Sweeping legislation in the US, including the Inflation Reduction Act, is infusing hundreds of billions of dollars into new climate and energy technologies, funding research, development, and implementation. But as the money begins to flow, there are open questions regarding who will benefit most, and who might bear the brunt of unexpected consequences.
Shalanda Baker, director of the Office of Economic Impact and Diversity at the US Department of Energy, spoke at MIT Technology Review’s ClimateTech event in Cambridge about the need to simultaneously address climate change and equity and the possibility of seeking justice during the energy transition. You can watch her full talk below.
Afterwards, Baker sat down with us for a conversation about how to distribute the benefits of new technologies and address community concerns around new projects.
This conversation has been edited for clarity and length.
In your session, you talked a little bit about these situations where climate change and inequality intersect. Could you give some examples of clear cases where we can achieve progress on addressing climate change and inequality at the same time?
I like to think about the [low-income] tax credit program—it’s a 20% additional tax credit for investments in solar, wind, and clean energy.
I’m really excited that my office leads that program as the program administrator in partnership with Treasury. And over the last nine months or so, we’ve designed a program that we think will actually move the needle for low-income households, so they’re going to get access to solar and wind through either community energy, rooftop solar, or small-scale wind.
That access obviously helps to fight the climate crisis while also, if we’re successful, bringing down the overall cost of energy for those folks and actually bringing true economic benefits to those communities.
We think about a lot of clean energy technologies as being good for communities—like, having more access to cheap power is obviously a good thing. But there are also things like the hydrogen hubs or carbon removal, where there might be environmental impacts, especially for projects that still involve fossil fuels. How is your office navigating that and addressing those concerns?
Your question reminds me of the 1970s, which was the high-water mark for environmental laws and legislation making it to the books, with the Clean Air Act and the Clean Water Act. All of these new laws protecting our air and water were beneficial for many, many, many communities around the country. But communities of color, in particular, were saying: “We’re not seeing the benefit of these laws.”
So fast-forward 50 years to the climate movement, where we have this unprecedented legislation, and it’s all to tackle the climate crisis.
And communities are saying to us, “We’re not going to see the benefits of this locally, even though in the aggregate we may be reducing carbon dioxide emissions. You’ve already been polluting me for 50 years, then you’re going to put carbon dioxide removal technologies in my community and site other facilities that will add more impacts.”
So how do we deal with that? How do we prevent the mistakes of the past? The only way to do it is to hold ourselves accountable, and to hold companies that are availing themselves of taxpayer dollars accountable, through our community benefits planning framework.
We also empower communities to be at the table, not as recipients of information but as partners and experts and negotiators in the room as these technologies are being talked about and as the development impacts are being discussed. And the hope is that they’re going to win this time—that they’re going to get economic development, they’re going to get job creation.
No community is a monolith. But we’re talking to folks to really understand what they need and how we can best provide them with the capacity to be at the table.
There’s been lots of discussion specifically around the planned direct-air-capture hubs in Louisiana and Texas, including recent reporting from E&E News laying out communities’ concerns that they haven’t been consulted. You said that you don’t want communities to be just recipients of information. Do you think that there has been adequate communication engagement as these projects have been announced and the response has started to come out?
We were in many of those communities. When you look at a map of the country where existing fossil-fuel infrastructure is, it’s the Gulf South—outside of New Orleans, South Texas. These are places where we know that if we’re going to fight the climate crisis, we’re going to need to mitigate emissions in those areas.
So my team organized two different roadshows where we brought delegations of DOE colleagues to those places to meet the communities that would likely be impacted by the work that we’re doing.
That created a foundation of relationships and information being shared with those communities. At the time, we didn’t know when and if projects were coming to those communities.
So fast-forward to September, when the direct-air-capture announcements were made. One is going to be in the Corpus Christi area—we were there in April. One is going to be in Lake Charles—we were there in June.
So we had already created relationships, and our colleagues already understood what those communities look like. We had a small meeting with advocates we had met with in both Corpus Christi and Lake Charles, and we said, “These are announcements that are going to be made.”
The developers that were the winners of these awards were charged with doing the engagements on the ground. But we heard in some of those meetings, “This is the first time we’re hearing about this.” So that’s a problem—we understand that.
And then subsequent to that, folks were asking a lot of questions. So now we’re going back to Lake Charles, and we were in Corpus [Christi] a couple of weeks ago, to actually meet with community members and talk to them.
I will say that this is messy. I will also say that we’re building it as we go. We’re teaching a lot from my office to other parts of the agency about how to do community and stakeholder engagement. We have a lot of expertise around the agency, but we’ve never done engagement at this scale. We’ve never been an agency that does industrial development.
So we’re learning a lot. We’re listening—my ear’s to the ground, the secretary’s ear is to the ground. And we’re operating in real time to try to adjust based on community concerns. And there’s more to come. It’s not the end of the story.
