Here’s the Deal — A Biden Win Means the U.S. Isn’t a Lost Cause on Climate (5)

By Mathew Carr


Nov. 1-6, 2020 — LONDON: The climate dominos are teetering. The not-so-little push by U.S. voters toward Joe Biden just might do the trick — limit global warming and stop the planet from becoming uninhabitable.

Biden, knowing climate protection can be demonised, has been a little vague about what he has in mind. But it’s clear from his policy stance that he’s going to be a whole lot more ambitious than Donald Trump, if he wins office.

The Biden/Kamala Harris ticket says this:

They will demand that Congress enact legislation in the first year of the presidency that: 

  1. establishes an enforcement mechanism that includes milestone targets no later than the end of the first term in 2025,
  2. make a historic investment in clean energy and climate research and innovation, 
  3. incentivize the rapid deployment of clean energy innovations across the economy, especially in communities most impacted by climate change.

    It’s not before time: the U.S. has only about 4% of the world’s population yet has done most accumulated damage to the climate, as this 2018 chart from the NYT shows:
  • Use of the term “enforcement mechanism” is intriguing. Whatever can that be? Perhaps, an emissions cap? A carbon tax?

    A hint is signalled in another part of their proposal:

    The Biden/Harris plan will: Ensure the U.S. achieves a 100% clean energy economy and reaches net-zero emissions no later than 2050. On day one, Biden will sign a series of new executive orders with unprecedented reach that go well beyond the Obama-Biden Administration platform and put us on the right track.

    Biden/Harris
    will not only recommit the United States to the Paris Agreement on climate change – they will go much further than that. They will lead an effort to get every major country to ramp up the ambition of their domestic climate targets. They will make sure those commitments are transparent and enforceable, and stop countries from cheating by using America’s economic leverage and power of example. They will fully integrate climate change into our foreign policy and national security strategies, as well as our approach to trade.

    So, like in the EU, a Biden/Harris ticket would put climate and trade up front and centre of policy priorities, including foreign policy.

    The potential importance of this can’t be understated.

    With China, Japan and South Korea now all adopting net zero targets, the world’s biggest countries are moving in lockstep. The dominoes are falling down, down, down.

    Once the EU and these nations set net-zero targets for 2050 – or in China’s case 2060 – their next task to set downward trajectories to reach that level.

    That means targets for 2025, 2030, 2035 and/or 2040, etc, etc.

    The Paris climate deal has a mechanism in place to tighten targets over time. This year, countries are meant to tighten their first limits under Paris, usually set for 2025 or 2030.

    Because the next major UN climate conference has been delayed by a year to November 2021, those tighter targets may not be finalized this year, but next.

    So, given that ratcheting of targets under Paris, the EU’s plan to impose a carbon-border adjustment, the net-zero pledges and Biden’s promises, the world is moving from an era where climate policy was resisted because it hurt trade, to an era where ambitious climate policy is necessary for trade to occur easily.

    The message is clear: Want to sell stuff to the world’s richest nations or fastest-growing ones? Clean up.

    Peru, for instance, is taking heed, using Swiss money to make its factories more efficient and green. See this:

    https://carrzee.org/2020/10/25/so-you-think-the-world-is-too-selfish-to-save-the-climate-a-peru-switzerland-deal-shows-youre-wrong/

    Those two countries are not the only ones.

    The EU has also made this point, with its tentative plan to impose a carbon adjustment at its border EU emissions from fossil fuels have crashed, under its forward-thinking climate policy, which includes the world’s biggest cap-and-trade market by traded volume.

    The emissions from energy dropped 24% through 2019 since 1990, when the world agreed to tackle climate change under a UN process, according to data from the Environment Agency. They’ve dropped another 15 points so far this year alone because of the pandemic, if power-sector data from Finnish energy group Wartsila is any indication.

    That means the EU might even achieve its most ambitious target under the Kyoto Protocol, 30% lower than 1990 levels rather than 20%. That Protocol is being replaced next year by the Paris climate deal, and most commentators have been focussing on the EU’s plan for a 2030 cut of as much as 60% under Paris.

    What’s less-well known is that the EU’s 30% reduction target for 2020 under Kyoto was conditional on other nations making a stronger contribution, which is now happening (ex USA). It’s basic target is for a 20% cut. See this from the Kyoto extension text, which was last month ratified by United Nations envoys:

As part of a global and comprehensive agreement for the period beyond 2012, the European Union reiterates its conditional offer to move to a 30 per cent reduction by 2020 compared to 1990 levels, provided that other
developed countries commit themselves to comparable emission reductions and developing countries contribute adequately according to their responsibilities and respective capabilities.

