Companies headquartered in the United States, and global organizations with US operations, have been keeping a close eye on the 2020 US election candidates’ energy and climate plans. During this election cycle, climate change and US energy policy has taken on renewed importance, as both the urgency to act and candidates’ different stances on go-forward action became apparent.
With the announcement of a Biden win, we take a closer look at how the new administration’s plans, and new congressional make-up, may impact your company’s energy and sustainability strategies for the next four years, and to offer recommended actions to take in the near-term.
Q. How will Biden’s plans impact energy markets and costs?
The President-elect has run his entire campaign on a platform of “build back better”, in which he combines COVID-19 economic recovery with a robust climate and clean energy investment strategy, with plans to deploy USD$2T over four years across several new initiatives.
As part of this strategy, Biden plans to achieve net-zero emissions, economy-wide, by no later than 2050. The administration’s nearer-term goal is to achieve a pollution-free power sector by 2035. Biden also supports significant renewable energy and sustainability stimulus funding which could include the extension of federal incentives that make it easier and more attractive for corporations to choose renewable energy.
Should further retirement of coal and oil come to pass, this will also accelerate an increase in renewable energy and EV adoption. This may leave natural gas to fill the gaps as scalable solutions—including storage for renewable energy—continue to develop and expand, an outcome difficult to reconcile with Biden’s stated position that he intends to transition away from hydraulic fracturing (fracking) as a means of natural gas production.
A diminished production outlook for commodities like coal and natural gas could lift fossil fuel prices in the near-term due to reduced supply. Longer-term, ceding market share to renewable resources would likely force fossil fuel prices lower. The demands for coal and oil have both seen a steady decline since the pandemic began, and Biden has ultimately committed to transitioning away from these industries, which will likely accelerate the overall reduction of fossil fuel energy generation. Part of his intended effort to move away from fossil fuels includes his commitment to dedicate government spending towards installing 500,000 electric vehicle (EV) charging stations. As mentioned above, Biden has indicated that he will transition away from natural gas production via fracking, although he has been inconsistent in outlining a timeline or a method to do so. He has, however, stated that he will not issue new permits for drilling on federal land.
If, as now predicted, Republicans maintain control of the Senate, the most likely pathway for aggressive decarbonization is through bipartisan energy efficiency measures and tax extenders for renewable energy. However, one thing has become increasingly clear to Republicans during this election: voters are changing on the issues of energy generation and climate action and the Party will also need to adapt and change. Young voters, in particular, favor a strategy on climate change and the pursuit of clean energy and sustainability targets.
While Republicans tend to favor market-driven approaches to climate change and clean energy, we can expect a greater appetite on both sides of the proverbial aisle to make progress on this issue. One example is the recent conservative-led FERC Order 2222, which allows distributed energy resource (DER) aggregators to compete in all US wholesale markets, leveling the playing field for DERs and expanding market access.
For information on potential impacts to energy costs, or to learn about the latest policies and incentives, contact us to speak with one of our experts.
Q. How should companies anticipate the Biden administration will impact climate action?
The President-elect is likely to enact his goals through agency regulations and Executive Orders. Under his climate plan, companies will likely see increased federal support for the development of, and adoption of, emissions-reducing technologies and climate action strategies. This support should make adoption of renewable energy or energy efficiency and other emissions reduction mechanisms like EVs more economically attractive to corporations, likely accelerating the pace of corporate decarbonization.
Biden has publicly stated his intention to rejoin the Paris Agreement on his first day in office, and he has promised to set enforcement mechanisms for the country to reach net zero emissions by 2050. Paired with this legislative landscape, the pressure from investors, employees, and customers for companies to address the climate impact of their products and services is expected to accelerate. Biden’s election may also put pressure on other nations, such as Australia, to increase their commitments to climate action.
Q. What actions do I need to take now, and what will this mean in coming years?
Companies should continue to “buy smartly” as it relates to traditional and emerging energy supply and focus on increasing resource efficiency, setting science-based carbon reduction targets, adopting renewable energy and other DERs such as microgrids, and evaluating the impact and influence they have on their supply chains and product life cycles.
This holistic energy and carbon management strategy allows companies to address Scope 1, 2, and 3 emissions from their business and value chains and increase their overall resilience to disruption, while strategically managing the source and cost of their energy supply. Regardless of US federal policies, ESG and climate issues are mainstream topics, and investors and other stakeholders are demanding firms to have climate change mitigation targets. The price for renewable and clean energy resources also continues to rapidly decline, making access easier than ever before.
Corporations should expect increased pressure and incentives from the government to adopt clean energy and commit to climate targets. Multinational corporations based in the US, or those headquartered elsewhere, with US operations, will also be faced with the need to adapt and reconcile their global energy and sustainability strategy with the change in administration. A combination of compliance and voluntary drivers should accelerate corporate-wide performance on climate change mitigation.
Q. What can I do to create and/or maintain a competitive advantage in the market?
To maintain a competitive advantage, corporations should aggressively embed climate solutions into their business strategy. Commitments to reduce Scope 1 and Scope 2 emissions have become basic “table stakes” for all corporations to compete and attract investment and talent.
Even with favorable federal policy, companies will still have access to a full range of voluntary strategies, like science-based decarbonization targets and clean energy/DER sourcing. Over the past four years, companies have made climate commitments faster than ever before, and this is unlikely to slow down under a Biden administration. If anything, the bottom-line and environmental benefits that efficiency, clean energy, and DERs can provide—especially in a time of economic constraint—are likely to spur ever greater action.
The Biden administration’s forward stance on climate action will likely make it easier and cheaper to achieve climate solutions in the US, but it may also create a false sense of security for companies who assume that these actions will be enough to help them meet their goals or their stakeholders’ demands. Even if companies are provided with proactive legislation, regulation, or funding to advance their climate action aims, it will be critical for companies to ensure they are moving aggressively to achieve science-based targets themselves while lowering costs along the way.
Q. Where can I find an overview of Biden’s energy and climate policy?
*While this summary represents the best knowledge available today, ultimately and in practice, this information is subject to change. Subscribe to our weekly digest to get the latest updates delivered directly to your inbox.