Biden is getting ready to sign a bill that would loosen environmental restrictions on federally funded microchip projects.
It builds on the landmark 2022 CHIPS Act which provided $280b to build, expand and modernise the semiconductor industry. It was especially aimed at increasing domestic manufacturing of microchips, which would create jobs and contribute to the US’s foreign policy goal of limiting China’s tech development.
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A White House official told POLITICO that Biden will sign the bill which they said would “allow us to continue our efforts to ensure Americans across the country can benefit from the promise of the Investing in America agenda while protecting communities and the environment.”
The controversy surrounding the bill highlights the difficulty behind reconciling a wide array of important issues on the government’s agenda. In this case, national security, environmental ambitions and the revival of the manufacturing industry seem to be at a crossroads.
What’s in the bill?
The Build Chips in America Act passed the House on Monday, after a tense vote that faced major pushback from Democratic committee leaders.
Californian Democratic Rep. Zoe Lofgren told POLITICO Biden “should veto” the bill and that it would be “unwise” to eliminate environmental requirements given the historic pollution that has been tied to the semiconductor manufacturing industry.
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By GlobalDataThe microchip lobby has been trying to dilute environmental impact rules for two years to facilitate the industry’s access to federal funding.
Those who apply for federal subsidies from the CHIPS Act are currently obligated to complete federal environmental reviews under the National Environmental Policy Act (NEPA) before receiving funds. Lobbyists warn that without the new bill, these requirements could delay projects for months or years.
The bill would waive NEPA reviews for projects starting construction before 2025, only allow projects to take loans from the government (not grants) and limit subsidies to be worth less than 10% of the total project cost.
The Sierra Club, an environmental non-profit, has warned against the impacts of the bill. Henry Manin, the club’s deputy legislative director for industrial policy and trade, warned that “it’s going to be completely secret going forward whether facilities are using PFAS and other harmful chemicals […] That was the last protection that communities and workers had.”
The manufacturing of semiconductors has historically involved carcinogens like arsenic and benzene.
A higher regulatory burden can be one of the risks of reshoring, as outlined by GlobalData economists in their latest analyst briefing for Investment Monitor. They highlighted that “reshoring/nearshoring does not come without its challenges, which include rising labour costs, resource limitations, and an increase in regulatory complexities.”
Similar narratives
Across the Atlantic, there’s a similar narrative unfolding. The EU is in a face-off regarding the EU Deforestation Regulation. The policy is set to take effect in December and would prevent exports that can be traced back to deforestation from entering the European market.
Wide-spread calls for delays highlight that the industry is not prepared to apply the policy as it would result in unintended consequences such as rerouting trade and irregular implementation.
Similarly to the US, there is a question about how to apply environmental regulations while balancing other political objectives. In the age of the green transition, it is a question that will continue to plague policy decisions that affect the global economy.
