Prospects of American Energy Policy Under the Biden Administration

Donald Trump campaigned as a saviour for middle America; he promised a revitalization of the coal industry and manufacturing across the Rust Belt. He was an outspoken critic of climate change, often calling it a “hoax”. He opened the Arctic National Wildlife Reservoir to oil drilling and issued over 1400 permits to drill on federal land in his last three months as president alone. America’s limited environmental progress in recent decades has been fueled by the transition from coal to natural gas, a significantly cleaner energy source.

Although still considered a fossil fuel, natural gas emits 50-60% less carbon dioxide than coal when used. Despite Trump’s efforts to revitalize the coal industry, there has been a 26% decline in coal as an energy source between 2010 and 2020 in the United States. President Biden has taken a strong stance against fossil fuels, more than any president in history; he banned new permit issuance by executive action on his first day in the White House. Biden has also appointed political heavyweights such as John Kerry to guide his vision of an American energy revolution. However, the perspective of American energy policy under the new administration is more complicated. Biden has already shown his dedication to boosting the United States renewable energy sectors and speeding the transition away from fossil fuels, but the extent that he will be able to pass large scale, meaningful legislation will be determined by political maneuvering in Congress and his ability to convince the opposition that renewables and a sustainable energy grid will create well-paying jobs for the heart of America. 

Goals of the Administration & Key Figures

Since his inauguration, Biden has wasted no time in pursuing his audacious goals to combat climate change and innovate America’s energy industry toward a more secure and sustainable future. Before taking office, he proposed plans for a $2 trillion energy and infrastructure program and set bold dates for sustainability transitions. He announced the goals of net-zero emissions in electricity generation by 2035 and economy-wide net zero emissions by 2050. The president has also pledged to increase economic opportunities for communities previously dependent on employment in the fossil fuel industry. He now plans to double offshore wind production, make all light and medium weight vehicles electric and make climate a pillar of his foreign policy. Perhaps his most ambitious goal, given the comparatively little innovation, is to make the agriculture sector carbon neutral by 2035. Overall, Biden is prioritizing climate, calling it an “existential crisis”. This is evident through his staff appointments, as his experienced staff are poised to integrate energy issues into all government policy. He has already directed all federal agencies to review their environmental impact and has ordered a shift toward electric vehicles. Biden also formed the National Climate Task Force which includes members from 21 different federal departments, in order to coordinate government-wide progress. In terms of climate leadership in his administration, Biden tapped former Michigan governor Jennifer Granholm, who famously mediated labor disputes in the automotive industry during the Great Recession, as the Secretary of Energy. The president also appointed Gina McCarthy, a former EPA chief, to be his National Climate Advisor. On an international scale, Biden created the role of Special International Envoy for Climate for former Secretary of State John Kerry. His task will be to advance American climate interests around the world.

Renewables: 43% biomass, 24% wind, 22% hydrothermal, 9% solar, 2% geothermal

Oil / Non-Renewables

Executive Orders & Regulation

During a spree of executive actions on his first day in office, President Biden rejoined the Paris Climate Agreement and revoked permits for the Keystone XL pipeline. The Keystone pipeline is a contentious and heavily debated project that is designed to carry oil from Alberta to the Gulf Coast to be treated in American refineries. Biden sees the project as an environmentally dangerous and aged infrastructure which would prolong dependency on fossil fuels. Biden has also proposed increased regulation of oil wells, aimed at eliminating methane leaks. Although the scale and severity of the new regulations have yet to be announced, experts expect Biden will return to standards set under the Obama administration. Biden could expand the regulation to older wells built before the 2015 cutoff date set by Obama. As methane leaks are responsible 10% of all green-house gas emissions domestically, this regulation would have huge environmental impact. Biden is also expected to reinstate mandatory maintenance and operational tests of blowout preventers on offshore oil rigs. Blowout preventors are a safety measure used to seal deep-water wells in the case of a blow out; regulation was originally created by the Obama administration following the BP Deepwater Horizon disaster in 2010, but was then overturned by Trump. 

