US re-joins Paris Agreement to tackle climate crisis
Hours after being sworn in as US President on 20 January 2021, Joe Biden signed an executive order to re-join the Paris Agreement.
This marks the start of much broader efforts that Biden has promised during his election campaign to tackle the existential threat to climate change.
Biden has also pledged to review the Trump administration’s rollback of over 100 environmental rules and regulations, potentially reversing them to re-introduce stricter vehicle fuel efficiency standards and tougher rules on oil and gas companies and power plants.
In our view, Biden is likely to take a whole-of-government approach to fighting climate change – extending far beyond the Environmental Protection Agency and the Departments of the Interior and Energy that traditionally regulate environmental pollution, to include other parts of the federal government such as the US Treasury, and the Departments of Agriculture and Transportation, and even into areas such as national security and foreign policy.
We expect Biden to weave climate policy and decarbonisation targets into key government initiatives to advance his climate agenda, instead of relying on broad climate-focused legislation and spending proposals that could face defeat in Congress, given the Democratic Party’s very slim control in the Senate.
Biden has already made it clear that climate policy will be at the heart of the government’s plans to rebuild the US economy as it recovers from the Covid-19 pandemic.
“We can put millions of Americans to work modernising water, transportation, and energy infrastructure to withstand the impacts of extreme weather,” he said on 19 December 2020.
“We see farmers making American agriculture first in the world to achieve net-zero emissions and gaining new sources of income in the process.”
The push to align federal government policy with climate targets is likely to receive broad support among the US public, based on recent surveys. Sixty percent of US adults now believe that global climate change is a major threat to the country’s well-being, compared to 44% in 2009, according to Pew Research Center survey results published in April 2020.
Much of this increase has come from Democrats and those who lean toward the Democratic Party.
A separate Pew report published in June 2020 showed that about two-thirds (65%) of Americans believe that the federal government is doing too little to reduce the effects of climate change.
A large majority of the US public also believe that the priority for the country’s energy supply should be developing alternative sources of energy such as wind and solar, rather than expanding the production of oil, coal and natural gas.
A majority (58%) say government regulations are needed to encourage reliance on renewable energy.
Biden’s key picks to support his climate agenda so far include:
- Former Environmental Protection Agency chief Gina McCarthy as the first ever National Climate Advisor to coordinate the Biden administration’s domestic climate agenda and interagency policy and lead the newly formed White House Office of Domestic Climate Policy.
- Former senator and Secretary of State John Kerry as Special Presidential Envoy for Climate, a new position on the National Security Council that reports directly to Biden, to address the climate crisis in US international diplomacy and national security affairs. Biden has pledged to work with other world leaders to fight climate change.
- Former Federal Reserve chair Janet Yellen asTreasury Secretary. Yellen is a strong advocate for a carbon tax to discourage the use of fossil fuels and spur the development of clean energy alternatives, calling it a“textbook solution” to climate change.
- Brian Deese, global head of sustainable investing at BlackRock and former climate advisor to President Obama, as director of the National Economic Council, Biden’s top economic adviser.
- Michael Regan, head of North Carolina’s environmental agency, as Environmental Protection Agency chief.
Expect new targets and milestones, and perhaps even a carbon tax
To support his pledge to deliver a carbon neutral US economy with net zero carbon emissions by 2050, Biden’s climate plan includes a promise to demand that Congress approve legislation to
- establish an enforcement mechanism for the US to achieve its 2050 net zero carbon goal that includes milestone targets by 2025
- make USD400 billion of investments in clean energy and climate research and innovation over the next four years; and
- incentivise the rapid deployment of clean energy innovations across the economy.
Although the plan does not explicitly mention a carbon tax, it states that the enforcement mechanism would be based on the principles that “polluters must bear the full cost of the carbon pollution they are emitting and that our economy must achieve ambitious reductions in emissions economy-wide instead of having just a few sectors carry the burden of change.”
