Janet Yellen on the ‘real opportunities’ for inexperienced buyers | USAEMALL.com

Welcome back.

As Treasury secretary under Joe Biden, Janet Yellen was central to his administration’s push to foster a US boom in low-carbon industries of the future.

In the three months since Yellen left office, Donald Trump has made serious headway in pulling down the clean energy framework that she and her colleagues built.

Yellen — who also previously chaired the Federal Reserve — is keeping some skin in the climate game. She’s just taken a position on the advisory board of Angeleno Group, a Los Angeles-based venture capital firm focused on clean energy and other climate-related businesses.

In our conversation this week, Yellen told me why she’s still bullish on the opportunities for green tech investors in the US — even as she warned of severe risks that Trump’s tariff war is creating for the entire national economy.

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Janet Yellen enters the climate VC arena

This transcript has been edited for length and clarity.

Simon Mundy: I’m sure you’ve had no shortage of invitations to take various positions since leaving government. Why did you decide to take this one?

Janet Yellen: Well, I think climate change is an existential challenge, and addressing it effectively has to involve massive private investment, and I am very impressed with the work and commitment of the Angeleno Group to identifying investments that will be both profitable and also mitigate emissions or deal with adaptation.

Over four years during the Biden administration, I tried to use every tool that we had at Treasury to address climate change; most recently, being involved in writing the tax rules for the Inflation Reduction Act. But I really believe that this is an utterly critical global challenge, and that private investment in climate solutions is a key way to address it.

SM: As you mentioned, this was a priority for the Biden administration, and there were policies that were seen as very helpful to this space. Now we have a very different administration that is dismantling a lot of that policy framework. How much of it do you think is going to survive?

JY: Well, I am certainly concerned about the hostility towards climate change. For example, I think it was yesterday or the day before we saw the entire staff of the National Climate Assessment team sacked, which is discouraging. I’m discouraged about what’s happening to research in this field.

That said, the Inflation Reduction Act is an extremely important law. It created enormous incentives for investment in clean energy, and many of the rules have been finalised.

I’ve heard calls to repeal some of it [but] I think there is bipartisan support, because the truth is that these tax incentives have created a huge wave of investment across the country. And it’s investment that is benefiting, particularly, red states that have suffered losses, either because of the decline of coal and fossil fuels, or because of the China shock and loss of manufacturing. We’re seeing a battery belt grow up in the Midwest.

These are huge and meaningful incentives, and I am hopeful that they will remain in place. I expect them to remain in place . . . A lot of the activity that relates to clean energy, I’m hopeful will continue, although certainly there is a sense of hostility in the Trump administration towards anything that’s labelled climate change.

SM: You’re certainly not the only one who sees that hostility. To what extent is this concerning for you as an economist? To what extent do you think these rollbacks of various areas of climate policy are a problem for the American economy in the long term?

JY: Well, I believe clean energy for the American economy is really an important sector to support, for an administration concerned with manufacturing. There are real opportunities for firms to invest in these areas.

This is a sector where, in some sense, the infant industry argument really applies. These are sectors that deserve support, direct support, which they’re getting through the IRA, and they also are areas that will generate very meaningful technological change that will boost American success and productivity growth in the years ahead.

And one of the reasons I wanted to serve on [Angeleno Group’s] board of advisers is . . . that this firm is doing exactly the kind of thing that I would love to see private investors do more generally — which is to identify promising technologies and invest in them, to help these companies scale up and ultimately become globally competitive.

SM: President Biden talked a lot about the need for the US to have a really strong position in clean energy industries. And what’s been happening recently has made some people quite worried about the US’s long-term position in that contest. How are you feeling about it?

JY: Well, I was very supportive of President Biden’s strategy to support domestic firms in order to make them leaders in this sector, and to generate innovation and scale in ways that would make them globally competitive, and that meant limited tariffs to provide a window of protection. At the same time, there was a lot of direct support, tax subsidies and the like going to these firms.

I do think if ever there were a case where the infant industry argument applies, this is the sector. I had a chance to visit, while I was Treasury secretary, some very innovative firms operating in this space. Some of them, I think, were really harmed by the enormous subsidies that China put in place.

I will always remember a visit to a firm outside of Atlanta called Suniva that was a leader in developing solar cell technology, was growing rapidly, and then China’s subsidies essentially put it out of business. But the factory is still in place, and because of the incentives in the IRA, the management has come back. They’ve unlocked the doors. They’re up and operating again. This is just an example of a highly innovative firm that I believe, with the right support, can be a leader in this space. So I’m very supportive of this strategy, and hope it will remain in place.

SM: Something else that often forms part of infant industry strategies is high tariffs. To some, it might look like the Trump administration’s tariffs could create an easier playing field for domestic clean energy companies. But of course, it is creating problems for many of them. Just looking at the implications for the energy transition, what’s your take on the impact of these tariffs?

JY: Well, I’m very concerned about the broad-based tariffs that President Trump has put in place, and very concerned about the tariff war that he’s started with China. I think we have to be very careful. I mean, I was supportive of very limited tariffs that were well targeted in the clean energy space that would give firms like these solar cell manufacturers some breathing space to scale up and become competitive.

But then when you’ve decided you want to support, say, solar cell manufacturing, you have to be extremely careful not to put yet larger tariffs on the inputs that go into this — wafers, for example, that are needed to produce these cells. We have very limited production capacity in the United States. So in designing the specific tariffs that Biden put in place, we were very careful to think through the implications of the whole set of tariffs for parts of the industry we wanted to support.

We’re highly dependent on China for most of the critical minerals that go into clean energy technologies, batteries and the like. And by putting enormous tariffs on them, I think we potentially hobble industries that could have a chance.

Now, I do recognise that over-dependence on China creates both industrial and national security concerns, and I am supportive of strategies that would diversify our supply chains and make us less susceptible to the possibility of China cutting us off from inputs we need, as they have done very recently with respect to rare earths and magnets.

I’m not going to go into every detail about the tariff strategy that President Trump has put in place, but I think it will have tremendously adverse consequences for the United States, for consumers, for the competitiveness of firms that rely on imported inputs. Forty per cent of our total imports into the United States is inputs into production of domestic firms, including our export industries.

SM: You’ve spoken in the past about the need for massively increased climate finance at the global level, to the tune of trillions of dollars per year. How are you feeling about the progress towards that at the moment?

JY: A lot of what’s taking place is driven by fundamental economics. There are investments that pay, have good pay-offs and can scale up, and I’d expect to see that continue.

But when I look globally at the landscape, in many cases, in emerging markets — even in countries where there is ambition to invest, to reduce dependence on coal, to make the clean energy transition — investment is risky.

I think private investors would like to take advantage of opportunities, but often public-private partnerships are necessary to make that possible, and this is a place where the multilateral development banks can play an important role. They have been working to do that, whether it’s political risk insurance or finding ways to address exchange risk, some joint work to improve the policy environment in emerging markets to make it safer and better for private investors to come in.

I think that these public-private partnerships are very important, and I believe it will take massive amounts of private investment globally to address climate change, so I’m very hopeful that the multilateral development banks will be able to continue to play a positive role here.

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