  • https://unfccc.int/files/kyoto_protocol/application/pdf/kp_doha_amendment_english.pdf

    A European Union source said the EU’s conditional offer of moving to a 30% target under the Doha Amendment to the Kyoto Protocol if others undertook comparable levels of ambition under that deal was made in 2012. Doha covers emissions in the eight years through this year.

    “That condition was never met,” the person said. “The recently announced long-time goals by these countries in 2030 and/or in 2050 or 2060, while very much welcomed, have no relationship to the Doha Amendment.  The EU is nonetheless on track to overachieve its Doha Amendment commitment to reduce its emissions by 20%.”

    So tighter pledges are firmly in play. And with new lockdowns across the world, emissions may fall even further during the next two months, potentially making more ambitious targets even more likely.

    In the U.S., emissions have barely shifted compared with levels in 1990. CO2 from energy for instance fell 0.1 of a single percent from 1990-2019, according to BP.

    So in voting for Biden/Harris, Americans would potentially be on board, at last, assuming they embrace Paris.

    Biden has carefully eroded the ability of Trump’s Grand Old Party to demonise climate protection. Green jobs are good jobs. Green jobs will be plentiful. A little fracking is still needed for now, he has said.

    Republicans will struggle during the last few days of the Presidential campaign to demonise Biden’s climate plan, even though they may try.

    Carbon pricing can be structured to engage the free-enterprise spirit. It’s a conservative notion that does not necessarily require big government.

    Having said that, there still will need to be strong market oversight for any new carbon markets to work, so the world is far from out of the woods. Carbon pricing covers less than 20% of global emissions, to be sure.

    A Biden win would probably be an “accelerant” for global climate protection, said Micheal Liebreich, chairman of clean-energy advisory Liebreich Associates.

    “With a good political tailwind” from a Biden victory and a green stimulus from the coronavirus pandemic, global emissions may drop by as much as a fifth by 2030 instead of peaking in the mid 2030s, Liebreich said by phone.

Russia is one country that’s still talking up the prospects of fossil fuels and the recent plunge in fossil fuel assets may indeed prove to be premature.

See this story published today in the Guardian:
https://www.theguardian.com/world/2020/nov/01/russia-rules-out-cutting-fossil-fuel-production-in-next-few-decades#:~:text=Russia%20rules%20out%20cutting%20fossil%20fuel%20production%20in%20next%20few%20decades,-Energy%20minister%20says&text=Russia%20has%20no%20plans%20to,according%20to%20its%20energy%20minister.

Even if Trump wins, self interest may well spur him to adjust his climate policy in a bid to protect U.S. exports because, from now on, climate policy is not just about energy and not just about the environment, it’s about trade.

Interest in North American carbon allowances and renewable-energy certificates remains at record levels for the time of year. Open interest is a measure of trading positions that have not been closed.

Volume and open interest in California carbon allowance futures, Regional Greenhouse Gas Initiative contracts, various renewable energy certificates: ICE

The chart shows that there is strong interest in these environmental-based financial products even before the election result is known.

Should Biden win, some of these U.S. contracts may be folded into national programs, if that proves politically possible.

What Biden might lock in during his first term is crucial, given a Republican winner of the next Presidential election in 2024 might try to unwind measures, should they stay/get in at that stage, said Yvo de Boer, former executive secretary of the UN Framework Convention on Climate Change, speaking in a discussion on Linked In.

Biden could roll out a swathe of renewable power projects in four years, dramatically cutting the nation’s reliance on coal and natural gas and locking in big emission cuts.

Biden should focus on what Republicans might want in return for climate measures and do a deal, said Chris McDermott, a policy expert at Amp, a renewable energy infrastructure manager, developer and owner founded in 2009.

It’s noteworthy that Senate support for climate packages has been achieved by progress on Republican priorities, such as the Wall Street bailout more than a decade ago and, more recently, lifting the oil-export ban, he said in the Linked In discussion. “Democrats need to start thinking of what the deal will be to get the $2 trillion Biden climate plan through the Senate.”

Should Trump win again, states may continue to lead the charge on climate policy, making the existing traded contracts more valuable.

G30 nations will become less inclined to embrace Paris if the U.S. stays out of it.

The world may continue to push the boundaries of heat-trapping emissions like it’s pushing the boundaries of government debt during the coronavirus pandemic. Countries don’t deserve too much criticism for using fossil fuels, because those that are most responsible for climate change also invented economic/technological development and spread it to the rest of the world, some academics argue. See this:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3679381

Whatever happens in the U.S. presidential race, the global stage now seems better set for more effective climate action. But with more Trump, action seems unlikely to meet the emission reductions implied by the Paris climate deal.

As of Nov. 6, Biden was pulling ahead of Trump.

(Updated Sunday night, Monday morning, Tuesday evening London time, including with European Commission spokeswoman, Michael Liebreich, chart, ICE environmental-trading data. Smoothed, updated on Nov. 6, including with de Boer, McDermott)

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