Incoming Treasury Secretary Yellen is a co-founder of the bipartisan Climate Leadership Council comprising business leaders and influential economists that proposed the introduction of a carbon tax in the Bipartisan Climate Roadmap published in October 2020.
Limits on Biden’s green ambitions
While the Democrats’ winning control of the Senate in January’s run-off elections in Georgia is unambiguously positive for the Biden administration’s overall climate ambitions, we highlight three key factors that are likely to restrict the government’s ability to achieve its climate goals quickly:
- The ongoing spread of Covid-19 will draw attention and resources away from other priorities in the early days of Biden’s presidency.
- The Democrats’ slim control of the Senate(split 50-50, with Vice-President Kamala Harris as tie-breaker) means that sweeping legislation such as a carbon tax would struggle to pass in the face of opposition by Republicans or dissenting Democrats.
- Most bills need 60 votes to pass in the 100-seat chamber.
- The Supreme Court, with its 6-3 conservative majority, would likely limit the extent that Biden is able to use his executive powers as President to implement climate policy.
What can be done regardless?
Even if the more ambitious parts of Biden’s climate agenda – such as USD2 trillion in climate-focused spending that he proposed in his election campaign – are opposed by lawmakers, the government can use its vast procurement power as a policy lever to encourage the adoption of clean technologies.
“The federal government owns and maintains an enormous fleet of vehicles. And we’re going to harness the purchasing power of our federal government to make sure we are buying clean, electric vehicles that are made and sourced by union workers right here in America,” Biden said on 19 December 2020.
Moreover, state- and city-level authorities across the US have significant powers to determine policy and strategy for their local economies and are well positioned to continue promoting climate initiatives locally even in the absence of new nationwide legislation, especially with political support, leadership and a clear blueprint for climate action from the Biden administration.
As an example, California, the state with the largest economy in the US, had in 2018 already pledged to achieve carbon neutrality by 2045, including a target for 100% of the state’s electricity to be produced by renewable energy and zero-carbon resources by 2045.
Several other states, including New York, Michigan, Nevada and Hawaii have also announced plans to slash net carbon emissions to zero or near zero by 2050.
Many US cities such as New York City, San Francisco, Seattle and Washington, DC have also pledged to turn carbon neutral, together with international counterparts that are part of the Carbon Neutral Cities Alliance.
We expect these localised climate initiatives in various parts of the US – including the roll-out of low-carbon power, greener buildings and cleaner transport – to gather further momentum, adding greater impetus to the nationwide climate agenda.
Greater international cooperation on climate action likely
In the coming months, we expect the US to make a significant push to regain a leadership role in the global fight against climate change.
Other major economies including China and the European Union would welcome greater cooperation with the US on climate action to meet the Paris Agreement goals.
Traditional US allies in Europe are likely to be eager to forge new partnerships with the US to advance the global climate agenda, and we expect to see climate-related political momentum to gather new strength this year, ahead of the UN Climate Change Conference or COP26 meeting in November 2021.
“I warmly welcome President Biden’s steps to re-enter the Paris Agreement on Climate Change and join the growing coalition of governments, cities, states, businesses and people taking ambitious action to confront the climate crisis,” United Nations Secretary-General António Guterres said.
The re-entry of the US into the Paris Agreement means that more than two-thirds of the world economy – including China, the European Union, United Kingdom, Japan and South Korea – have now joined the fight against climate change with ambitious commitments to carbon neutrality by around mid-century.
Overall, we expect to see significant advances in global climate action and the broader environmental, social and governance agenda this year.
More intense competition in clean technologies to drive innovation and growth
At the same time, we expect to see more intense US-China competition to take the lead in clean technologies.
China’s bruising experience with the US during the Trump administration has accelerated its pursuit of self-reliance in key economic sectors, and we expect these efforts to continue even if bilateral relations improve significantly under Biden’s presidency.