Pushback

There has been serious pushback from the oil industry, lobbying groups, and Republicans for both the cancellation of the Keystone XL project and the expected methane leakage regulation. Opponents have charged that Biden has launched an “attack” on American energy independence and that increased regulation will cause the United States to import more oil from OPEC+ countries which have less environmentally stringent practices. Energy independence and security originates from the OPEC oil crisis and subsequent stagflation of the 1970s and 80s which caused a severe recession. Republicans, in a statement released shortly after the Biden executive orders were signed, played on fears of the Green New Deal and radical liberalism and stated that hard working Americans in oil states like Texas and Louisiana will lose their jobs to Russia and the Middle Eastern. While decreased oil production could increase imports from hostile nations if not replaced by renewables, currently only 6% of oil imports come from Middle East; the vast majority instead come from Canada. Many Republicans also have argued that these new regulations will cripple the energy sector as it recovers from the impacts of Covid-19. In order to mitigate these negative effects, Biden has announced increased federal support for fossil fuel communities and pledged investment to create new jobs in sustainable energy production. The president stated in remarks before signing an executive action on January 27th that, “We’re never going to forget the men and women who dug the coal and built the nation. We’re going to do right by them and make sure they have opportunities to keep building the nation and their own communities and getting paid well for it”, and continued by stressing that, “[a] clean energy future that will create millions of good-paying union jobs — not 7, 8, 10, 12 dollars an hour, but prevailing wage and benefits”. Biden’s infrastructure plan proposal, which he announced at the end of March, includes $16 billion to fund retraining fossil fuel workers.

Renewables

Executive Orders & Regulation

Biden is expected to use a whole government method of speeding the shift toward renewable energy in the United States. This includes government officials appointed by Biden increasing renewable projects that were stymied by the Trump administration, such as New York State’s plan to develop 9GW of offshore wind production of the coast of Southern Long Island. The SEC is also said to be contemplating mandating environmental risk disclosure, which would increase environmental transparency for businesses and stimulate ESG investing practices. Biden has also directed federal procurement to increase its environmental awareness, and with $600bn annual procurement spending, this would spur demand and innovation for climate friendly technology and products. Furthermore, the new administration is also expected to utilize a loan program which the Trump administration chose not to distribute. Biden has $43bn worth of low interest loans allocated for clean energy and carbon capture projects which will both contribute to the president’s decarbonization goals and stimulate the local economies amid the recovery from the pandemic. The scope of legislation Biden can create through executive action is limited, and the president will need to work with congress to pass large scale bills. This being said, renewable energy financial markets have skyrocketed during the Biden transition, as markets anticipate that Biden will be successful in increasing government expenditure and support for the sector. Sustainable funds increased AUM by almost 20% to $1.26 trillion in the third quarter of last year, coinciding with Biden’s emergence as Democratic nominee. There has also been a rapid increase in clean energy lobbying groups seeking tax credits for electric vehicles and government funded electric charging stations. 

Legislative Actions & Solutions

Biden’s announced $2 trillion energy and infrastructure bill was unveiled in detail at the end of March; the massive bill contains funding for a variety of topics from bridges to veteran’s hospital. In terms of energy, the proposed bill includes $100 bn to update the energy grid, $174 bn in electric vehicle incentives, $35bn of clean energy research, $46bn to support clean energy production, and an additional $50bn in disaster resilience funds. Although it could be possible to pass the bill without a filibuster-proof majority in congress, the viability of the legislation will largely depend on Biden’s ability to convince Republicans that a clean energy transition and a wide spread modernization of the nation’s infrastructure will create quality jobs for middle-class workers. “If we can show that we are growing jobs and that those jobs are good union jobs, then we’re going to be able to convince the middle of this country”[3] says Gina McCarthy, Biden’s National Climate Advisor. Two thirds of Americans believe the government is not doing enough to fight climate change, so there is hope that some Republicans cross the aisle. This statistic is rising across political parties, and there are several red states that have benefitted from the transition to renewable energy. Idaho and South Dakota are two states with little to no significant oil production and huge increases in hydroelectric and wind production in recent years. Montana and Alaska are both oil rich, however they are prime states for both wind and hydroelectric production. Biden will need to appeal to these states and their respective senators if he wishes to pass sweeping national energy legislature. Furthermore, the balance in congress could shift after the 2022 midterm elections when nearly two dozen Republicans are up for senate reelection. If Biden succeeds in convincing the voters of red states, their senators will be pressured to be more supportive of climate policy.

