Are We Entering a New Climate Era?

To what extent does Biden’s election change the landscape in terms of American climate policy?

I feel it changes the dynamic dramatically, not only in terms of climate but also in economic and investment trends and geopolitics. That said, the train had already left the station: 2019 was the first time in history that the U.S. consumed more energy from renewables than coal¹.

Transitioning to a cleaner world is a priority for the U.S. President: he has called climate change «the existential threat of our time» and has compared the scale and urgency of the challenge to the Covid-19 pandemic. In that vein, in April 2021 Biden unveiled a historic $325 billion research and innovation plan².

I believe this policy implies three transitions: environmental, social and economic.

It is my view that a ‹green economy› has three interconnected and mutually dependent goals: increasing economic growth by financing the right technologies and developing labor skills, alleviating poverty by both reducing unemployment and increasing social inclusion, and reducing greenhouse gas emissions

The U.S. will have to adapt fast, as the global race to tackle climate change has already started, and other countries, such as China, have a head start.

Will the Eagle and the Dragon go toe-to-toe again?

After trade and technology, climate mitigation and adaptation could be the next contest between China and the U.S., with both countries committed to Net Zero emissions.

Between 2010 and 2020, China didn’t wait for the U.S. to take action, spending twice as much on climate action: $1.2 trillion against $600 billion³. China also dominates the global market in electrical vehicles and battery production, boasting 77 percent of global lithium-based battery capacity in 2020, compared to only 10 percent in the U.S.⁴.

However, the Biden administration marks America’s return to international climate leadership. The administration’s stated goals are to halve greenhouse gas emissions by 2030 compared to 2005 levels, implement carbon-free electricity by 2035, and reach Net Zero emissions and 100 percent clean energy by 2050⁵.

The government also plans to lead the upgrade of millions of buildings and homes to be more energy-efficient, plug abandoned oil and gas wells, reclaim mines and make environmental justice a focal point⁶.

How is Europe positioned?

I believe that Europe is already a leader in climate policy, as it has the most advanced green regulation and a significant head start in decarbonization. The EU’s renewable energy consumption is growing fast, reaching almost 20 percent in 2020 compared to 9.6 percent in 2004⁷. The target is 32 percent by 2030⁸.

Also, the Green New Deal consists of a range of political initiatives aimed at developing the continent's biodiversity strategy by 2030 and sets out to achieve carbon neutrality for the EU by 2050⁹. I feel that these ambitious targets will require substantial investment in each impacted sector. This initiative is now part of Next Generation EU, a one-off financial instrument designed to support the post-Covid recovery, with 750 billion euros of additional funding to be raised on the markets over the period 2021 to 2024¹⁰.

In conclusion, while each region has its own agenda, this is the first time in history that there is a true global alignment towards one goal: making the planet greener. It is not an exaggeration to say we are truly at the dawn of a new era.

¹Source: US Energy Information Administration, 2020
²https://sciencebusiness.net/news/biden-unveils-historic-325b-research-and-innovation-plan
³Source: BofA Global Research, Thematic Investing, Climate wars. February 2021.
⁴Source: BofA Global Research, Thematic Investing, Climate wars. February 2021.
⁵https://joebiden.com/climate-plan/
⁶https://joebiden.com/clean-energy/
⁷European Commission, Eurostat.
⁸Source: European Commission, Eurostat.
⁹ENMirovaAlpha5.pdf
¹⁰ENMirovaAlpha5.pdf

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