The road has certainly been bumpy, but the next chapter in the US’s political future has finally been confirmed. All things considered, the outcome is, very nearly, perfect for US president-elect Joe Biden. He has taken the coveted ‘clean sweep’: control of the presidency, Congress and the Senate, although by the faintest of margins.
Failure to command the control of the Senate would have risked the status quo prevailing when it comes to environmental policy, and this clearly would have had a profound impact on climate change and society as a whole. But this situation has been averted, so we can now turn our attention to Biden’s first 100 days in office and ask what’s next on his climate agenda?
Setting the tone from the top
Donald Trump’s tenure in the Oval Office marked an about-turn in environmental policy when compared by the climate leadership shown by the leaders of other developed nations. Believing man-made climate change to be a hoax, Trump rolled back many of the environmental protections enacted during Obama’s administration, ended the Clean Power Plan, nominated officials tied to the fossil fuel industry and, most alarmingly of all, withdrew from the Paris Climate Agreement.
In the run up to his election victory, Biden committed to achieving net-zero carbon emissions by no later than 2050 and he has since proposed what is arguably the most ambitious climate programme from any president, including a $2trn climate package to be spent over his four years in office, supporting renewable energy and overhauling polluting industrials.
The president-elect has also announced the US will host a climate summit of the world’s major economies in 2021, and will knock on the door of the Paris Climate Agreement asking for redemption. Importantly, the climate leadership Biden will inevitably show means the US will now be moving with the global direction of travel, matching the commitments made by the EU and the UK, which is vital for encouraging other nations to take action on the climate.
In truth, there are a million and one areas Biden could focus on in his first few months of the presidency to start the journey to net zero, but infrastructure and electric vehicles immediately come to mind as two ripe targets, and these areas should be on the mind of investors too.
The trillion-dollar man
Trump promised infrastructure in 2016, but never really delivered. Biden has made similar grand promises on infrastructure in the run up to the election, including a commitment to rebuild America’s “crumbling” infrastructure to lay “a new foundation for sustainable growth”, and it’s likely given his ‘clean sweep’ of control that we may actually see action this time around.
Infrastructure doesn’t come cheap, and the $1trn figure has been floated by Biden’s transport secretary nominee, Pete Buttigieg. But infrastructure projects are a crucial part of transitioning to a more sustainable economy and kickstarting the US’s journey to net zero and over the coming years we are likely to see increased federal funding to update the nation’s public transport networks to encourage people off the roads, as well as a mass roll-out of electric vehicle charging points.
Accelerating down electric avenue
In 2019, Bureau of Transport statistics show more than 727,000 electric vehicles were sold in the US, out of a total of 17 million vehicle sales. A good start, but there is certainly a long way to go and removing just a small percentage of the US’s gas guzzlers off the road will make a big difference to emissions. And to do this, incentives are going to be crucial.
The US government currently offers a federal electric car tax credit of up to $7,500 per electric car purchase. Sounds great, but the catch is that the government starts to taper the tax credit for certain vehicles as their sales increase, and once a carmaker has sold more than 200,000 of a particular model, that model no longer qualifies for the credit.
Given their popularity, all new Tesla models and all General Motors plug-in electrics no longer qualify for the tax credit, stunting demand for these popular electric vehicles. Biden has already said he will remove the tax credit limits to encourage purchases of electric vehicles and hybrids, which will benefit these manufacturers, and will speed up the uptake of electric vehicles.
Other federal subsidises could also be used, including a return of the Car Allowance Rebate System, lovingly known in the US as the ‘cash for clunkers’ scheme. This was a $3bn federal scrappage programme introduced in 2009 to incentivise the purchase of more fuel-efficient vehicles. The scheme failed pretty spectacularly after just a month and a half when the funds were completely exhausted following high demand.
But a cash for clunkers 2.0 has been floated by Democratic senator Chuck Schumer’s in his “clean cars for America” programme which proposes buyers receive rebates of $3,000 for purchasing more fuel-efficient vehicles. According to Schumer, this will help transition 63 million vehicles by 2023.
Turning the White House green
It’s clear there are many ways Biden can start to tackle the climate crisis once he reaches the Oval Office and, compared to the last administration, we expect to see the positive actions and strong commitments required to make the US a climate-leader, arguably for the first time.
We do have to be aware, however, that Biden commands only very marginal control of the Senate, which could throw a spanner in the works of his climate plans, and it is likely that his attention will be immediately fixed on the ongoing Covid-19 emergency and subsequent stimulus package, not to mention starting to heal the divisions in a nation that appears to have been pulled apart at the seams in recent years.
That said, from a climate perspective it is reassuring to see a president-elect with a clear climate plan entering office with the political authority to start making big changes.
