IMPLICATIONS OF PRESIDENT BIDEN'S PLAN TO COMBAT CLIMATE CHANGE - JANUARY 2021
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IMPLICATIONS OF PRESIDENT BIDEN’S PLAN TO COMBAT CLIMATE CHANGE During his campaign to be elected as President of the United States, Joe Biden set out an ambitious climate plan which, among other things, calls for a goal of net-zero emissions in the U.S. by 2050 and actively combating climate change. Below, we have outlined the implications of the Climate Plan for the U.S. and the international community under the new Biden-Harris Administration. Domestic Implications that they are more energy efficient and “climate-ready.” Specifically, the We expect a Biden-Harris Administration Climate Plan calls for energy updates to initially implement its climate change for four million commercial offices, agenda through Executive Orders and warehouses and public buildings, administrative empowerment. Throughout making two million homes more energy his term, President Trump overturned efficient and resilient to adverse over 100 major environmental regulations weather over a four-year period and implemented by the Obama-Biden introducing legislation to set net-zero Administration. The new Biden-Harris emissions for all commercial buildings Administration will likely reverse President by 2030. Trump’s rollbacks aimed at boosting fossil fuel production, and could reinstate and • Repositioning the auto industry expand upon many Obama-era The Climate Plan aims to reposition environmental regulations. the auto industry to focus on clean vehicles and speed up the transition Here are some of the commitments to electric vehicles, including under the Climate Plan that could be expanding the investment in supply implemented to tackle climate change chains and infrastructure for clean in the U.S. vehicle production. • Financial regulations • Substantial investments in energy President Biden has said he will sign an efficiency Executive Order requiring public The Climate Plan calls for substantial companies to disclose climate change- spending in clean energy and related financial risks and greenhouse infrastructure (both onshore and gas (GHG) emissions in their offshore), committing to USD$2 trillion operations, ensuring the U.S. joins the in investments over four years. More growing number of nations who are specifically, Biden’s Climate Plan calls already mandating, or preparing to for increased development of mandate, climate-related financial distributed and utility scale renewable reporting. We anticipate that U.S. energy, including solar, onshore and financial regulatory agencies will move offshore wind, and hydropower, to further assess and account for among others, as well as an amended climate change in policy, enforcement regulatory framework for utilities and guidance measures. to source clean energy instead of fossil fuels. • Public land leases President Biden will pivot away from • Smart infrastructure investments the Trump-Pence Administration’s to withstand the impact of approach toward leasing public lands climate change to oil and gas companies (including Biden’s Climate Plan intends to President Trump’s recent Executive upgrade the commercial building sector Order permitting drilling on federal by retrofitting buildings, upgrading lands in Alaska) and is likely to schools and improving energy efficiency re-evaluate various agencies’ review in homes across the country to ensure 2 CLIFFORD CHANCE IMPLICATIONS OF PRESIDENT BIDEN’S PLAN TO COMBAT CLIMATE CHANGE
of environmental impacts of energy Global implications At a glance exploration and development efforts. The Biden-Harris Administration’s focus It is anticipated that this will favor • The Biden Climate Plan contains on climate change will also have development efforts in offshore ambitious proposals for a clean significant global implications. Here are a wind while disfavoring oil and energy/low carbon future, but the few likely impacts that the new gas development. most ambitious measures are likely Administration could have on global to be challenging to implement if • Civilian climate corps efforts to tackle climate change and faced with a Republican Senate. The Climate Plan includes the potential opportunities for international The new administration is likely to establishment of a civilian conservation parties with an interest in investing in the make maximum use of Executive corps to find nature-based solutions to U.S. energy market. Orders and administrative address climate change, reduce empowerment to reverse numerous leakage of toxic chemicals, methane, Rejoining the measures aimed at facilitating fossil and other wastes from oil and gas wells Paris Agreement fuel development. and restoring and reclaiming President Biden has pledged to rejoin the • Major domestic green economy abandoned coal, hardrock, and Paris Climate Agreement on his first day investment is expected in areas