Environmental Law: CHIPS and Science Act

Writers: Aarzoo Modha, Jakob Tawney, Nela Labuzek, Thomas Howald

Editor: Erin Riley and Anna Ramesh

Background

The CHIPS and Science Act is a U.S. law designed to increase domestic semiconductor production and address national economic and security vulnerabilities resulting from overreliance on foreign chip manufacturing. Domestic semiconductor production refers to the process of designing and manufacturing computer chips within the United States, using local facilities, labor, and resources. These tiny computer chips power everything from smartphones and cars to medical equipment and military technology. The need for this law became clear during the COVID-19 pandemic, when global supply chain issues led to a severe shortage of chips, resulting in factory shutdowns and delays in product delivery. At the same time, countries like China were rapidly investing in their chip industries, raising concerns that the United States might fall behind in technology and national security. In response, Congress created the CHIPS and Science Act to bring more chip manufacturing back to the U.S., strengthen the supply chain, and invest in American scientific research and innovation. The law includes approximately $52 billion in funding to support chip production and an additional $ 200 billion or more for science and technology programs, including support for universities, laboratories, and STEM education.

Passed in August 2022, the CHIPS and Science Act is legislation passed by both the House and Senate with bipartisan support and signed into law by President Biden. The law is currently in the implementation stage, meaning government agencies, such as the Department of Commerce, the National Institute of Standards and Technology (NIST), and the Department of Energy, are working to distribute funds and oversee new projects. Companies can apply for grants or tax credits to build new factories or expand existing ones. These financial incentives aim to encourage private companies to invest in U.S. chip manufacturing, which has declined significantly over the past few decades. The Act also directs funding to support cutting-edge research, workforce training, and efforts to make science and engineering more inclusive. Overall, the CHIPS and Science Act is a long-term investment in America's economic strength, national security, and global leadership in technology.

History

There have been prior instances where U.S. industrial policy clashed with environmental regulations and sparked debate over national competitiveness. One notable precedent is the National Environmental Policy Act (NEPA) itself, enacted in 1970. Since then, various large-scale industrial and infrastructure initiatives, from oil pipelines to highway expansions, have triggered NEPA reviews that many in industry viewed as burdensome. A more specific parallel comes from the American Recovery and Reinvestment Act (ARRA) of 2009, which included major public investments in renewable energy and infrastructure. Like the CHIPS Act, ARRA projects required NEPA compliance, and similar tensions arose between federal stimulus goals and environmental review timelines. In both cases, the federal government had to balance economic revitalization with environmental protection, raising questions about how to prioritize when the two come into conflict.

In the case of NEPA-related delays under ARRA, the outcome was a series of reforms aimed at "streamlining" the review process. The Obama administration issued guidance to accelerate environmental reviews without eliminating them, trying to ensure compliance while avoiding undue delay. This approach helped many projects move forward, but critics argued it diluted environmental safeguards. In contrast, the response to CHIPS Act-related NEPA slowdowns has been more aggressive. The Building Chips in America Act (2023) sought to limit NEPA's application by giving more authority to the Department of Commerce and prioritizing rapid industrial buildout. The trend shows an increasing willingness among legislators to curtail environmental oversight in favor of national security and economic imperatives. If this trend continues, future outcomes may involve further legal challenges from environmental groups and court rulings that reshape the balance between industrial growth and environmental stewardship.

Current Standing

The CHIPS and Science Act of 2022 was passed by the 117th Congress with strong bipartisan support and signed into law by President Biden. Key legislative figures included Senators Chuck Schumer, Todd Young, John Cornyn, and Mark Warner. While the Department of Commerce became the primary agency overseeing implementation, environmental oversight fell under existing federal review laws like the National Environmental Policy Act (NEPA), requiring impact assessments before federal funds could be distributed to semiconductor projects.

As implementation progressed, new decision-makers emerged in response to industry concerns that NEPA reviews were delaying projects and raising costs. Lawmakers such as Senators Mark Kelly and Ted Cruz introduced the Building Chips in America Act in 2023, which limited the scope of NEPA by giving the Department of Commerce more control and fast-tracking reviews. This shift in decision-making—from environmental regulators to economic policymakers—signals a trend toward prioritizing industrial growth over environmental safeguards. Based on past legislative moves, further efforts to weaken or bypass environmental review in the name of national competitiveness are likely.

Conclusion

It has been approximately two years since the CHIPS and Science Act was enacted. It has only been effective for a short period, but it has had some profound effects on the industrial sector, the environment, and society as a whole. Various concerns over the past couple of years have been about its effects. On an international level, there have been some worries of protectionism, specifically a subsidy race between the United States and the European Union (EU), when, back in 2022, the EU proposed its own European Chips Act, which was enforced in September of 2023. Such distress has made it evident that environmental sustainability is largely ignored, including the lack of desire for renewable energy and the use of dangerous man-made chemicals in materials for operational use. Additionally, there has been a lack of support to address racial and gender divides in the STEM field, which has paved the way for workforce fragmentation. This leads to the issue of the organization of trade unions or their inaction, leading people to grow worrisome, as insufficient resources are available. Moreover, constructing new chip manufacturing establishments is expensive, and companies have requested more than $70 billion in subsidies, which is higher than what is available; however, private investments have contributed, but they are not sustainable for the long term. In contrast, there are benefits to the act's passage, including the revitalization of the semiconductor industry by strengthening semiconductor manufacturing, creating new jobs, stimulating economic growth, and creating new technological innovations.

Therefore, the CHIPS and Science Act has been an excellent yet conflicting investment for the United States and its semiconductor industry. A report from 2024, the National Academies of Sciences, Engineering, and Medicine, concluded that the act could not proficiently reach its outlined goals. This includes the lack of increased workforce development, boosting economic security, and receiving adequate budgetary support from Congress. Overall, the effects of the CHIPS and Science Act will vary over time in positive or negative ways. Continued support from legislators and political figures, including state governors in the United States, depends on its effective execution and resolution of challenges, and the importance of the formation of a strong relationship between the federal government, the semiconductor industry, and research institutions to provide practical guidance in addressing the act's weaknesses. Still, until then, the environment and semiconductor industry have interwoven, where the latter dominates the former in importance.