However, there are also conservative democrats, who are more hesitant of Biden’s plans; with the current division of the senate, this gives senators such as Joe Manchin immense influence. Senator Manchin supports climate action, but refuses to accept that coal (a core of the West Virginian economy and accounting for 10% of national coal production) will be entirely eliminated in the United States. Manchin essentially has a veto power in a delicately divided Senate, and Biden will likely have to make concessions to the senator in order to pass bills on the thin margin of the Senate. Given Biden’s experience in congress and strong relationships with key members such as Mitch McConnell, the president is well suited to pursue political mediation to advance his climate goals. 

In order to pass major legislation through congress, Biden would need a 60-vote filibuster proof majority in the senate. However, there are some alternatives to force legislation, such as budget reconciliation which would require only a simple majority. Budget reconciliation allows changes in congressional spending and revenues to pass with a simple majority. Although it applies only to budgetary policy, there are several large-scale systems such as a carbon credit system could in theory pass using a budget reconciliation. A carbon pricing scheme is where the government sets a cap on “pollution credits” which permit emissions, and companies have to buy and trade credits in order to pollute. The revenue from credits could then be used to fund loans to accelerate energy change. The US currently has several state and regional emissions trading system (ETS), but lacks a standardized national carbon pricing system. Using budget reconciliation Congress could also promote the creation of a national ETS by passing law which incentivizes individual states to adopt similar systems by offering grants. While there is historical precedent of presidents using budget reconciliation to pass major legislation (such as Obamacare), it would draw harsh criticism, and Biden will likely pursue bipartisan passage before resorting to this alternative method.

N.B: Forecast is usage needed to meet sustainability goals

Foreign Energy Policy

Biden has pledged to put climate change on the front stage of American foreign policy, but the leverage that the United States has internationally will depend on his domestic successes. John Kerry has been tasked with coordinating international climate policy, and if Biden shows a serious commitment at home, Kerry’s job will be much easier. Around the world, many governments have made similar pledges as Biden’s, including the EU commitment to carbon neutrality by 2050 and Beijing setting 2060 as their mark. There are several American organizations that President Biden controls which could play major roles in climate policy around the world. This includes the US International Development Finance Corporation (DFC) which has a wide range of experience in investing in infrastructure in developing countries. Many experts believe that the DFC should utilize their $60 billion lending capabilities to offer loans to developing countries in order to establish renewable energy sources to developing economies. This would be a direct counter-force to China’s Belt & Road Initiative (BRI) which is overwhelmingly dominated by fossil fuels. The BRI will have long term consequences, as it establishes dirty energy infrastructure in underdeveloped economies around the world. Similarly, the US Agency for International Development (USAID) is another American agency that could play a significant role in foreign energy policy under Biden. Several policy groups, including the Brookings Institute, believe that USAID could be a key player in increasing education and specialization on environmental monitoring in developing countries around the world. Emerging economies are typically dependent on low cost, high carbon energy sources and lack the human capital to institute strong monitoring and compliance policy. Support from USAID would develop and train staff in environmental monitoring to both help decrease emissions and create more demand for renewables. 

Only two months into his presidency, Biden has already been strongly criticized by the international community for failing to block the appointment of Mathias Cormann as director of the Organization of Economic Co-Operation and Development (OECD). Cormann is known to strongly oppose renewable energy and during his time as Australian Finance Minister, tried to end Australia’s renewable energy policy. He has been an outspoken critic of economic policies such as carbon-pricing which aim to incentivize a sustainable economic transformation. Biden has been criticized for failing to exert US influence in international economic organizations. Overall, Biden is expected to return America to the global stage and exert its economic prowess to advance climate interests around the world.

Conclusion

No president in American history has been more outspokenly critical of fossil fuels or has prioritized climate change as much as President Biden. While these are positive signs of what is to come, his ability to meet his bold objectives and their long-term impact will be determined by politics in congress. The American economy, when partnered with effective and aggressive legislation, has a long history of overcoming the world’s challenges from the war time production of World War II to the race to create a Covid-19 vaccine. If Biden is able to push his climate policy through a divided congress and continue to implement regulation through executive action, American society could become a world leader in renewable energy. “America’s wealth, national laboratories, universities, corporate giants and entrepreneurs, if properly harnessed to the task of decarbonization, will undoubtedly produce novel approaches and technologies”. While there will be serious political challenges for Biden, his stark rhetoric and holistic approach to climate change offer a prospective of positive change. 

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