Promising “no malarkey” on the campaign trail, US president Joe Biden made good on his promise to bring the US back into the Paris Climate agreement on day one, within hours of moving back into the White House. This, says Bank of Singapore’s (BoS) investment strategist Conrad Tan, marks the beginning of a whole-of-government approach to fighting climate change in Washington.
“We can put millions of Americans to work modernising water, transportation, and energy infrastructure to withstand the impacts of extreme weather,” the new president promised on Dec 19, 2020. “We see farmers making American agriculture first in the world to achieve net-zero emissions and gaining new sources of income in the process.”
Tan believes that Biden will seek to weave climate policy and decarbonisation targets into all areas of his government. This includes the US Treasury, the Departments of Agriculture and Transportation, and even into national security and foreign policy issues. He will likely rely on government initiatives in the executive branch rather than risk defeat in Congress, where Democratic control of the upper house is relatively weak.
For more stories about where the money flows, click here for our Capital section
But despite potential congressional gridlock, it seems the American people are with Biden on this issue. A Pew Research survey found that in 2020, six in 10 US adults now see climate change as a major threat to the country’s well being as opposed to just 44% in 2009. According to another Pew poll published in June 2020, about two-thirds of respondents felt the federal government was doing too little to address climate change.
Biden’s economics team comprises strong sustainability advocates. Treasury secretary Janet Yellen strongly advocates a carbon tax to deter fossil fuel usage and reward clean energy use. The director of Biden’s National Economic Council is Brian Deese, previously global head of sustainable investing at Blackrock and former climate advisor to President Barack Obama. He is now Biden’s chief economic advisor.
Markets can therefore expect new sustainability targets and milestones in the US, with even the possible mooting of a carbon tax if congress acquiesces. Biden has already promised to create an enforcement mechanism to help the US achieve its target of net zero carbon emissions by 2050, with milestone targets by 2025. He is also planning US$400 billion ($531.2 billion) worth of investments into clean energy and climate research and innovation over the next four years.
Internationally, Washington will be looking to regain global leadership in the fight against climate change that it forsook under President Trump.
Major economies like China and the European Union (EU), says Tan, will likely welcome the opportunity for greater cooperation. Former secretary of state John Kerry has been named Biden’s climate envoy to make a special push to address the climate crisis in diplomatic and national security affairs.
Nevertheless, in the context of growing US-China rivalry, Tan sees the US and China competing economically to lead in clean technology. He argues that such competition could be a key driver of innovation and growth in the coming years.
SEE: Here are the major parts of the US$1.9 trillion Biden relief plan
Beijing wishes to develop greater technological self-reliance following trade disputes with the Trump administration. Meanwhile the US under Biden plans to compete with China on such technologies in the belief that they will create well-paying jobs for US workers. The president claims that in 2017, China invested US$3 in renewable energy for every US$1 in the US.
Obstacles to these climate goals include not only potential congressional gridlock, but also a conservative-dominated supreme court that could hamper the federal government’s attempts to roll out climate policies. Resources will also likely be redirected towards resolving Covid-19.
But with the return of Washington to the sustainability fold, the fight against climate change has regained much lost momentum. Tan is therefore bullish about the future of assets exposed to the war on climate change.
“Given the all-encompassing nature of decarbonisation efforts worldwide and the fast-evolving but uneven rollout of supporting legislation and regulations across the world, we continue to believe that a strategy of adding diversified exposure to a wide range of potential beneficiaries of the global transition to a carbon-neutral economy is appropriate,” the BOS strategist argues.
