The Green Economy is the Future Economy

by | Apr 24, 2024

Executive Summary

For Northeast Ohio, and regions like it, the move toward a greener economy marks a transition from an era of scarcity to one of potential abundance. It marks the emergence of a new set of industries for regions to compete over. It also marks a fundamental shift in what it means for a firm or a region to be competitive, like the digital revolution of two decades ago. Unlike the digital revolution, however, this coming economic era will reward places with the capability to build and deploy, not just program and design. The Inflation Reduction Act (IRA) injected enormous energy and capital into sectors largely dormant since the federal government’s last attempt to pass major climate legislation in 2009. And federal investment is a catalyst of, and complement to, ongoing changes in consumer and corporate behavior.  

The competition is still in its early stages, with the peak of capital investment for decarbonization still an estimated five to 10 years away. All in all, this adds up to an enormous, positive economic shock that has the potential to alter the trajectories of regions.  

But “potential” is the operative word.  

To benefit from this future, Northeast Ohio must go beyond celebrating the comparative advantage of abundant water and temperate climate. The goal of the practical guide to the green economy is to seed ideas and actions required today to maximize the region’s equitable growth of tomorrow.  

A reality check: Northeast Ohio is not automatically advantaged in the transition to a greener economy.

While Northeast Ohio’s temperate climate and access to abundant water provide some comparative advantages, other regions offer similar environmental profiles and may be better positioned to capture gains. Northeast Ohio must still be fundamentally competitive if it is to realize potential benefit.  

And the green economy is changing what it means to be competitive.

Evidence points to firms valuing access to clean energy above other environmental considerations, and Ohio is not currently well-positioned to win 

Most obviously, the state government is behind competitor states like Illinois in enabling or accelerating the shift to clean energy. Ohio’s energy policies risk inhibiting business attraction over time, given the rising importance of energy mix in site selection discussions. The public sector is also capable of creating markets for green products and services. States have significant control over infrastructure-related decisions (net metering), and in other states, investments are being made to accelerate the green transition—for example, profiled in the guide are initiatives and investments by Georgia Tech, the University of Minnesota, the Connecticut Green Bank, and the California Energy Commission.  

Even if the green economy results in regional growth, inclusive access to those jobs, or opportunities for communities to build wealth, are far from guaranteed.

The green economy will have implications for most industries, workers and communities, and will require most businesses to adapt their processes and products, and many workers to acquire new skills. While the green economy will show up everywhere as a disruptive force, it will not automatically create equal opportunities. Northeast Ohio, like places across the country, faces persistent racial and ethnic disparities in income and employment and entrenched concentrations of poverty exist throughout the region. This is a rare moment where a coming economic shock is visible in real time. Our shared responsibility requires us to go beyond simply imagining a more inclusive future. We must proactively work toward it.  

Public and private sector investments are already happening and the investments are significant.

The U.S. is reinvesting in its ability to build and deploy hardware, and this federal government’s industrial policy is explicitly designed to incentivize investment in places like Northeast Ohio. The manufacturing resurgence, including and especially clean manufacturing, is real—federal industrial policy is driving reshoring. In the year since the IRA was passed, $213 billion went into new clean investment across the economy, an amount larger than the GDP of 18 states, representing a 37% increase from the year before and a 165% increase from five years ago. There have been 100 new cleantech manufacturing announcements during this time. Many of these facilities expand on existing workforce and industrial infrastructure, particularly in the automotive industry. The region has high capacity organizations that are attuned to these opportunities and have experience helping firms, workers and industries navigate economic transitions.  

Business leaders are also laying the foundation for a different future: An Accenture survey of CEOs found that over 60% are launching new sustainable products or services, over 40% are increasing R&D on sustainable innovation, and over 30% are taking proactive steps to reduce scope 3 emissions. As more and more firms are setting decarbonization goals, growing skepticism of carbon offsets is changing how corporations must pursue those goals. There is a trend away from offsetting and toward what the World Economic Forum calls “insetting.” This means that the next era of corporate decarbonization commitments should be viewed very differently from those of the previous era; these commitments will result in deeper changes to products and processes, including throughout supply chains. This shift in corporate and government behavior will translate directly to pressures on suppliers, including small- to mid-sized manufacturers. These firms will need to be able to quickly develop the capabilities to quantify their carbon emissions, track changes precisely over time, and implement changes in practices, processes and products to measurably decrease embodied carbon. Very few smaller firms have these capabilities.  

This shift in demand does not just create opportunities (and risks) for incumbent firms, but also for startups. Investors clearly believe that there are massive opportunities for startups. Global venture capital investment in cleantech firms grew from $1 billion in 2018 to over $12 billion in 2022, of which $7 billion was in the U.S. While venture capital fell significantly in 2023, the portion of all startup investment devoted to climate investment increased. Unlike the 2008-2009 era, cleantech market opportunities are expected to be real and enduring.  

Success is achievable.

The green economy will reward places, like Northeast Ohio, that know how to make things. Economic expansion over recent decades, largely in tech and finance, was highly concentrated in certain places but effectively divorced from the specific qualities of those places. While certain metro areas benefited from reputation, proximity to research and development, and a shared talent pool, most tech companies operate out of the kind of multi-use office space that is relatively similar, whether it’s in Seattle, New York, or Tel Aviv. The same is not true of the green economy. Both green manufacturing and clean energy project development are directly connected to spatial and locational realities.  

And, with individual and collective actions now, Northeast Ohio can be better positioned for the future.

The work ahead is repurposing land, utility infrastructure and workforce for the green economy, and aligning with the rapidly changing needs of companies. This manifests in land use planning and permitting, energy policy, and infrastructure investments. States and cities can fast track permitting, increase capacity and local matching funds to pursue federal funding, push for changes in utilities’ integrated resource plans, and match workforce programs to clean industry needs. There is a clear competitive advantage for regions, like Northeast Ohio, with an existing manufacturing base. When place matters, there are new opportunities to support inclusive growth and to lift up communities that have been left behind.  

The size, scale and scope of the work ahead can be paralyzing. Not to worry; the guide is here to help. Read the entire guide for a starting set of practical ideas with the potential to catapult our region toward success.

Strategic Imperatives

The ideas are organized around three strategic imperatives essential for those working together in economic development to peruse in order to achieve big—and in this era, eminently doable—objectives:  

  • Greening job hubs  
  • Future-proofing businesses  
  • Maximizing community benefits  

There is no green economy formula and few, if any, regions have a shared definition of and strategy for the green economy. Because so few regions have done it, those regions that do create shared strategies for the green economy, anchored in a clear set of job creation, job quality, inclusion, and wealth creation goals (not just decarbonization), will be a step ahead of the competition. Read The Practical Guide to the Green Economy and together we will get a leg up. 

Note: A full glossary of Green Economy terms can be found at the end of the Guide, starting on page 92.  

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