Biden emissions pledges and environmental policies
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With Biden framing climate action as a boost for jobs and technology, his administration aims to transform American infrastructure while working towards a clean energy future. Initiatives for renewable energy and offshore wind, as well as electric vehicles, energy efficient buildings and even increased corporate disclosures on climate change and sustainability, are all elements of the US’s strategy to take on a leading role.
New climate pledges
Climate change mitigation and adaptation are becoming a primary focus of US public policy. President Biden kicked off his Earth Day global climate summit with a pledge to cut US emissions in half (50-52%) by 2030 from 2005 levels. Biden also tweeted that “America is back” and “ready to rally the world to tackle the climate crisis.”
The US pledge represents a major step forward compared to the past four years of US climate policy. However, though it is one of the more ambitious short-term targets globally, Biden’s commitment still falls short of reductions already promised by the EU and UK. To meet the goal of halving its emissions, the US will have to expedite widespread changes to nearly every aspect of its economy. Legislators will also need to enshrine Biden’s pledges into law in a meaningful way to boost the US’s climate credibility. With the Trump administration’s decision to leave the Paris Agreement still on the minds of many global leaders, Biden will need to provide assurance that a future US administration cannot easily withdraw from such commitments. Though some of Biden’s plan can be achieved through executive action alone, certain key proposals will likely face significant hurdles in the Senate. Biden must work to drum up the political support necessary for his policies, and convince the world that the US intends to fulfil them.
At the Earth Day summit, the US, UK and Norway announced a groundbreaking coalition with global companies to raise at least $1 billion for sustainable development efforts focused on protecting tropical forests. The LEAF coalition—‘Lowering Emissions by Accelerating Forest Finance’—aims to mobilize private-sector investment in intact forests and eliminate the profit incentives that traditionally encourage governments and industries to clear land for timber and agriculture.
The initiative’s objective is emissions reduction through forest preservation, while at the same time safeguarding biodiversity and sustainable livelihoods for Indigenous peoples and forest communities. Under the plan, coalition members would provide funding to pay the national or regional governments protecting forests at least $10 per ton of reduced carbon dioxide. Global companies participating in the effort, including Airbnb, Salesforce, Unilever, Nestle, Amazon, and GSK, must have in place a scientifically sound plan to achieve net zero emissions across their supply chains, operations, and products.
“Whole of government” climate strategy
During his first weeks in office, Biden signed several executive orders on environmental issues and announced a “whole of government” climate change strategy. As part of this effort, the US rejoined the Paris Agreement, federal agencies have been directed to review major environmental rules, and Biden revoked the Presidential permit for the Keystone XL pipeline. In addition, Biden’s May 20, 2021 Executive Order on Climate-Related Financial Risk positions climate change as a physical and systemic risk to companies, assets, securities and investments.
The Biden administration’s recovery plan centres its goal of rebuilding the US economy and infrastructure on climate change mitigation and a clean energy transformation. Biden is proposing between $3 trillion and $4 trillion in spending and tax credits on a variety of efforts intended to energize the economy, with $2 trillion expected to go towards climate and clean energy initiatives. The administration’s ‘green’ jobs and infrastructure strategy includes the following:
- strengthening the electric grid by building power lines that can deliver more renewable energy,
- building and expanding access to electric vehicle charging stations,
- implementing a rebate program to replace millions of cars with electric vehicles,
- increasing fuel economy standards for passenger vehicles and light trucks,
- capping oil and gas wells to reduce emissions,
- reclaiming abandoned coal mines,
- building millions of new affordable, energy-efficient homes,
- upgrading existing buildings to make them more energy efficient, and
- investing in high-growth industries with a sustainability angle, such as advanced battery manufacturing.
The plan does not, however, include a carbon tax. Instead, the Biden administration seeks to use enhanced regulatory standards for emissions from the transportation and power production sectors to steer those industries away from fossil fuels and towards clean and renewable energy solutions.
In April, the Biden administration announced it will work to pass a law mandating that utilities source more power from renewable and other clean sources. Imposing a national clean energy standard would further Biden’s campaign goal of decarbonizing the electricity sector by 2035. Critical aspects of this policy would include advanced nuclear energy, carbon capture and storage, and battery technologies.
Democrats in Congress have also recently introduced legislation that would require 80% of retail power sales to come from carbon-free sources by 2030, with the target increasing to 100% by 2035. Some Republicans have commented, however, that the proposed bill would raise energy prices and destabilize the grid. While a lack of bipartisan consensus may push these near-term targets out of reach, many large utility companies have already responded to new state laws and heightened investor scrutiny by promising to zero-out carbon emissions by 2050 at the latest.
The Biden administration has announced a major offshore wind plan along the East Coast, with the goal of generating 30,000 megawatts from offshore wind turbines nationwide by 2030. The US Department of the Interior estimates as many as 2,000 wind turbines could be built in the Atlantic Ocean, creating enough electricity to power roughly 10 million homes. The White House has said this industry will spawn new supply chains that stretch into America’s heartland as demand for raw materials such as steel will grow. According to the Departments of Interior, Energy and Commerce, meeting this target would avoid 78 million metric tons of carbon dioxide emissions, with a shared goal of protecting biodiversity and promoting ocean eco-use.
To accomplish this plan, the administration is expediting permits for projects off the Atlantic Coast and developing a new priority Wind Energy Area in waters near New York and New Jersey. The plan will also set aside $3 billion in federal loan guarantees for offshore wind projects, along with funds to equip US ports to support wind farm construction.
Just recently, on May 11, the Biden administration approved the Vineyard Wind project, the nation’s first commercial-scale offshore wind farm. This summer, construction is expected to begin to install 84 turbines off the coast of Martha’s Vineyard, Massachusetts. The wind farm will generate an estimated 800 megawatts of electricity for the New England grid, and the Biden administration predicts the project will create 3,600 jobs.
Corporate disclosures on climate and ESG
The US government has also recently announced review of, and potentially forthcoming updates to, guidance on climate change-related risk disclosure in public companies’ reporting. The Securities and Exchange Commission (SEC) is evaluating existing policies and currently seeking public comments on how disclosures can better address climate change-related risks. In particular, the SEC is exploring which data and metrics to use, whether industry-specific approaches should be taken, what can be learned from existing voluntary disclosure regimes, how to maintain flexibility in reporting requirements, and how to address the "significant gap" with disclosure in private markets.
The SEC’s Division of Enforcement has also launched an inaugural Climate and ESG Task Force, and its Division of Examination released a Risk Alert concerning its review of ESG investing. These measures suggest that the US has its eye on Europe’s proposals for corporate sustainability reporting and may be working towards keeping pace with those developments.
Finally, Biden’s May 20 executive order requires the Financial Stability Oversight Council (FSOC) to issue a report to the President within 180 days on efforts by FSOC member agencies (including the SEC) to integrate consideration of climate-related financial risk into their policies and programs. The report must also include a discussion of “the necessity of any actions to enhance climate-related disclosures by regulated entities”. This report is expected to provide fuel for the SEC and others to push for mandatory ESG disclosures.