For now, the thousand acres that may well portend a more prosperous future for Syracuse, New York, and the surrounding towns are just a nondescript expanse of scrub, overgrown grass, and trees. But on a day in late April, a small drilling rig sits at the edge of the fields, taking soil samples. It’s the first sign of construction on what could become the largest semiconductor manufacturing facility in the United States.
Spring has finally come to upstate New York after a long, gray winter. A small tent is set up. A gaggle of local politicians mill around, including the county executive and the supervisor of the town of Clay, some 15 miles north of Syracuse, where the site is located. There are a couple of local news reporters. If you look closely, the large power lines that help make this land so valuable are visible just beyond a line of trees.
Then an oversize black SUV with the suits drives up, and out steps $100 billion.
The CHIPS and Science Act, passed last year with bipartisan congressional support, was widely viewed by industry leaders and politicians as a way to secure supply chains, bolster R&D spending, and make the United States competitive again in semiconductor chip manufacturing. But it also intends, at least according to the Biden administration, to create good jobs and, ultimately, widen economic prosperity.
Now Syracuse is about to become an economic test of whether, over the next several decades, the aggressive government policies—and the massive corporate investments they spur—can both boost the country’s manufacturing prowess and revitalize regions like upstate New York. It all begins with an astonishingly expensive and complex kind of factory called a chip fab.
Micron, a maker of memory chips based in Boise, Idaho, announced last fall that it plans to build up to four of these fabs, each costing roughly $25 billion, at the Clay site over the next 20 years. And on this April day, standing under the tent, CEO Sanjay Mehrotra conjures a vision for what the $100 billion investment will mean: “Imagine this site, which has nothing on it today, will have four major buildings 20 years from now. And each of these buildings will be the size of 10 football fields, so a total of 40 football fields worth of clean-room space.” The fabs will create 50,000 jobs in the region over time, including 9,000 at Micron, he has pledged—“so this is really going to be a major transformation for the community.”
For any city, a $100 billion corporate investment is a big deal, but for Syracuse, it promises a reversal of fortune. Sitting at the northeast corner of the Rust Belt, Syracuse has been losing jobs and people for decades as its core manufacturing facilities shut down—first GE and more recently Carrier, which once employed some 7,000 workers at its East Syracuse plant.
An abandoned building in Syracuse, which has lost most of its legacy manufacturing.
KATE WARREN
Syracuse, of course, is not alone in its postindustrial malaise. The nation’s economy is increasingly driven by high-tech industries, and those jobs and the resulting wealth are largely concentrated in a few cities; Boston, San Francisco, San Jose, Seattle, and San Diego accounted for more than 90% of US innovation-sector growth from 2005 to 2017, according to a report by the Brookings Institution. Without these high-tech jobs and with conventional manufacturing long gone as an economic driver, Rust Belt cities like Detroit, Cleveland, Syracuse, and nearby Rochester now top the list of the country’s poorest cities.
The Micron investment will flood billions into the local economy, making it possible to finally upgrade the infrastructure, housing, and schools. It will also, if all goes according to plan, anchor a new semiconductor manufacturing hub in central New York at a time when the demand for chips, especially the type of memory chips that Micron plans to make in Clay, is expected to explode given the essential role they play in artificial intelligence and other data-driven applications.
It is, in short, an attempt to turn around a region that has struggled economically for decades. And the project’s success or failure will be an important indicator of whether the US can leverage investments in high tech to reverse years of soaring geographic inequality and all the social and political unrest that it has brewed.
Billions for fabs
In many ways, the Micron investment is an on-the-ground trial for the recent US embrace of industrial policy—government interventions that favor particular sectors and regions of the country. Over the last two years, the US government has allocated hundreds of billions to supporting everything from new chip fabs to a slew of battery manufacturing plants throughout the country. Micron, for one, says it would not be building in the US without the funding it expects from the CHIPS and Science Act, which designated $39 billion for support of domestic semiconductor manufacturing and another $13.2 billion for semiconductor R&D and workforce development.
While semiconductors were invented in the US, these days it fabricates only about 12% of the global supply; Taiwan and South Korea dominate the market. For DRAM (dynamic random-access memory) chips, the kind that Micron plans to build in Syracuse, the state of domestic manufacturing is particularly bad. Fewer than 2% of DRAM chips are made in the US. Even US-headquartered Micron, which is one of three companies that control the DRAM market, makes most of its chips in Taiwan, Japan, and Singapore.
It costs roughly 40% more to make chips in the US than in Asia, owing to differences in construction and labor costs and government incentives. The money in the CHIPS Act is meant to make it financially attractive to build fabs in the US once again.
Some of that money is going to places where chip manufacturing is well established: Taiwan Semiconductor Manufacturing Company (TSMC) is investing $40 billion in new fabs in Phoenix, Arizona, and Intel is building fabs in nearby Chandler. But other projects, including a $20 billion pair Intel is building near Columbus, Ohio and Micron’s project in Syracuse, will break ground on new locations for chip manufacturing, potentially creating centers of economic activity around the large investments.