China’s heavy investments to develop and expand the use of clean technologies is likely to pressure the US to step up its own investments. Indeed, Biden’s campaign platform makes explicit reference to this competition: “In 2017, China invested USD3 in renewable energy for every USD1 in America, giving China an edge on the technologies of tomorrow that will generate well-paying jobs.”
His campaign promised to “put the US back in the driver’s seat” in clean energy research, investment, commercialisation, manufacturing, and exports by 2030.
Overall, we expect China-US competition to be a key driver of innovation and growth in clean technologies for years to come.
Potential beneficiaries
Given the all-encompassing nature of decarbonisation efforts worldwide and the fast-evolving but uneven rollout of supporting legislation and regulations across the world, we continue to believe that a strategy of adding diversified exposure to a wide range of potential beneficiaries of the global transition to a carbon-neutral economy is appropriate.
Disclaimers and Disclosures
This material is prepared by Bank of Singapore Limited (Co Reg. No.: 197700866R) (the “Bank”) and is distributed in Singapore by the Bank.
This material does not provide individually tailored investment advice. This material has been prepared for and is intended for general circulation. The contents of this material does not take into account the specific investment objectives, investment experience, financial situation, or particular needs of any particular person. You should independently evaluate the contents of this material, and consider the suitability of any product discussed in this material, taking into account your own specific investment objectives, investment experience, financial situation and particular needs. If in doubt about the contents of this material or the suitability of any product discussed in this material, you should obtain independent financial advice from your own financial or other professional advisers, taking into account your specific investment objectives, investment experience, financial situation and particular needs, before making a commitment to purchase any product.
This material is not and should not be construed, by itself, as an offer or a solicitation to deal in any product or to enter into any legal relations. You should contact your own licensed representative directly if you are interested in buying or selling any product discussed in this material.
This material is not intended for distribution, publication or use by any person in any jurisdiction outside Singapore, Hong Kong or such other jurisdiction as the Bank may determine in its absolute discretion, where such distribution, publication or use would be contrary to applicable law or would subject the Bank or its related corporations, connected persons, associated persons or affiliates (collectively “Affiliates”) to any licensing, registration or other requirements in such jurisdiction.
The Bank and its Affiliates may have issued other reports, analyses, or other documents expressing views different from the contents of this material, and may provide other advice or make investment decisions that are contrary to the views expressed in this material, and all views expressed in all reports, analyses and documents are subject to change without notice. The Bank and its Affiliates reserve the right to act upon or use the contents of this material at any time, including before its publication.
The author of this material may have discussed the information or views contained in this material with others within or outside the Bank, and the author or such other Bank employees may have already acted on the basis of such information or views (including communicating such information or views to other customers of the Bank).
The Bank, its employees (including those with whom the author may have consulted in the preparation of this material))and discretionary accounts managed by the Bank may have long or short positions (including positions that may be different from or opposing to the views in this material or may be otherwise interested in any of the product(s) (including derivatives thereof) discussed in material, may have acquired such positions at prices and market conditions that are no longer available, may from time to time deal in such product(s) and may have interests different from or adverse to your interests.
Analyst Declaration
The analyst(s) who prepared this material certifies that the opinions contained herein accurately and exclusively reflect his or her views about the securities of the company(ies) and that he or she has taken reasonable care to maintain independence and objectivity in respect of the opinions herein.
The analyst(s) who prepared this material and his/her associates do not have financial interests in the company(ies). Financial interests refer to investments in securities, warrants and/or other derivatives. The analyst(s) receives compensation based on the overall revenues of Bank of Singapore Limited, and no part of his or her compensation was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this material. The reporting line of the analyst(s) is separate from and independent of the business solicitation or marketing departments of Bank of Singapore Limited.
The analyst(s) and his/her associates confirm that they do not serve as directors or officers of the company(ies) and the company(ies)or other third parties have not provided or agreed to provide any compensation or other benefits to the analyst(s) in connection with this material.
