US returns to the Paris Climate Accord on Day 1
President Biden has hit the ground running in the few days since his inauguration, signing a flurry of executive orders which addresses the Covid-19 pandemic and his climate change agenda.
Importantly, Biden has swiftly returned the US to the Paris Climate Accord, signaling that climate change and environmental sustainability will form the foremost priority of his policy platform in addition to dealing with the urgent Covid-19 crisis.
This brings the US back in broad alignment with the major initiatives already ongoing in Europe and China.
In the post pandemic business cycle, significant public and private spending related to modernizing the global economy in addressing climate and sustainability issues will comprise one of the foremost drivers of markets in the post-pandemic business cycle.
Biden’s climate agenda is highly ambitious
President Biden’s sweeping climate plan comprises 10 key decarbonization pledges which includes:
- USD2 trillion spending related to climate and sustainability priorities in his first term
Net-zero emissions by 2050
- Invest USD400 billion in clean energy and deliver a zero-carbon power sector by 2035
- Transition to clean transportation: zero emissions vehicles, restore electric vehicles tax credit, 500,000 public charging stations by 2030, clean rail and aircraft fuel
- Improve energy efficiency of buildings and reduce building sector emissions by 50% by 2025 - Drive cost of green hydrogen down - Ban new oil and gas permits on public lands and waters
- Enhance reforestation, protect biodiversity by protecting 30% of US lands and water by 2030
- Advance agri-tech
- Impose adjustment feeds and quotas on carbon-intensive goods
This is an ambitious plan which represents a steep trajectory to net-zero emissions for US greenhouse gases, and will require a sea change in US economic infrastructure.
Sustainability theme to form key market driver for next decade
Given that the Democratic Party does not have a 60-seat majority in the Senate and only a 50-50 set up with Vice President Harris being a tiebreaker, it is reasonable to expect that President Biden’s climate plan could be scaled down somewhat.
A new President, however, enjoys a strong mandate, and the Republican Party will be wary of being excessively obstructionist with the mid-term elections in view.
This is especially so if Biden subsequently proves to be a popular President credited for bringing the US out of the Covid-19 pandemic and providing relief to Main Street with a new Covid-19 stimulus aid package likely to be passed in February.
Assuming that the Biden/Harris administration will endure two terms, the sustainability theme would have significant legs for the most of the next decade.
Implications for sectors such as energy, transportation and infrastructure
The seismic transformation of the global economy to dramatically reduce emissions will have major implications for sectors such as infrastructure, industrials, energy, materials, and autos.
In particular, 35% and 28% of greenhouse gases emitted in the US are currently attributed to the electricity generation and transportation sectors, respectively.
Therefore we should expect these two sectors to see major modernization and retooling to address sustainability issues. The mix of energy sources in the US will also need to change dramatically ahead if the Biden administration is to achieve its emission goals.
This will boost companies in these sectors that are well positioned to benefit from this theme, together with the industrials, infrastructure and materials companies that will be involved in the modernization of power generation and transportation.
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