The intention of the CHIPS Act, says Mark Muro, a senior fellow at Brookings, is not just to support building “a big box” to make semiconductors but to help create regional economic clusters around the investments. After years of growing inequality between different parts of the country, he says, this strategy reflects a renewed emphasis on so-called placed-based economic policies to support the local development of high-tech manufacturing.
Burnet Road in Clay, New York, where the Micron fab will be built, is still rural—but that could soon change.
KATE WARREN
Predictably, states are aggressively competing for the investments; New York attracted Micron with a staggering $5.8 billion in economic development incentives. But the billions of dollars flowing into Syracuse come with uncertainty. Will this lead to sustainable economic transformation? Or will the massive amounts of money simply provide a temporary burst of growth and jobs for some, leaving many in the community behind and causing a severe case of buyer’s remorse for the city and state?
The incentives that were offered to lure Micron represent “a wild, wild amount of money,” says Nathan Jensen, a professor of government at the University of Texas in Austin.
While the Micron investment will likely bring good jobs and could be a great opportunity for a distressed city, he says, local and state leaders will need to manage multiple risks over the long term. Corporate strategies can change, and 20 years is a long time to bet on growing market demand for a specific technology. What’s more, says Jensen, by offering generous tax breaks to companies, state and local communities can limit their sources of revenues in the coming decades, even as—if all goes well—they deal with booming demand for housing, roads, and schools. He calls it the “winner’s curse.”
The challenge for Syracuse is that there are no “hard-and-fast recipes” for how to get it right, says Maryann Feldman, a professor of public policy at Arizona State University. “We think like we have an economic development sausage machine,” she says. “You line up a bunch of factors and, voilà, you have a productive and growing economy. It’s much more difficult than that.”
Risky business
When Ryan McMahon became county executive of Onondaga County, in 2018, the long-imagined industrial park in Clay was languishing. Previous county executives had promoted it as the perfect location for a semiconductor fab. But for two decades there had been no takers. McMahon decided to go all in, pouring millions into expanding and upgrading the site.
His timing couldn’t have been better. Even before the CHIPS Act was passed last summer, semiconductor manufacturers had begun scouting sites in the US to expand. TSMC and Intel both sniffed around Clay, says McMahon, before choosing other sites. Preliminary talks began with Micron, but it all depended on whether the act got passed.
Once that happened, the Micron deal was done. In late October, President Biden went to Syracuse to celebrate what he called “one of the most significant investments in American history.”
The business of memory chips, such as the DRAM chips that Micron will make in Clay, is a notoriously competitive one with very low margins. Like their more glamorous cousins, the logic chips made by Intel and TSMC, they are immensely complex and expensive to make: the process involves cramming billions of transistors onto each thumb-size chip with a precision of a few atoms. To survive, companies have to run their fabs continuously, with remarkable efficiency and yields.
The technical and market demands make finding a suitable site difficult. Micron says it chose the site in Clay because of its size, access to clean power, and abundance of water (by some estimates, large chip fabs use up to 10 million gallons a day). The transmission lines running through it draw power from a huge hydroelectric plant at Niagara Falls and nuclear plants on Lake Ontario. And the lake, with its nearly endless supply of water, is less than 30 miles away.
The Micron investment, including the $250 million the company has committed to a community fund, could help the city repair its crumbling infrastructure.
“There are very few sites, frankly, in the country that were ready on our timeline,” says Manish Bhatia, Micron’s executive vice president of global operations. Bhatia also points to the area’s manufacturing legacy, which despite being “hollowed out over the last 20 years” has left a “tremendous pool of engineering talent.” Throw in the generous incentives from the state and the company was sold, he says.
Micron’s ambitious expansion plans for the next few decades are fueled in part by anticipated demand from artificial intelligence, as well as increased use of memory in automotive applications and data centers. “AI is all about memory,” says Bhatia. “It needs larger and larger data sets to be able to glean the insights.” And more data means more memory.
Construction of the first fab is scheduled to begin in 2024, but it won’t be expected to come fully online until the latter half of the decade. Further expansion is planned but will depend on the demand for the memory chips. Another fab could begin operations by the mid-2030s; after that, two more fabs are on the table, if the market allows.
Micron projects that it will eventually hire 9,000 people to work at the fabs, with roughly 3,000 of those jobs needed for its initial build-out. And it says as many as 41,000 additional jobs will be created in other businesses, from companies supplying the fabs with materials and maintenance to restaurants meeting the needs of the growing workforce.
The fabs will require workers with a wide range of skill sets, from electrical engineers to a roughly equal number of technicians without college degrees but with specialized training. That means large investments in the area’s vocational schools, community colleges, and universities.
In response to the Micron investment, Syracuse University plans to expand funding for its College of Engineering and Computer Science by 50% over the next five years or so. While some graduates will surely go to work at Micron, the goal is more broadly to train people with a wide range of skills and expertise, from materials science to automation, in hopes that the investment in the fabs will seed a booming local high-tech community.
The Micron investment could mean plenty of jobs for skilled workers, such as these apprentices in training at the local electrical union.
