The ability of President Joe Biden to enact his 2020 campaign’s energy policy platform is contingent on two reality checks: a closely divided Congress and the intrusion of competing priorities – specifically, the effort to end the COVID-19 pandemic.
Yet despite those hurdles, the enactment of Biden’s energy priorities began on his first day of office with an executive order mandating the United States rejoin the Paris Agreement on addressing climate change, a reversal of the decision to leave that agreement by the previous administration.
This support for the multination pact buttresses a Biden energy agenda that, broadly outlined, reinforces and accelerates a transition of global energy production away from fossil fuels already underway. We will review Biden’s stated energy policy priorities to assess their likelihood of enactment and whether, together, they can form the basis of a comprehensive strategic energy policy the United States still lacks.
In his Jan. 20 inaugural address, Biden spoke optimistically about America’s role in the world, outlining the many social, political and economic challenges ahead. Notably, Biden’s words on climate change and renewable energy reflect current views of environment management. Climate change has bipartisan support, it is a focus of many global companies and capital markets, it could create new jobs across multiple sectors and can help heal divides with longtime allies.
In the address, Biden stated support for several actions and considerations on climate change, which include supporting energy innovation, establishing a Clean Energy Bank, cleaning up fossil fuel and supporting industries in transition.
Previous government programs have supported the innovation of solar, wind and battery storage with tax and financial incentives. Under Biden, grants, tax credits, loans and other programs that can help finance research and development of power storage and decarbonizing heavy transport and industry are likely to be promoted. This is key, as the U.S. Energy Information Administration predicts renewable energy resources are expected to deliver 70% of new generation capacity in 2021, according to Greentech Media.
Federal and state governments can focus resources to solve global warming issues innovatively -- in ways that have the least impact on our way of life. With continued innovation, new infrastructure developments such as deep offshore wind power can bring power to our largest population centers. This is a crucial step, since almost 85% of American power consumption is along the coasts, where wide-open spaces for solar and wind power are not readily available. According to Brandon Burke, Director of Policy and Outreach at Business Network for Offshore Wind, this is a once-in-a-generation opportunity to create jobs, expand companies and push American innovation.
In addition to power generation, innovations will accelerate identifying and commercializing carbon-free fuel sources for heavy equipment, aviation and marine transportation. This could lead the next decade to focus on green hydrogen and carbon capture and have us on track for a carbon-free world by 2050.
As a catalyst to decarbonizing our energy system, the Biden campaign also called for the development of a climate finance plan, a National Clean Energy Bank. The bank would mobilize private capital for clean energy initiatives, administered by a proposed Clean Energy Deployment Administration. As stated in the campaign publication Clean Energy for Biden, “These two recommendations aim to leverage smaller federal investments to channel hundreds of billions of private and public dollars in clean energy technologies while creating millions of new jobs.”
The Clean Energy and Sustainability Accelerator Act, H.R. 806, introduced Feb. 4, calls for $100 billion to be provided for loans and investments into economy sectors devoted to decarbonization efforts. Projects mentioned in the bill that are authorized for this support include grid infrastructure, reforestation, climate-resilient infrastructure and industrial decarbonization.
These proposals, if implemented, may facilitate federal investment in private-sector clean energy development, supporting innovation and deployment that may be not possible without federal support and lower-cost financing. Leveraging smaller federal investments to channel hundreds of billions of public and private dollars in clean energy technologies and creating millions of new jobs is the administration’s objective.
Cleaning up fossil fuel
Biden also has announced plans to revive an interagency working group that will set the “social cost of carbon,” a measure of the economic damage caused by the release of carbon dioxide into the atmosphere. This may result in carbon tax on those companies that emit carbon and promote the advancement of reduced carbon emissions and carbon capture.
The Biden energy plan also promised to support 250,000 new jobs by capping leaky, abandoned oil and gas wells and cleaning up abandoned mines. This will strategically support states that may suffer the most from the reduction in oil and gas production.
For their part, the oil and gas companies are looking to reduce their impact on the environment. The U.S. has invested heavily into exporting liquefied natural gas, which will not only reduce carbon emissions by 80% compared to coal, but will also help emerging markets, industrialized nations and key allies rely on the United States for their low-carbon power generation and national energy needs.
Biden is likely to revive the cash-for-clunkers program to fund subsidies for electric vehicles (EVs). According to Christopher Guith, senior vice president of the U.S. Chamber of Commerce, “Auto makers have been pushing harder for accelerated EV deployment for some time and recently they’ve been joined by electric utilities.” The Biden team is focused on EV infrastructure and the charging stations to support them.
Government support also is crucial for carbon-dependent industries such as steel. That industry is dependent on coal to produce the highest-quality product, and innovation is helping to upgrade the steel industry to develop and produce lighter, stronger steel, all while reducing the impact of carbon emissions.
Biden faces many challenges, but with the backing of Congress, capital markets, the global community, and an increasing number of Americans who support action to counter climate change, there is the potential for significant policy outcomes. The new administration has an unprecedented opportunity to establish the nation’s first-ever long-term strategic energy policy, addressing all sources of energy.
The president cannot and should not be expected to fix everything by executive orders alone. Historically, American innovation initiatives that teamed entrepreneurs and investors with government guidance and support has produced accomplishments that define our national heritage, from the interstate system and the space program to today’s COVID-19 vaccine program. With resolution, cooperation and a sound, forward-looking plan, that legacy of innovation can be perpetuated for the energy industry.
Bryan Benoit is a partner in the US Strategy and Transactions practice and the Global Valuation Co-Leader. Further, he is a principal in Grant Thornton Financial Advisors LLC, providing fairness opinions and other board services. In addition, he serves as the US National Managing Partner, Energy.
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