Biden’s Climate Goals Rest on a 71-Year-Old Defense Law
The Defense Production Act has become an important tool as the White House’s climate policy has stalled in Congress.
A legal relic dating back to the Korean War has become one of the White House’s most important tools to pursue its climate goals.
On Monday, the White House announced that it was invoking the Defense Production Act to boost manufacturing of certain technologies that will be essential for decarbonization, such as solar panels, heat pumps, and transformers for the electrical grid. This move may sound like standard federal paper-shuffling (heat pumps!?), but it amounts to one of the most aggressive executive actions that the administration has yet taken on climate change. It signals that with the White House’s climate legislation stalling in Congress, President Joe Biden is willing to use his sweeping executive authority, including under defense bills, to achieve his goals.
Even before the move, the Defense Production Act was the law of the moment. Both the Trump and Biden administrations have activated it in high-profile ways several times over the past two years, including to alleviate shortages of COVID-19 drugs and infant formula. In March, the White House invoked the law to secure more minerals for electric-vehicle-battery production.
Seemingly every problem has called for the DPA as a solution: Our economy today is physically constrained, and the DPA is one of the few laws that lets the White House operate in the realm of the physical. That’s because it allows the government to take a number of actions to speed up production and prevent shortfalls, including subsidizing private production of a certain good, securing more raw materials for a production process, or expediting the shipment of products across the country.
The law has been used thousands of times every year since it was passed in 1950, mostly by the Department of Defense. But the Trump administration—and now the Biden administration—turned to the DPA as a policy-making tool as supply chains stuttered to a stop. Under Trump, the Department of Health and Human Services used the DPA for the first time. Now Biden will also allow the Department of Energy to do the same.
Generally, invoking the DPA allows the government to take a wide range of actions, Todd Tucker, the director of industrial policy and trade at the Roosevelt Institute, a progressive think tank, told me. “Probably the biggest” of these actions is that the DPA “allows the administration to install capital equipment and technology in private facilities,” he said. Take solar panels, for example. Historically, foreign-made solar panels have been at least 30 percent cheaper than U.S.-made ones, which is one reason why America does not have a large solar-panel industry. Under the DPA, the government could directly pay to install equipment in factories, which would cut into that premium and theoretically help jumpstart domestic production, Tucker said.
Under the DPA, the government can also make a so-called advance market commitment, a promise to buy a certain volume of a product in order to ensure its production. The same idea undergirded Operation Warp Speed, the federal program that mass-produced COVID-19 vaccines roughly a year after the coronavirus’s discovery by promising companies such as Pfizer and Moderna that the government would buy millions of doses, allowing companies to manufacture them before clinical trials were complete. The DPA declaration allows the government to take similar steps for solar panels and other technology crucial for decarbonizing: Because companies know that they will have a customer for their products, they can quickly scale up production.
“If they’re talking to power-grid-equipment manufacturers, [who are] making X amount of products this year, the administration could say next year, ‘Why don’t you make 150 percent of that, and we’ll guarantee that you have a market for that,’” Tucker said.
But the appeal of the DPA is about politics as much as it is about policy. It largely skirts the two biggest obstacles that the Biden administration has faced in its attempt to decarbonize the economy. The first is Congress, where Senators Joe Manchin and Kyrsten Sinema have blocked its domestic climate proposals. Of course, an executive order by definition evades Congress. The second is the judicial branch, which can severely curtail the White House’s executive authority—and could soon diminish it significantly in West Virginia v. EPA, a case that the Supreme Court is due to rule on in days. On the courts front, Biden’s orders fit within a plain-text reading of the law. The law’s definition of national defense explicitly cites energy production as an industry that the government is allowed to buttress. And since 2009, Congress has instructed the government to favor renewable energy over fossil fuels in DPA actions whenever possible. This instruction was upheld by the Republican-led Congress (and signed by President Donald Trump) when it renewed the law in 2018.
That’s not to say that the DPA goes totally unchecked. In future years, the administration may have to return to Congress to get more funding to execute its DPA authority, Tucker said. Though that is usually handled in the National Defense Authorization Act, which usually passes with bipartisan, filibuster-proof majorities. (The act is also up for renewal in 2025.)
Congress may also be more willing to foot the bill, because, more broadly, the White House’s moves should be understood as part of a bipartisan willingness to prepare the U.S. economy for economic conflict with China. For the past month or so, climate advocates have complained about a set of tariffs that are blocking imports of solar panels from China. On Monday, the Biden administration took a separate set of actions that will prevent new tariffs from being put on Chinese panels for two years, but it doesn’t remove the ones that already exist.
That Biden is turning to the DPA is also a telling sign about how his administration views the economy more broadly—specifically, how it understands inflation. At least some of the inflation happening in the U.S. seems to arise from too much demand in the economy. As the economist Jason Furman has written, that explains some of the difference between U.S. and European inflation.
But not all inflation tracks back to demand. As I’ve written, some price increases, especially those in agriculture, may stem from the physical impacts of climate change. Others may arise from so-called bottleneck industries that can’t ramp up production as fast as the rest of the economy. Energy is the classic bottleneck sector, Yakov Feygin, an economic historian at the Berggruen Institute, told me, if only because it can take a year or longer for new energy infrastructure to come online. If the “bottleneck industry” hypothesis is behind some of the inflation we’re seeing now, then the government can help the economy by clearing those bottlenecks—that is, by directly facilitating the transfer of stuff.
In a way, that’s exactly what the DPA is built to do. For the past few decades, climate action has largely been about preventing private actors from doing things. The use of the DPA signals that we’re in a new era. The government now has to cajole private actors into doing things—and when they can’t or won’t, the DPA makes sure that the White House can do them on its own.