KATE WARREN
“This is a fascinating natural experiment,” says Mike Haynie, vice chancellor for strategic initiatives and innovation at Syracuse University. “Industry left here largely 25 years ago, and the economy, to a large extent, has been sustained by health care and colleges—it’s essentially what’s driven the economy.” Now, says Haynie, “all of a sudden you insert this $100 billion high-tech investment into the regional economy and see what happens.”
Until now, he says, “we have not been able to authentically look an engineering or computer science student in the face and say, ‘There’s a reason for you to stay in central New York.’”
Going bad
If Syracuse and the surrounding towns want a lesson on how not to do economic development, they just need to drive 150 miles down the thruway to Buffalo.
In 2012, Governor Andrew Cuomo announced the Buffalo Billion, an ambitious redevelopment initiative intended to revive the distressed city. The star project in the Buffalo Billion was an effort to create a clean-tech hub by spending $750 million to build and equip a massive manufacturing facility for SolarCity, a Silicon Valley–based company that financed and installed solar panels.
SolarCity promised it would produce a gigawatt of solar panels by 2017, creating 3,000 jobs in the city, including 1,500 manufacturing jobs at the plant. The so-called gigafactory would be the largest solar panel manufacturer in the Western Hemisphere, the company boasted.
In the late spring of 2015, I visited SolarCity’s plant as it was being built at the so-called Riverbend site, once the location of a sprawling plant operated by Republic Steel. Less than four miles away from the city’s revitalized downtown waterfront, it seemed like the perfect place to center a new manufacturing economy for Buffalo.
“The Buffalo Billion has been a failure with a capital F.”
Jim Heaney
The following years turned out to be pretty much a bust for the solar gigafactory. With SolarCity several billion dollars in debt, Tesla Motors bought the company. Amid much fanfare, Elon Musk, its CEO, announced it would make solar roof tiles—a product others had tried but that had never really caught on. They turned out to be more or less a market flop. Panasonic, which Tesla had originally brought into the plant to help make solar cells at the facility, pulled out in 2020.
Today, Tesla does in fact employs some 1,500 people at the facility, but many don’t work in solar manufacturing, according to local media reports. Rather, many of the jobs involve assembling charging stations for Tesla’s cars and annotating traffic scenes to help train the autonomous features in its vehicles. Without the anticipated boom in solar panel production—the promise of being the largest solar manufacturer in the US is long forgotten—there are few new jobs for suppliers and other companies that expected to support a growing center of manufacturing.
Tesla’s solar gigafactory in Buffalo, New York, in early 2022.
AP PHOTO/FRANK FRANKLIN II
“The Buffalo Billion has been a failure with a capital F,” says Jim Heaney, editor of the Investigative Post in Buffalo, who has followed the state initiative from its outset. The booming tech hub that the Buffalo Billion was explicitly chartered to create never materialized. Heaney points out that the only apparent spinoff from the investments at the Riverbend site is the Tim Hortons doughnut shop across the street.
In many ways, the plans for the Buffalo Billion violated Economic Development 101. For one thing, SolarCity, which was meant to be the clean-tech manufacturing anchor, was a company that installed residential solar panels; it had little experience in large-scale manufacturing.
There were broader questions about the state investment. Why build in Buffalo, which has no apparent supply chain for the technology and little local demand for it? (It’s one of the cloudiest cities in the country.) Where was the workforce with the skills to produce solar panels going to come from?
The key lesson of the Buffalo Billion is not that the solar gigafactory was a waste of taxpayer money, though it probably was, but that government-funded economic policy needs to be done in a way that respects a region’s resources and talents.
Richard Deitz, an economist at the Federal Reserve Bank of New York who is based in Buffalo, contrasts the strategy with the investments the state had previously made in Albany. There, the money went into a nanotech research center and to support an existing semiconductor industry; it created partnerships between businesses, higher education, and the state and local governments. The investments strengthened an existing cluster of expertise around those resources.
“These were very different approaches, and I’d say the one in Buffalo did not work very well,” he says.
Will the Micron investment change the economic trajectory of upstate New York? It’s the right question, says Deitz, “but I don’t think anybody can tell you the answer.”
However, he says he’s encouraged by what’s happened in Albany over the past 10 years. “You get a picture of what’s possible,” he says. From 2010 to 2020, Albany added some 4,000 jobs, while Buffalo lost some 25,000, according to Deitz: “It’s not like [Albany is] growing like gangbusters, but it’s doing quite well and it’s reinventing itself.”
Winning the lottery
The initial injection of money from Micron will inevitably create high-tech jobs and will have what economists like to call a “multiplier effect” as those workers spend their generous salaries at local businesses. But the real, sustainable payoff, says Enrico Moretti, an economist at the University of California, Berkeley, will come if the fabs trigger the creation of a cluster of companies that result in a flourishing of new innovation activities and brings long-term high-tech growth beyond Micron.
