The final stage begins when speculators identify the transformational potential of the new technology and mobilize capital to fund the infrastructure needed for its broad deployment, and for the Darwinian exploration of additional applications. A productive bubble emerges, driven by the promise of a new economy.
Elements of this pattern can be seen in previous industrial revolutions. In the century leading up to the Battle of Waterloo in 1815, the British army’s rising demand for guns fueled the productivity gains (from mass production and the division of labor) that made Birmingham, England, the workshop of the First Industrial Revolution. Then, a generation later, the British Parliament endowed railway promoters with powers of eminent domain and limited liability, setting the stage for the Great Railway Mania of the 1840s. Likewise, in the United States, state guarantees and subsidies underwrote the canal and rail networks that were needed to establish a truly national economy. And, as in Britain, speculators followed where the state had led.
Today, climate change offers a mission that is greater in scale and scope than even the Cold War. But the response so far has been radically different. For years, the US was paralyzed by Republican politicians’ denial of reality—a self-defeating stance that culminated in former President Donald Trump’s withdrawal from the Paris climate agreement in 2017.
In America’s absence, China sought to lay claim to the Green Revolution, funding the world’s largest program for greentech research and development, and securing its dominant position in the production of wind turbines and solar panels. But China’s climate leadership is compromised by its reliance on coal and continued construction of new coal-fired power plants both at home and abroad.
Moreover, while US policymakers have dithered, the American public has accepted reality. According to the Pew Research Center, a majority of Republican voters and an overwhelming share of Democrats believe the US government should do more to address climate change. That means there is a broad constituency for Biden’s plan to “build back better,” the blueprint of which already contains much of what is needed.
Biden’s commitment sets the stage for government to fill in the missing pieces of a nationwide shift to renewable energy, starting with the establishment of grid-scale energy storage. Also needed are enhanced grid management to accommodate a preponderance of intermittent energy sources; an extension of the grid to substitute electricity for carbon-generating systems in industrial, commercial, and residential buildings; a nationwide expansion of broadband access; and the reconstruction of transportation infrastructure to accommodate lower-carbon forms of mobility (including charging stations for EVs).
Having witnessed the difference that competent national leadership makes in the deployment of vaccines, it is possible that US voters will deliver the Democrats even larger legislative majorities in the 2022 midterm elections. The last time that happened was in 1934, when voters heartily endorsed Franklin D. Roosevelt’s New Deal. If a Green New Deal then follows, the greentech boom, bubble or not, will leave behind a new world.
William H. Janeway, author of "Doing Capitalism in the Innovation Economy," is a special limited partner at the private-equity firm Warburg Pincus and an affiliated lecturer in economics at the University of Cambridge.