Strategies for the U.S. to Regain Leadership in Clean Energy Technology

The United States is currently falling behind China in the race for clean energy technologies and critical minerals. To regain its position, it needs a strong domestic industrial policy and strategic international partnerships.

Overview

Clean energy and related technologies are becoming increasingly vital for the security and prosperity of the United States. To effectively decarbonize its economy and contribute to global efforts to achieve net-zero emissions, the U.S. must implement changes that extend beyond its borders.

In the past year, the Carnegie Endowment for International Peace convened the U.S. Foreign Policy for Clean Energy Taskforce, a bipartisan group of 23 former and potential future policymakers. This group met monthly to discuss ways to enhance clean energy supply chains, thereby bolstering national security and prosperity. This paper distills key insights and recommendations from those discussions, as well as from analysis of supply chains and international relations.

The Challenge

The emergence of clean energy presents significant economic and diplomatic opportunities for the United States but also poses strategic challenges. Three critical issues stand out:

1. Economic Imperative: Clean energy technologies are crucial for the economic future of the U.S.
2. Intensifying Competition: The competition for leadership in these technologies is intensifying, and the U.S. is currently losing this race.
3. Strategic Response: A focused industrial strategy, supported by international alliances, can help the U.S. regain its technological edge.

The Inevitable Rise of Clean Energy

The rapid proliferation of solar, wind, and battery technologies stems from their cost competitiveness and long-term advantages. These technologies are thermodynamically efficient and can harness local resources, reducing dependency on complex fuel supply chains. As a result, countries reliant on fuel imports can lessen their vulnerability.

Although global fossil fuel consumption is expected to persist, clean energy is witnessing the fastest growth, with annual investments nearly double that of fossil fuels. For instance, in 2023, global battery storage installations nearly tripled compared to the previous year, and by 2025, new batteries capable of storing energy for days are expected to be deployed.

Further advancements are on the horizon, with the cost of next-generation geothermal power decreasing rapidly. Nuclear energy is also experiencing a revival, given its capacity for continuous power generation. In the U.S., new cement and steel facilities are being established to operate without fossil fuels.

Electric vehicles (EVs) may emerge as the most transformative technology in this landscape. They are not only more energy-efficient than internal combustion engines (ICE) but also cheaper to maintain due to fewer moving parts. As a result, global ICE sales have dropped significantly, while the number of EV chargers has quadrupled since 2020.

Investment trends highlight the shift towards clean energy, with fossil fuel investments stagnating at around $1 trillion while energy transition investments have surged by approximately 25% annually, exceeding $2 trillion in 2024.

The Global Race for Clean Energy Technology

Since the adoption of the U.S. Inflation Reduction Act (IRA), other nations have intensified their investments in clean energy technologies. Countries like Japan, South Korea, and members of the European Union are advancing their industrial policies to enhance their positions in solar, wind, and battery technologies. Emerging markets, including India and Brazil, are also developing strategies to become key players in clean energy supply chains.

Moreover, Gulf states like Saudi Arabia and the UAE are diversifying their economies by investing in clean energy alongside oil and gas, recognizing the importance of this transition for long-term prosperity.

The historical strength of fossil fuels in the U.S. economy—particularly following the shale revolution—underscores the need to pivot towards clean energy technologies. If current investments in fossil fuels detract from the resources needed to compete in the clean energy sector, the U.S. risks falling behind in critical technologies and minerals necessary for future growth.

Strategic Recommendations

To ensure its leadership in clean energy technologies, the U.S. must adopt a comprehensive strategy that includes:

1. Domestic Industrial Policies: Focus on leapfrog opportunities in clean energy technologies while using foreign policy to stimulate export markets and support joint R&D initiatives.

2. Partnership for Global Infrastructure and Investment (PGI): Broaden and refine the PGI to set clear supply chain targets, improve domestic policy processes, and develop a cohesive set of foreign policy tools.

3. Collaboration with Allies: Strengthen partnerships with international allies to focus on developing shared clean energy technologies and secure critical minerals.

4. Project Pipeline Development: Establish a domestic interagency process to generate a project pipeline for building clean energy supply chains overseas.

5. Financial Support: Bolster agencies like the International Development Finance Corporation (DFC) and the Export-Import Bank (EXIM) to enhance their roles in strategic industrial policy.

Conclusion

The U.S. must act decisively to reclaim its position in the clean energy race. By focusing on innovative technologies and forming strong international partnerships, the country can secure its economic future and maintain its leadership role in the global clean energy landscape.