Ten years ago, Moretti wrote a book called The New Geography of Jobs showing how the rise of such so-called innovation clusters in a few areas of the US, mostly along the coasts, has led to deep economic inequalities. (Those disparities, Moretti now says, have only gotten worse and more troubling since he wrote the book.) “Innovative industries bring ‘good jobs’ and high salaries to communities,” he wrote. They deliver a far stronger multiplier effect than other employers, even those in manufacturing. But communities without innovation clusters, he wrote, “find it hard to create one” and fall further and further behind.
The trick for Syracuse is not to try to be another Silicon Valley (a well-known list of others have failed at that fool’s errand) or even another Austin, but to use its resources and skills to define its own unique brand of innovation.
Think Albany but on a far grander scale.
To demonstrate how important these high-tech clusters are to productivity growth, Moretti recently showed what happened to innovation in Rochester after the fortunes of Kodak began to decline in the late 1960s. The company had helped make Rochester one of the country’s wealthiest cities during the 20th century—but then came the invention of digital photography. Kodak’s business, which by then centered on selling film rather than making cameras, collapsed.
As Moretti documented, the damage to the city was not just the loss of Kodak jobs, but a parallel collapse of its ability to invent new technologies. He found that even non-Kodak inventors, who had nothing to do with the photography business, also became far less productive—as measured by number of patents—after Kodak’s decline. The benefits of a flourishing community of innovators interacting with each other, as well as the legal and financial services that facilitate startups and entrepreneurs, had seemingly left town with Kodak.
Now Syracuse wants to run what happened to Rochester in reverse, hoping a large corporate presence will kick-start its own innovation cluster around semiconductors.
“Syracuse has won the economic development lottery,” says Dan Breznitz, a professor of innovation studies at the University of Toronto. Besides the size of the investment, Micron has a long-term track record in chip manufacturing and commitment to building its own production capacity. But, Breznitz suggests, the community now needs a pragmatic vision for what the region and its economy will look like in 15 to 20 years, aside from the Micron fabs.
Having won the lottery, he says, the community and local businesses can say either “We don’t need to worry anymore” or “This is our moment to create a local vision of how we can become an important location for the global semiconductor industry or related industries.”
Shared prosperity?
When I spoke to Kevin Younis in late April, he appeared to be fully aware that he and Syracuse had won the lottery. As chief operating officer of Empire State Development, the agency responsible for promoting economic growth, Younis had helped lead the effort to recruit Micron. Now, sitting outside on the patio of a bustling downtown food market that he had chosen for the meeting, he basked in the recent revival of the city and its potential prospects.
Younis grew up a mile away, and he says the city has slowly been rebounding in recent years. “When I was a kid in the ’80s and for sure in the ’90s, the downtown was emptying out. I would come down with friends to go to the comic-book store, and we’d be the only people down here,” he says. Now, on a late Thursday afternoon, the market, which has kiosks serving food from all over the world, is busy with young families, businesspeople, and 20-somethings grabbing a beer after work.
New homes for sale. Hopes are high that the Micron facility will help the local real estate market take off.
But it’s that lottery ticket that Younis knows could change everything, helping a city that has been crawling its way back to reach or exceed its old success. Beyond the $100 billion to build the fabs, there is another $70 billion in operational costs, meaning $170 billion that will be spent in central New York over the next 20 years. “It is something like a $15-billion-a-year GDP impact in central New York on average over the next 30 years,” says Younis. (The GDP of the Syracuse metro area is roughly $42 billion now, according to the Federal Reserve Bank of New York.) And that, he says, is probably a conservative estimate.
Younis, however, is definitely not the type of person who wins the lottery and sits around without any worries. “A lot of things keep me up at night,” he admits. Housing. Infrastructure. “Nobody has ever done anything like this at this scale,” he says.
The state is trying to be strategic, he says, pointing to the plan announced earlier this year to open its first Office of Semiconductor Expansion, Management, and Integration. And when he talks about the existing expertise in the region around smart sensors, drones, and automation, one can see the clear threads of the type of strategic vision that the University of Toronto’s Breznitz talks about.
“A lot of things keep me up at night. Nobody has ever done anything like this at this scale.”
Kevin Younis
But there is another challenge on Younis’s mind these days, one that feels very personal. It goes back to growing up as one of 12 children in a working-class Syracuse family. “Central New York has among the most entrenched poverty in the nation. Having grown up in that poverty and having an opportunity to change that is a generational opportunity,” he says.
Poverty is all around, he says: “It’s where we’re at—it’s right here. It’s where I grew up. These are among the poorest Census tracts in the nation. Imagine living and raising a family on less than $10,000 a year. That’s insane! That’s what keeps me up at night, where I would feel like I failed if we don’t do something about that.”
Sunset in Syracuse’s Eastwood neighborhood.
KATE WARREN
Perhaps the ultimate test of the Syracuse experiment will be whether, in addition to boosting the opportunities in the largely middle-class suburbs around Clay, the Micron investment also lifts up those living in poverty in the downtown Syracuse neighborhoods that Younis talks about. Can the inevitable economic growth benefit a broad swath of the community? Or will it exacerbate inequality? The results in other booming innovation clusters are not particularly encouraging. Can Syracuse be different?