An “associate” is defined as (i) the spouse, parent or step-parent, or any minor child (natural or adopted) or minor step-child, or any sibling or step-sibling of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, parent or step-parent, minor child (natural or adopted) or minor step-child, or sibling or step-sibling is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
Conflict of Interest Declaration
The Bank is a licensed bank regulated by the Monetary Authority of Singapore in Singapore. Bank of Singapore Limited, Hong Kong Branch (incorporated in Singapore with limited liability), is an Authorized Institution as defined in the Banking Ordinance of Hong Kong (Cap 155), regulated by the Hong Kong Monetary Authority in Hong Kong and a Registered Institution as defined in the Securities and Futures Ordinance of Hong Kong (Cap.571) regulated by the Securities and Futures Commission in Hong Kong. The Bank, its employees and discretionary accounts managed by its Singapore Office/Hong Kong Office may have long or short positions or may be otherwise interested in any of the investment products (including derivatives thereof) referred to in this document and may from time to time dispose of any such investment products. The Bank forms part of the OCBC Group (being for this purpose Oversea-Chinese Banking Corporation Limited (“OCBC Bank”) and its subsidiaries, related and affiliated companies). OCBC Group, their respective directors and/or employees (collectively “Related Persons”) may have interests in the investment products or the issuers mentioned herein. Such interests include effecting transactions in such investment products, and providing broking, investment banking and other financial services to such issuers. OCBC Group and its Related Persons may also be related to, and receive fees from, providers of such investment products. There may be conflicts of interest between OCBC Bank, the Bank, OCBC Investment Research Private Limited, OCBC Securities Private Limited or other members of the OCBC Group and any of the persons or entities mentioned in this report of which the Bank and its analyst(s) are not aware due to OCBC Bank’s Chinese Wall arrangement.
The Bank adheres to a group policy (as revised and updated from time to time) that provides how entities in the OCBC Group manage or eliminate any actual or potential conflicts of interest which may impact the impartiality of research reports issued by any research analyst in the OCBC Group.
If this material pertains to an offer, it may only be offered (i) in Hong Kong, to qualified Private Banking Customers and Professional Investors (as defined under the Securities and Futures Ordinance); (ii) in Singapore, to Accredited Investors (as defined under the Securities and Futures Act 2001); and (iii) in the Dubai International Financial Center, to Professional Clients (as defined under the Dubai Financial Services Authority rules). No other persons may act on the contents of the material.
Other Disclosures
Singapore
Where this material relates to structured deposits, this clause applies:
The product is a structured deposit. Structured deposits are not insured by the Singapore Deposit Insurance Corporation. Unlike traditional deposits, structured deposits have an investment element and returns may vary. You may wish to seek independent advice from a financial adviser before making a commitment to purchase this product. In the event that you choose not to seek independent advice from a financial adviser, you should carefully consider whether this product is suitable for you.
Where this material relates to dual currency investments, this clause applies:
The product is a dual currency investment. A dual currency investment product (“DCI”) is a derivative product or structured product with derivatives embedded in it. A DCI involves a currency option which confers on the deposit-taking institution the right to repay the principal sum at maturity in either the base or alternate currency. Part or all of the interest earned on this investment represents the premium on this option.
By purchasing this DCI, you are giving the issuer of this product the right to repay you at a future date in an alternate currency that is different from the currency in which your initial investment was made, regardless of whether you wish to be repaid in this currency at that time. DCIs are subject to foreign exchange fluctuations which may affect the return of your investment. Exchange controls may also be applicable to the currencies your investment is linked to. You may incur a loss on your principal sum in comparison with the base amount initially invested. You may wish to seek advice from a financial adviser before making a commitment to purchase this product. In the event that you choose not to seek advice from a financial adviser, you should carefully consider whether this product is suitable for you.
