Biden eyes US energy overhaul
Following a tense and polarized US election, Joe Biden’s victory presages a major change in direction on climate and energy policy following four years of climate change denial and active discouragement of the energy transition by the Trump administration. Biden’s election platform included ambitious goals, such as ensuring that electricity production would be carbon-free and largely renewable by 2035, and achieving carbon neutrality by 2050. This plan also took into account the energy transition accelerating in countries like China, the EU states, Japan, South Korea and many others — developments that risk the US being left behind in the next industrial revolution.
The election, however, also left the political landscape tricky to navigate. Unless the Democratic Party gains two Senate seats in the upcoming run-off in Georgia, Biden will face a difficult legislative environment. Nevertheless, the president-elect has some leeway. First, he can, and will, easily recommit the US to the Paris Agreement to limit global warming.
Next, an economic stimulus bill of about $2 trillion is expected to be presented to Congress. It is also expected that Biden will quickly reverse executive orders that inhibit clean energy investment in favor of hydrocarbons. Furthermore, Biden will also reinstate regulatory controls on polluting industries, including coal, oil and gas. The Trump administration had radically tilted the playing field in favor of these sectors and the return of regulatory constraints will provide powerful market signals for clean energy investment.
Away from the legislative and regulatory arena, market developments are underway that undercut the viability of fossil fuel investments. The pandemic has taken a massive toll on energy demand, badly hurting the US oil and gas sector. More than 300 shale oil and gas companies have gone bankrupt. This fact lays bare the dirty secret of the industry: It is massively leveraged and breakeven margins are rarely achieved. Shale, therefore, has become more precarious, making renewables in America even more competitive going forward.
The incoming administration is determined to put the US back on track to be a global leader in renewable energy.
These commitments will trigger new momentum in energy and industrial transformation, with immense geopolitical implications. Indeed, the new resources that power growth will no longer be commodities like coal, oil and gas; they will be knowledge, technology and innovation.
The US, which previously doubled down on the old paradigm of energy security based on hydrocarbons, has fallen behind, as competitors — China in particular — have surged ahead. In essence, this means the Biden administration’s pivot toward clean energy technologies must be seen as a crucial move to again reposition America as a global industrial and economic leader in an increasingly complex economic environment. The Biden administration’s energy vision is that important to the US.
Adnan Z Amin is a senior fellow at the Belfer Center for Science and International Affairs at the Kennedy School of Government, Harvard University. He is also director general emeritus of Irena, the United Nations clean-energy agency.
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