Robert Simpson, president of the CenterState Corporation for Economic Opportunity and a close collaborator with Younis in recruiting Micron, puts the challenge this way: “Economic growth is no guarantee of a greater measure of shared prosperity. You can grow without improving the quality of life for a lot of people in the region. However, economic growth is a necessary precondition for a greater level of shared prosperity. You need growth—otherwise you’re just redistributing income and wealth from one place to the next. And that gets people understandably upset and nervous.”
The massive Micron investment, says Simpson, “gives us a chance to do something we have wanted to do for a long time, but we didn’t have the tools to do: bridge the socioeconomic divides that have held our region back.”
It’s a lofty goal that will no doubt be challenged over the coming years. There will be inevitable fights over housing and where and how to invest the hundreds of millions earmarked for community development. There will certainly continue to be skeptics, especially given the state’s hugely generous incentives and the number of years it will take to get the fabs fully up and running.
Transforming a city and its economy is not easy work. It comes with enormous risks. But in many ways, Syracuse has no choice. The great experiment unfolding there is one that the city—indeed, the country—badly needs to succeed.
As the world becomes increasingly networked and connected devices proliferate, organizations are producing a plethora of data. The potential to collect data is growing exponentially. From smart grids to mobile phones and from connected cars to the industrial internet of things, tens of billions of devices will act as sensors, delivering data to networks.
Whether data is created intentionally or as a by-product of operations, companies that want to grow beyond digitization and become data-driven enterprises must harness it to inform decisions and streamline operations. As experts predict that nearly every employee in the modern enterprise will use data to support their work, targeted curation and analysis of real-time data will be increasingly critical. While the fintech and health-care sectors are leaders in using real-time data, the trend is also picking up in manufacturing, city infrastructure, and other sectors where the push for smart technology is growing.
This report examines how organizations can rethink their data management strategies to leverage real-time data to develop personalized real-time digital experiences or applications that customers want, boost operational efficiency, and increase business performance.
The following are the key findings of this report:
• Collecting and analyzing data in real time allows companies to create innovative applications. When done right, real-time data can be used to gauge customer sentiment and engagement, accurately deliver targeted content, optimize supply chains, fight fraud, and offer alternatives to missed flights, among other things. However, experts say only a fraction of data from connected devices is collected and processed in real time due to hurdles including legacy technology architectures, signaling untapped potential for enterprises.
• Organizations need to determine which business processes would benefit most from real-time data collection and analysis, because capturing all data and processing it in real time is expensive. Creating architectures to process captured data also becomes exponentially more difficult as the number of devices grows. Companies that create the right data architectures will be able to process the captured data in real time and store the information in a way that is most useful for future decisions.
• Open-source solutions, cloud, and artificial intelligence systems could help organizations overcome the challenges of managing real-time data. Experts we spoke to for this report recommend developing initial data pipelines with open-source technologies. That will help organizations to develop in-house expertise, avoid vendor lock-in, and establish a baseline for expectations. In addition, artificial intelligence (AI) is the next natural progression: Operational data platforms need to support real-time analytic functionality as AI and machine learning (ML) become increasingly embedded in enterprise operations. Real-time, AI-powered apps with the right data, at the right time, will deliver the biggest business impact for leading organizations.
From generating artworks to creating sustainable supply chains, artificial intelligence (AI) has become a critical tool in a myriad of economic sectors worldwide. As global enterprises increasingly use AI to gain a competitive edge, governments are also working hard to fuel innovation and growth with AI.
In recent years, Asian countries have stepped up efforts to support the rapid growth of their digital economies. These include measures to equip businesses with the necessary tools and infrastructure to use emerging technologies, such as AI, and support innovation and foster global confidence in them.
Singapore has unveiled the world’s first AI governance testing framework and toolkit. Named AI Verify, it is currently a minimum viable product at a pilot stage.
The ‘innovative regulator’
“We have a belief that being an innovative regulator is not an oxymoron,” says Lew Chuen Hong, chief executive of Singapore’s Infocomm Media Development Authority (IMDA). “And the real role of the regulator is to build the foundations for trust, so that businesses, governments, and consumers have the trust to innovate and co-create in the digital domain.”
As AI fast becomes ubiquitous in day-to-day activities, calls for more robust governance to ensure AI systems are fair, transparent, and safe are increasing. For example, the European Union is negotiating a new AI Act and the U.S. Federal Trade Commission is working on new legislation to allow it to rule on issues of AI discrimination, fraud, and related data misuse.
In Asia, countries such as Korea, India, and Singapore are trying to chart their own paths in AI ethics and governance. Among them, Singapore is taking a balanced approach by working with various stakeholders to build a more trusted AI environment.
In 2020, Singapore released its Model AI Governance Framework to provide detailed guidance—with implementable measures and practices—to help companies deploy AI responsibly. Besides showcasing use cases from different industries, IMDA also collaborated with the World Economic Forum’s Centre for the Fourth Industrial Revolution to release a guide to help organizations align their AI governance practices with the framework.