Hong Kong
This document has not been delivered for registration to the Registrar of Companies in Hong Kong and its contents have not been reviewed by any regulatory authority in Hong Kong. Accordingly: (i) the shares/notes may not be offered or sold in Hong Kong by means of any document other than to persons who are "Professional Investors" within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and the Securities and Futures (Professional Investor) Rules made thereunder or in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance; and (ii) no person may issue any invitation, advertisement or other document relating to the shares/notes whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the shares/notes which are or are intended to be disposed of only to persons outside Hong Kong or only to "Professional Investors" within the meaning of the Securities and Futures Ordinance and the Securities and Futures (Professional Investor) Rules made thereunder.
The product may involve derivatives. Do not invest in it unless you fully understand and are willing to assume the risks associated with it. If you have any doubt, you should seek independent professional financial, tax and/or legal advice as you deem necessary.
Where this material relates to a Complex Product, this clause applies:
Warning Statement and Information about Complex Product
(Applicable to accounts managed by Hong Kong Relationship Manager)
Where this material relates to a Complex Product – funds and ETFs, this clause applies additionally:
Where this material relates to a Complex Product (Options and its variants, Swap and its variants, Accumulator and its variants, Reverse Accumulator and its variants, Forwards), this clause applies additionally:
Where this material relates to a Loss Absorption Product, this clause applies:
Warning Statement and Information about Loss Absorption Products
(Applicable to accounts managed by Hong Kong Relationship Manager)
Before you invest in any Loss Absorption Product (as defined by the Hong Kong Monetary Authority), please read and ensure that you understand the features of a Loss Absorption Product, which may generally have the following features:
Where this material relates to a certificate of deposit, this clause applies:
It is not a protected deposit and is not protected by the Deposit Protection Scheme in Hong Kong.
Where this material relates to a structured deposit, this clause applies:
It is not a protected deposit and is not protected by the Deposit Protection Scheme in Hong Kong.
Where this material relates to a structured product, this clause applies:
This is a structured product which involves derivatives. Do not invest in it unless you fully understand and are willing to assume the risks associated with it. If you are in any doubt about the risks involved in the product, you may clarify with the intermediary or seek independent professional advice.
Dubai International Financial Center
Where this material relates to structured products and bonds, this clause applies:
The Distributor represents and agrees that it has not offered and will not offer the product to any person in the Dubai International Financial Centre unless such offer is an “Exempt Offer” in accordance with the Market Rules of the Dubai Financial Services Authority (the “DFSA”).
The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers.
The DFSA has not approved the Information Memorandum or taken steps to verify the information set out in it, and has no responsibility for it.
The product to which this document relates may be illiquid and/or subject to restrictions in respect of their resale. Prospective purchasers of the products offered should conduct their own due diligence on the products.
Please make sure that you understand the contents of the relevant offering documents (including but not limited to the Information Memorandum or Offering Circular) and the terms set out in this document. If you do not understand the contents of the relevant offering documents and the terms set out in this document, you should consult an authorised financial adviser as you deem necessary, before you decide whether or not to invest.
Where this material relates to a fund, this clause applies:
This Fund is not subject to any form of regulation or approval by the Dubai Financial Services Authority (“DFSA”). The DFSA has no responsibility for reviewing or verifying any Prospectus or other documents in connection with this Fund. Accordingly, the DFSA has not approved the Prospectus or any other associated documents nor taken any steps to verify the information set out in the Prospectus, and has no responsibility for it. The Units to which this Fund relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on the Units. If you do not understand the contents of this document you should consult an authorized financial adviser. Please note that this offer is intended for only Professional Clients and is not directed at Retail Clients.
These are also available for inspection, during normal business hours, at the following location:
Bank of Singapore
Office 30-34 Level 28
Central Park Tower
DIFC, Dubai
U.A.E
Cross Border Disclaimer and Disclosures
Refer to https://www.bankofsingapore.com/Disclaimers_and_Disclosures.html for cross-border marketing disclaimers and disclosures.