uranium mines. in office, calling climate change an of energy efficiency, smart • Clean energy research and “existential threat to humanity.” The infrastructure, clean vehicles, and innovation Biden-Harris Administration will have to related research and The Climate Plan would represent “the determine new climate targets once it innovation efforts. largest-ever investment in clean energy rejoins the Paris accord. The Climate Plan research and innovation,” at an includes the goals of net zero emissions • President Biden has committed to estimated cost of USD$400 billion over by 2050, and for all electricity to be the U.S. rejoining the Paris ten years to increase federal emissions-free by 2035. Key questions Agreement on his first day in office, procurement for the purchase of key will be whether the commitment will cover and has pledged a net carbon clean energy inputs such as batteries all GHGs and the extent to which the neutral U.S. by 2050, with emissions and electric vehicles. U.S. will rely on domestic action to meet free electricity by 2035. the net zero goal. The Paris Agreement • U.S. re-engagement in international Prospects for the will also require that the U.S. sets climate climate action is likely to encourage implementation of the targets for 2030, a nearer-term goal greater international carbon which is likely to require near term action, reduction and climate finance efforts Biden/Harris domestic immediately testing the robustness of the at the COP 26 meeting, and could climate agenda U.S. commitment. Rejoining the Paris help unblock continuing impasses Aspects of the Climate Plan such as Agreement will also re-establish the U.S. on the development of a carbon increasing investments in energy storage, commitment to, and participation in, market mechanism. clean hydrogen and carbon capture climate finance, a collective commitment incentives are likely to garner bipartisan for developed countries to provide finance • Biden-Harris Administration’s plans support, whereas other aspects of the to developing nations for climate for measures to penalize high- Climate Plan, such as gradually mitigation and adaptation efforts by at carbon imports are likely to find eliminating fossil fuel production, may not. least USD$100 billion per year. favor with the EU in light of their similar plans, but could well open up a new trade dispute front In order to fully implement and achieve U.S. role in the United with China. certain goals set out in the Climate Plan, Nations Climate Change the Biden-Harris Administration will also • Significant opportunities are have to win support and buy-in at the Conference (COP26) anticipated for international state level, as the ability for the federal The COP26 summit in November 2021 investment in U.S. domestic climate- government to undertake broadscale will bring parties together to accelerate related projects, in particular in the change on its own is ultimately limited. action towards the goals of the Paris renewable energy field. Notably, clean energy projects are Agreement and the UN Framework booming in certain Republican leaning Convention on Climate Change. Since states, for example, Texas, North Carolina President Biden has pledged to rejoin the and Oklahoma, and generally, bi-partisan Paris Agreement, among other support for renewables at the state commitments, we would expect that the legislature level continues to grow. U.S. will attend the COP26. These COP meetings are a key opportunity (and For more details about President Biden’s catalyst) for countries to announce or Climate Plan, please see our July 2020 agree to GHG reduction targets, and U.S. client briefing on the topic here. participation and leadership is key to building momentum for this process. CLIFFORD CHANCE 3 IMPLICATIONS OF PRESIDENT BIDEN’S PLAN TO COMBAT CLIMATE CHANGE
Given its global influence, setting a target discretion and independent powers when for meaningful emissions reductions it comes to international policy. When Joe in the U.S. could well lead to other Biden was elected, UK Prime Minister countries that have so far been less Boris Johnson noted that climate change ambitious in their GHG pledges would be an important area of establishing more stringent targets in cooperation between the new U.S. alignment with the goals of the Paris Administration and the UK, alongside Agreement. The U.S. presence at the trade and security. table is also likely to be a major boost to efforts to ramp up international climate We expect that a Biden-Harris finance for developing countries, which Administration will leverage its authority to have languished during the years of the integrate its climate change initiatives into Trump-Pence Administration. U.S. foreign policy, national security, trade and other international agreements. Another area where US re-engagement In particular, President Biden notes in his could help kick start international action Climate