baby drill motto, so to speak, is in many ways inconsistent with a clean energy transition. How have some of those incentives been doing so far? I mean, there was much made when the Inflation Reduction Act passed about all of these tax credits and whether or not it would really spur the clean energy transition. I mean, what kind of progress have we seen so far from these policies that are now at risk of being rolled back?

They've been taken advantage of. So we've seen a lot of investment in battery manufacturing facilities. Obviously, you see a lot of electric vehicles driving around. There's also investments in solar and wind, as well as investments going into hydrogen production.

So the Inflation Reduction Act laid out tax credits across the entire spectrum of clean energy investments and firms have been using those. And in fact, what we found in the data is over 80 percent of the tax credits are going toward Republican congressional districts. Given that the

distribution of benefits with these red counties benefiting a lot more from the Inflation Reduction Act. Are Republicans mounting any meaningful resistance to efforts to cut those back? In the fall, there was a letter that was signed by, I believe, 16 Republican members of Congress to the administration asking for the Inflation Reduction Act tax credits to survive. And

There hasn't been much talk since then, at least publicly. I'm sure, however, that all the discussion about the new tax bill will be centered around how do we replace these clean energy tax credits that are going toward red districts with other tax credits that may not be clean energy based, but would still benefit these districts. What are some examples that they're thinking about or floating at this point?

Yeah, it could be investment tax credits more generally that they hope to drive investment in these red districts. In the Northeast areas, something that's on the table, at least from my understanding, is the SALT exemption.

And maybe you can get some Northeast Republicans on board. Sorry, I'll just pause here. That's the state and local tax deduction. So basically, whatever taxes you pay in your state and local area, you could write off your federal taxes. But go ahead. Exactly. So in the Northeast, there was a lot of investment going into offshore wind taxes.

So how do we make whole, so to speak, these Northeast congressional districts? And one way to do that might be through the SALT deduction cap. But in the southern part of the U.S., where a lot of investment was going into building battery manufacturers, they're going to have to incentivize investment more generally. And we're waiting to see how they'll actually do that.

Dr. Knittel, obviously federal money is an incentive for private investment, but I'm wondering, you know, how much can private and state money make up for the loss of federal investment? Many states have their own policies on the books to incentivize clean energy investment, such as what are known as renewable portfolio standards or clean energy standards that

mandate a minimum amount of electricity that comes from carbon-free sources. But unfortunately, those policies get more expensive when the federal tax credits go away. So they're really complements to each other rather than substitutes.

So we might actually see the reverse where states will have less of an appetite to lean in on clean energy incentives because of the lack of federal leadership here. You know, you mentioned electricity demand, and there's been just a huge expansion of data centers and the rise of AI, which we know is very energy intensive. And so U.S. electricity demand is growing rapidly.

You know, the whole point of the Inflation Reduction Act and to some extent the infrastructure law was to sort of build more resiliency and infrastructure for that glowing, growing electricity demand. What happens if these policies actually get unwound? Can we meet our future electricity needs without investing pretty heavily in clean energy?

Well, I think that's where the drill baby drill comes in. We certainly could by building a lot more natural gas power plants. Of course, those that work on climate change, you know, we would prefer it to be carbon free, which could be solar and wind or it could be nuclear. We still don't know this administration's views on nuclear power in many ways, but

But absent solar, wind and nuclear, we would be powering those data centers with natural gas, I would imagine. So many believe that the world will decarbonize and the U.S. risks being left behind. Do you see that as a real possibility? I do. And in fact, I think that's one of the biggest risks from pulling back from these tax credits. The

The world is switching to electric vehicles. The world is switching to solar and wind.

And the less we do domestically, the less capability we build domestically to provide those clean energy sources, the worse off our industries will be in the future. So in many ways, the Inflation Reduction Act was just as much industrial policy as it was climate policy. It was to incentivize

building more electric vehicles domestically, more batteries domestically, more hydrogen, more carbon capture and sequestration. These are the industries of the future that if we're not doing them here, we'll be buying them from somebody else in the future. And I think that's the biggest risk.

Let's just say this is a blip in the timeline. And, you know, at the end of this administration, we get a new administration that comes in, different Congress that, you know, puts all this stuff back in place and, you know, continues the march towards a clean energy transition. How much permanent damage is being done by what the Trump administration is doing right now in terms of moving us along a path to

towards a cleaner economy. So we'll certainly have to wait and see on that, but there is potential for permanent damage. And the reason for that is these sort of infant industries often benefit from a lot of what we economists call learning by doing.

That is, you build a lithium ion battery and the next one you build, you do it better and cheaper. And even a four-year pause means that that learning by doing is happening outside of our country. In many ways, that can lead to large permanent damage because you just get left behind. We can certainly catch up, but it's going to cost more to catch up.