Putting AI governance to the test
In 2022, Singapore took another step forward to help companies validate the implementation of responsible AI. The island nation unveiled the world’s first AI governance testing framework and toolkit, named AI Verify, designed to provide a standardized method to verify AI systems’ performance in relation to internationally recognized ethical principles.
Currently a minimum viable product at a pilot stage, AI Verify is a testing framework that comprises process checks and technical tests. For a start, the technical tests will focus on verifying the fairness, robustness, and explainability of some supervised learning models. Companies that test with AI Verify can use the reports it generates to improve their AI models and demonstrate how their AI systems align with their claimed performance. Rather than setting ethical standards, AI Verify helps companies be more transparent about their AI implementation.
Following feedback and preliminary testing with partners such as Singapore-based bank DBS, Google, Meta, Microsoft, Singapore Airlines, and Standard Chartered Bank, AI Verify is available for international pilot. Policymakers, regulators, AI system developers, and business owners can participate and provide feedback on the global viability of the framework.
Robust growth, high digital penetration
The role of AI governance will become even more significant as Asia’s digital economy continues to grow. While a tech slowdown has dogged the U.S.—with more than 91,000 workers laid off in 2022—Asia seems unfazed. According to a Google, Temasek, and Bain & Company report in October 2022, Southeast Asia’s leading digital economies likely amounted to S$ 200 billion (US$ 149 billion) in 2022, marking a 20% increase from 2021. Far from this being a short-term growth spurt, the region’s digital economy is forecast to reach S$ 300 billion (US$ 224 billion) by 2025.
Asia’s ability to defy a digital downturn that has plagued others lies in “big shifts both on the demand side and the supply side,” says Simon Chesterman, senior director of AI governance at AI Singapore. On the demand side, a combination of high internet usage, high penetration of digital devices, such as smartphones, and population-level comfort with technological innovation has seen many Asian individuals and businesses embrace the digital economy at speed, explains Chesterman.
As of February 2023, 93% of companies in Singapore had adopted some form of digital technology, marking an increase of 19 percentage points from 2018, according to IMDA. This explains a key point of differentiation with some western economies, says Chesterman. “When you’ve got fast-developing economies, people are more willing to embrace change because they can see the benefit,” he says. “Whereas the more comfortable you are, the more resistant you may be to change.”
This willingness to embrace digital technologies has only increased with the global pandemic. Three quarters (76%) of the population in Southeast Asia viewed technology as an enabler rather than an impediment during the peak of covid-19, according to an August 2022 report by VMware—surpassing the global average by four percentage points—and 77% say digitalization improves both their work and lifestyles.
Compounding strong demand in the region has been a steady supply of innovation from the region’s vast network of enterprises, underpinned by direct support from government. Increased public funding in Hong Kong, for example, resulted in the creation of 3,755 start-ups in 2021, a 12% boost over the previous year, marking a record high for the Special Administrative Region. The Singapore government has committed S$ 25 billion (US$ 18 billion) to research, innovation, and enterprise from 2021 to 2025, and growing the digital economy was identified as one of the key pillars of that initiative.
Building a digital ecosystem
Meanwhile, Singapore’s IMDA, which bills itself as the “architect” of the island’s digital future, has introduced a series of initiatives to entrench the city-state as a global and regional technology hub. It has made strategic investments in both hard and soft infrastructure to accelerate digital economic growth in the country. Singapore has achieved nationwide standalone 5G coverage (over 95%) three years ahead of schedule, and IMDA has rolled out digital utilities such as TradeTrust, which streamlines the exchange of electronic documents.
IMDA also plays a central role in creating a strong digital talent pipeline and a progressive regulatory framework to foster innovation. By enhancing the credibility and trustworthiness of digital products and services, it aims to spur growth in the digital economy. In June 2022, for instance, it launched a US$ 36.3 million Digital Trust Centre as part of the country’s R&D efforts focused on enhancing the legitimacy of digital systems.
A fine balance
Government intervention often takes a two-pronged approach, Chesterman explains: “Governments should regulate to avoid market failures, because it’s inefficient to expect individual consumers to negotiate this themselves. The second reason governments regulate, though, is, even if it’s not geared toward efficiency, we have certain values and principles that we hold to.”
There are challenges though, Chesterman adds. To develop globally accepted standards, a delicate balance between a viable framework and overregulation needs to be achieved via mechanisms such as digital economy agreements. Finding a way to develop a framework that can evolve at the same rapid pace as the technology itself is also crucial.
Singapore has risen to the challenge with AI Verify. Its pioneering work in AI governance, coupled with ongoing infrastructure investments to support the country’s digital economy, indicates the significance of the sector to the region’s growth prospects. It also shows the need for authorities in the region to collaborate with international partners to ensure any such digital economy is both open and interoperable. This is particularly true for cities like Hong Kong and geographically small countries like Singapore.
“Small states like Singapore require open trade for survival,” says Lew. “A strong and robust digital economy means companies here can thrive globally, where size or geography does not matter. Investing in such technology and innovation is critical for long-term competitiveness and value capture.”