Plan: “We can no longer separate at COP 26 under the Paris Agreement is trade policy from our climate objectives. in the area of emissions trading. Article 6 Biden will not allow other nations, of the Paris Agreement provided for a including China, to game the system by future global carbon market mechanism becoming destination economies for to offer a replacement for the Kyoto polluters, undermining our climate efforts Protocol (which allows for a carbon and exploiting American workers and market to help countries reach their businesses. As the U.S. takes steps to targets by reducing GHG emissions in make domestic polluters bear the full cost other countries, and encourages the of their carbon pollution, the Biden private sector and developing countries to Administration will impose carbon contribute towards emissions reductions). adjustment fees or quotas on carbon- Since the Paris Agreement, little progress intensive goods from countries that are has been made on the design for such a failing to meet their climate and mechanism and it is hoped COP26 will environmental obligations.” This will be a bring a breakthrough in this regard. Major welcome boost for policymakers in the disagreements remain: Key outstanding EU and elsewhere where green goals are issues relate to the carryover of legacy increasingly becoming a question of credits from the former Kyoto Protocol’s trade, and not simply domestic policy. Clean Development Mechanism/Joint For example, under the ‘European Green Implementation projects; accounting rules Deal’, the EU is planning its own around double-counting of emissions; legislation on a ‘carbon adjustment and how the trading mechanisms would, mechanism’ to be implemented at the in fact, lead to a reduction in global EU border for ‘selected sectors’ to emissions rather than simply shifting them reduce the risk of carbon leakage (i.e. around the globe. A robust resolution higher regulatory standards in the EU of the outstanding issues could see leading to production being displaced to significant incentivization for private outside the EU, or import of products sector companies able to aid in the with higher carbon content – see our transition to net zero, and therefore briefing on the European Green Deal). commercial opportunity. The development of a robust carbon adjustment fee or quota domestically in Global cooperation the US would be likely to facilitate US/EU trade, and thereby alleviate possible and trade political tensions. Given that President Biden has pledged to focus on combating climate change, How this will translate for U.S. trade with we can expect more stringent pollution China remains to be seen. On the one controls across various sectors and in hand, President Xi Jinping’s trade arrangements. Unlike domestic announcement in September 2020 policy, where the new Biden-Harris committing China to have carbon Administration may be limited in creating emissions peak before 2030, and new climate change legislation without targeting carbon neutrality by 2060, bipartisan support, in some respects, the creates a landmark boost to global U.S. President generally has greater 4 CLIFFORD CHANCE IMPLICATIONS OF PRESIDENT BIDEN’S PLAN TO COMBAT CLIMATE CHANGE
carbon reduction efforts. On the other incentives to support the development of hand, China’s targets would put it on a the renewable energy market, this will slower trajectory towards carbon create opportunities for international neutrality than the U.S. and many other market participants to invest in the U.S countries. Tough EU/US carbon energy, auto and technology markets. adjustment measures could have an For example, given that offshore wind is impact on China (and other major currently in its infancy in the U.S. developing country manufacturing hubs) compared with the rest of the world, and significantly triggering a major new front in the industry already has bi-partisan potential trade disputes. support among coastal state legislatures, offshore participants with expertise in the Investment opportunities area, as well as suppliers, and service providers could naturally have a in the US renewable competitive advantage in this burgeoning energy market, including industry in the U.S. It is expected that the the offshore wind market new Administration will reverse a number Biden’s Climate Plan aims to dramatically of the Trump-Pence Administration’s increase spending on development and trade tariffs imposed on solar modules corresponding infrastructure designed to and development materials. As a result, both reduce carbon emissions and development costs are likely to drop, and withstand the impacts of climate change. greater stability is likely to fortify the U.S. Given that the Climate Plan includes renewables market. measures for federal support and CLIFFORD CHANCE 5 IMPLICATIONS OF PRESIDENT BIDEN’S PLAN TO COMBAT CLIMATE CHANGE
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