Thanks so much, Christopher Knittel, who's an economics professor and associate dean for climate and sustainability at the MIT Sloan School of Management. Thanks for making us smart. Thanks for having me. Yeah, thanks so much. Thank you. Amy, this ties so much into what you've been doing with How We Survive. Yeah, so we just finished the latest season of our Climate Solutions podcast. It was really looking at private investment and the way that...

shareholder money can either fuel solutions or perpetuate the dirtier economy we have now. And I think, you know, the point he made is without that federal money, it's just a lot harder to attract private investment in things that are risky, like transitioning to a new kind of energy, you

One thing we talked about that people might find interesting is how to look at your own retirement savings and where it's invested and how to make that cleaner without necessarily sacrificing profits. So I hope people check it out. I mean...

I understand that it's harder to get private industry and private investors to step up when the federal government isn't subsidizing things. But is there more appetite for the private sector to step in and fund these kinds of technologies and initiatives than maybe there was in the past?

Well, in some ways, yeah. I think as there's more money to be made, you know, money will find those investments. I was actually at a couple of days of the D.C. Climate Week conference last week. You know, a lot of cities have these now and it's a chance for academics and investors and, you know,

tech entrepreneurs to get together and talk about solutions. And there's still a lot of energy and money flowing into solutions. There was a whole panel on decarbonizing public utilities. I think there's still a lot of interest and even some optimism, frankly. And part of that is because the rest of the world is in many ways plowing ahead. But I think

not to get too deep into our latest season, but what we are looking at is sort of the backlash against...

private capital trying to invest in climate solutions. There's a very serious concern that money is flowing away from the fossil fuel industry, and there are a lot of entrenched, you know, interests in keeping that money in fossil fuels. And so it's amazing how you see a backlash to what in many ways seem like wise investing, thinking about climate risk as investment risk.

But it's become very political. Well, this is my pitch for everybody to check out the latest season of How We Survive, which is the Marketplace Climate Solutions podcast hosted by Amy Scott. If you haven't already, we're going to have a link in our show notes, so it'll be easy for you to find it. And do let us know what you think about this conversation we just had on the clean energy economy. Leave us a voicemail, 508-827-6278, also known as 508-UESmart. We will be right back.

Building a business may feel like a big jump, but OnDeck small business loans can help keep you afloat. With lines of credit up to $100,000 and term loans up to $250,000, OnDeck lets you choose the loan that's right for your business. As a top-rated online small business lender, OnDeck's team of loan advisors can help you find the right business loan to fit your needs. Visit OnDeck.com for more information.

Depending on certain loan attributes, your business loan may be issued by OnDeck or Celtic Bank. OnDeck does not lend in North Dakota. All loans and amounts subject to lender approval.

Looking for a one-stop shop for everything from a leaking pipe or air conditioning repair to an EV charger installation for your home or business? Parrish Services, an Ace Hardware company, are your local experts for all your plumbing, heating, cooling, and electrical needs. Trust the pros of Northern Virginia at Parrish Services to keep your home humming and your family comfortable all year long.

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That's F-O-R-H-E-R-S dot com slash listen. Compounded products are not FDA approved or verified for safety, effectiveness, or quality. Prescription required. Price varies based on product and subscription plan. See website for full details, restrictions, and important safety information. Okay, time for some news. What you got today, Kimberly?

Right before we came in here, I was trying to keep tabs on the White House Oval Office spray because Trump is meeting today with Canada's new Prime Minister Carney. And as everybody listening to this show is probably aware, I was in Canada all last week and yesterday.

You know, it was so fascinating listening to people talk about their perspectives on the trade war and how they were changing their behaviors as a result. It would be interesting to see what comes out of this meeting. Carney seems to be coming out pretty strongly. Canada is not going to be the 51st state. Canada is not for sale. And Trump was even saying that a reporter asked him what the most important concession that he wanted from Canada was. And he said friendship.

And so right before this meeting, Trump was saying on Truth Social that there was like a trade imbalance and the United States was carrying Canada. But then he seemed to be striking a slightly different tone of engagement in person with Carney. So it'll be really interesting to see what comes out of this meeting. And, you know, Carney has really been, you know, kind of pounding the global pavement, trying to boost Canada's

relations with other countries. And it just really struck me, you know, after spending those few days up in Ontario, how the rest of the world is really coming to the view the United States as an unreliable partner and that they need to have a backup plan. And the fact that we can't seem to sort things out with Canada really is striking.

I know, it's making that South Park movie where we go to war with Canada just feel a little bit too real. Yeah, remember? It was satire. It was so clearly not plausible. And here we are. Here we are. What about you? What's your news?

Well, after nearly 20 years, the deadline to have your so-called real ID in order to board commercial flights in the U.S. and access some government buildings is tomorrow, May 7th. It's kind of crazy that it's actually here, but maybe it's really not because Homeland Security Secretary Kristi Noem told Congress today that people will still be able to fly if they don't have those IDs, but they may have to go through extra security steps. So

enforcement is going to be sort of phased in, I guess. So is the deadline really here or not? But what was interesting reading up on this is that, yeah,

So many states are not fully compliant, or at least weren't as of a couple weeks ago. CBS has been kind of tracking compliance and has a map you can check out. As of April, only about 27% of IDs in Washington state were real ID compliant, 37% in Kentucky, 31% in Alabama. A lot of people have reported, you know, challenges getting the IDs, not just because of

long lines and demand, but because of difficulty with documentation, proving, you know, name changes and the like. So if you are flying, I just would recommend giving yourself a little extra time regardless, because it seems like there might be some delays. Do you have your real ID?