This content was produced by Insights, the custom content arm of MIT Technology Review. It was not written by MIT Technology Review’s editorial staff.
In August, President Joe Biden signed the Inflation Reduction Act (IRA) into law, the largest US climate bill in more than a decade. The legislation puts the country back on track to meet its commitments under the 2015 Paris Agreement.
Beyond enacting specific measures to reduce US carbon emissions by more than 40 percent by 2030, the IRA also fundamentally reframes how the government approaches climate change. After decades of understanding climate policy as primarily about cutting emissions, the IRA pitches it as an opportunity to invest in new sources of economic growth.
The IRA does this primarily through a series of updated tax incentives, which require electric vehicle batteries, wind turbines, and solar panels to be manufactured in the United States (or a free trade partner) to qualify. Implicit in the IRA is the notion that taking advantage of the economic opportunities presented by the global energy transition will require new forms of government intervention in the economy. Such direct government policy intervention on behalf of domestic clean-energy manufacturing sectors breaks with Washington’s past approach to industrial policy, which primarily focused on public investments in R&D and support for clean energy markets.
This reframing of climate change as an economic opportunity is overdue. China has long used the tools of the state to secure market share in rapidly growing clean energy industries. That nation now makes more than 85% of photovoltaic cells used in the global production of solar modules. It also produces 78% of the lithium-ion batteries used in the assembly of battery packs for electric vehicles and energy storage. The European Union, too, has not merely set ambitious climate goals—it has used industrial policy to build clean energy sectors and transition domestic industries, such as automakers, to a low-carbon future.
Since it first passed the House and Senate in August, the IRA has been met with much enthusiasm. The White House called it the single most impactful climate legislation ever passed in the US. Scientists see it as a turning point in the climate change battle. Others have emphasized the potential to create a half-million jobs through the industrial policy provisions contained in the bill. Indeed, solar PV, battery, and electric vehicle manufacturers have been quick to announce new investments in domestic production facilities in the weeks since the bill was signed.
Such enthusiasm notwithstanding, the US will still face formidable challenges in building up its domestic clean energy industries.
The nation is entering markets already crowded with international rivals, many of which have been investing billions for decades. China alone has spent more than $50 billion to establish control of virtually every segment of the solar supply chain. To compete with China’s dominance in electric vehicle batteries, the European Union established an alliance in 2017 with the goal of ensuring that European firms are suppliers along the entire battery supply chain. To advance its goal of building domestic clean energy supply chains, the EU also spent more than 40 percent of economic stimulus funds allotted during the start of the covid-19 pandemic on green industrial policy initiatives, to build up clean-energy supply chains.
To establish US clean energy industries that can replace and compete with global wind, solar, and battery supply chains will be particularly challenging in the timeframe envisioned in the IRA. Many content requirements contained in the tax credits take effect almost immediately. But developing domestic manufacturing capacity and opening new mines could take years, not months.
If US supply chains for solar, wind, and batteries take longer to build than expected, clean energy products will fail to qualify for government support, which could in turn slow deployment. Climate policy is now explicitly framed as an economic policy issue, dependent on economic policy success in ways that could complicate efforts to reduce US carbon emissions.
This could be particularly problematic, because the use of the so-called local content requirements and other industrial policy tools in the IRA—including loans for retooling and constructing manufacturing plants—is unprecedented in the United States. And even if meeting supply chain targets turns out to be unexpectedly difficult, it would be difficult to adjust and tweak the bill. Narrow political margins in the House and Senate offer few prospects for correcting industrial policy goals and incentives contained in the IRA, even if they threaten to undermine the bill’s climate objectives.
The bill, for all its novel use of industrial policy tools, is also noteworthy for the things that it does not include. The local content requirements attached to the tax credits set important incentives for firms to establish domestic manufacturing capacity, but they fall short of proactive industrial policies to help firms meet these goals. To be fair, among other stipulations, the IRA includes substantial loans and loan guarantees for the establishment of domestic manufacturing plants in clean energy sectors, but such one-time investments are not a replacement for long-term fixes to US manufacturing.
The US financial sector has long been unwilling to fund domestic manufacturing, particularly in industries such as clean energy that heavily depend on government regulation. To scale up, these businesses also need a trained workforce, which will entail new investments in vocational training and coordination with clean energy industries to develop new curriculums and establish workforce needs. Meeting the industrial development goals of the IRA will necessitate new kinds of financing and training institutions that are not part of the bill itself.
Reframing climate policy as economic policy is not just important for the future of US competitiveness, it is politically savvy. Creating jobs in clean energy sectors will help build new coalitions behind climate policy, including in states where climate change has not yet been a priority of voters.
At the same time, the bill is just the starting point of a much broader industrial transformation. To make good on the IRA’s economic development goals, the US will need to fix structural problems that have long caused a decline in US manufacturing and are not addressed in the IRA itself. Because climate and economic outcomes are now so closely linked, failing to do so will jeopardize the growth of clean energy industries and the ability of the United States to meet its Paris Agreement goals.