I do. I think Marilyn started doing it, oh, I don't know, it seems like at least five years ago. So I've had mine for a long time. And the way to know, by the way, is look in the upper right-hand corner and you'll see a star. I think it's either a black star or a gold star.

I had to double check last time I was in line just to make sure. What about you? I assume you have yours. Yeah, DC has definitely had it in place for a while. So I've got like all the bells and whistles on my ID, but I...

I often use like other forms of ID when I'm traveling anyway, like a passport or like the, I got one of those passport cards and things like that. So, you know, there's lots of options. Passports, by the way, still work. So if your state or you have been a holdout and you have a passport, you're still good to go. But I'm just curious what it's going to be like for folks who don't have those IDs yet. What kind of extra steps are we talking about?

Yeah. It's like, what, do you have to show your birth certificate or something? Anyway. Yeah. All right. That is it for the news. Let's move on to the mailbag. Hi, Kimber Kai or Kyber Lee. This is Bernadette from Atlanta, Georgia. Dan from Boulder, Colorado. I have a bunch of questions. I love the show and y'all are awesome and nerd it out.

All right. So last week, while I was reporting in Canada, we talked about all these Canadians boycotting U.S. goods and choosing not to vacation here. And we got this message about it from Lori in Renton, Washington. In Seattle, the Toronto Blue Jays are coming to play our Mariners and the major hotel

hotels and restaurants, other tourist-oriented businesses are giving the Canadian folks coming down for the game a good deal. Anyone that can show a Canadian ID can get a 30% discount at some places. And the Seattle Hospitality Group, which runs a whole bunch of tourist-related stuff, is doing a campaign called Open Arms for Canada. I think the...

this is a great idea. You know, I think obviously they know what's up. They know the Canadians are upset. And so the market has responded. They're coming up with ideas to incentivize people for coming down.

Yeah, and hopefully the Canadians won't boo the national anthem at that particular game. Oh, and that 30% discount is to make up for the exchange rate between the U.S. and the Canadian dollar because the U.S. dollars worth a bit more than Canadian dollars. That helps the Canadians who are generous enough to come down into our country, you know,

make their money go a little bit further. But, you know, it's not really the money. I mean, I was meeting with somebody when I was in Ontario in Collingwood, and they were saying how they didn't feel safe traveling to the United States because their kid was trans, and they didn't feel safe bringing their trans kid into the United States. And so that's why they had stopped traveling, and there's no amount of exchange rate offset that's going to fix that one. Absolutely. Yeah.

Yeah. All right. One more. Last week, we were talking about how President Trump's tariffs are ultimately going to cause Americans to pay more, potentially for less stuff. And we got this message from Susanna in California.

My 12-year-old daughter was furious the other day when we paid $50 for two meals and two cookies from Venera. And the cookies had become smaller, more expensive, and used less frosting. She was so frustrated and just kept screaming, I hate tree poison.

whether it's computers, whether it's party savers, whether it's the narrow bread, what is going on in our economy is literally affecting everyone.

We need to make like a new sting for the show of her 12-year-old daughter screaming, I hate shrinkflation and just like drop it in where appropriate throughout the rest of the show. Please feel free to send us a voice memo. Oh, I love that. I love that. All right, before we go, we're going to leave you with this week's answer to the Make Me Smart question, which is what's something you thought you knew but later found out you were wrong about? This week's answer comes from listener Carl in Mississippi.

Hi Make Me Smart team. Here's something I thought I knew but later found out I was wrong about. A decade ago, a co-worker died tragically. We were all heartbroken, but also he was the smartest person there, and we all said we'd be lost without him. And it was really hard, but people stepped up, we figured it out, and we got things running again. Now sometimes people say they'd be lost without me, but I know they're wrong because I was.

The thing I learned the hard way was that there's no such thing as greatness. Only ordinary people deciding no one else is going to do it. That's a really beautiful story, Carl. Thank you for sharing that. Sorry you lost your colleague. But yeah, it is inspiring. Me too.

Yeah. Well, we want to hear from you all. If the story is inspiring, sad, uplifting, whatever you're feeling, if it's something you thought you knew but later found out you were wrong about, we hope that you'll share it with us. You can leave us a voice message at 508-827-6278, also known as 508-UBSmart.

This episode of Make Me Smart was produced by our intern Zoha Malik with help from Courtney Burt-Zeger. Today's program was engineered by Jake Cherry with mixing by Jessen Duller. Ben Talladay and Daniel Ramirez composed our theme music. Our senior producer is Marissa Cabrera. Bridget Bodner is the director of podcast. Francesca Levy is the executive director of digital. And Marketplace's vice president and general manager is Neil Scarborough. ♪

Hi, everyone. It's Kimberly. I want to take a minute to talk to you about public media. You may have heard about federal budget cuts and other threats to public media. But what you might not know is that Make Me Smart is actually part of the public media ecosystem. If you want to protect your favorite public media podcasts like this one, visit AmericanPublicMedia.org slash action to learn how you can help.