Biden’s Earth Day Party Invites the World But Courts Americans
(Bloomberg Opinion) -- The original Earth Day on April 22 in 1970 drew Americans’ attention to their planet. This year’s is designed to draw the planet’s attention to Americans.
President Joe Biden’s climate conference, kicking off on Thursday, aims to demonstrate that the U.S. is serious about tackling climate change, and showing it can outcompete China in the process. In doing so, though, Biden is also reaffirming his intent to transform the domestic scene with multitrillion dollar infrastructure plans. And that means courting a domestic audience, too.
The centerpiece is a new U.S. emissions reduction target that could be described as metamorphic. Halving the country’s greenhouse gas output in 2030 from the level of 2005, as Biden aims for, requires remaking swathes of the economy. Emissions peaked in 2007 and fell by 1.1% a year through 2019. Getting to the new target means accelerating that to 5%, or roughly half the estimated drop resulting from the pandemic in 2020 , compounded each year over a decade.
Put another way, it means cutting 2.85 billion tonnes of gross annual emissions. Say those from power generation fall by 80% and methane emissions (mostly from agriculture and the natural gas business) are cut in half. Either is a monumental job in itself, especially on this schedule. Even so, you would still need to find almost 1.2 billion tonnes of other reductions — with transportation an obvious target.
Thus far, Biden’s approach on climate has leaned more toward using a wide range of regulatory tools. We may yet see Congressional Democrats push a federal clean energy standard for the power sector, perhaps under the convoluted rubric of budget reconciliation. Indeed, 50% by 2030 would appear to demand it. Yet that target, while framed as a signal to the wider world, may also be directed at the states.
Former President Donald Trump’s rollback of environmental regulations met with pushback at the sub-national level. America’s Pledge, a coalition of local and business leaders backing the Paris Agreement co-founded by Michael Bloomberg (majority owner of Bloomberg News parent Bloomberg LP), encompasses states, cities, businesses and other organizations representing roughly two-thirds of the U.S. economy and population. It endorses a 50% emissions cut and estimated in a report published in December 2019 that bottom-up initiatives alone could deliver a cut of 37%. Meanwhile, at least 15 states have adopted net-zero emissions or 100%-renewable power targets and several more are actively considering such measures.
Biden’s appointments to key positions appear designed to capitalize on this, not least Gina McCarthy, his chief domestic climate adviser, and her deputy Ali Zaidi. Besides other roles, both held prominent environmental positions in states — Massachusetts and Connecticut for McCarthy, New York for Zaidi — that are blue and target net-zero emissions by 2040 or beyond. With their new boss trumping those, it’s a fair bet they will push their home states to follow his lead with similarly ambitious updates. That’s one way of cementing Biden’s climate ambitions in large parts of the U.S. even if Washington remains divided on them.
On that front, GOP counter-programming this week served to emphasize the contortions required in maintaining climate change as a wedge issue. House Republicans touted a slew of bills covering everything from shoring up nuclear energy to planting a trillion trees. Politically, this could help as younger voters, in particular, bridle at the party’s longstanding opposition to meaningful action on climate change.
It’s also an implicit admission that a threat the party has spent years deriding or downplaying is real. Yet the bills proposed aren’t anchored by an overarching objective in terms of emissions cuts. There are further tensions. For example, one amendment seeks to raise the tax credit for sequestered carbon from industrial facilities to $85 a tonne. But if a captured tonne of this stuff is deemed to be worth $85, why not just price it at $85 and let the market figure out the numerous ways in which it could be abated?
Even as Biden risks overshooting with his new targets, Republicans find themselves playing catch up. Never mind Major League Baseball and Coca-Cola Co. in Georgia, Republicans have been diverging from big business and big finance on climate issues for a while and this process has accelerated. Three sectors traditionally friendly with the party — energy, utilities and industrials — generate more than 70% of the emissions associated with the S&P 500 Index yet now weigh in at just 14% of the gauge, according to analysts at Bank of America.
Even if the rest of corporate America can display muddled thinking of its own in terms of tackling emissions, it tends to spot where the money is headed faster than most politicians. Biden’s new target, even if unmet, both draws encouragement from that and serves to galvanize it, especially if it prompts similar, coordinated updates in key states. For all its theater, this Earth Day will find an important audience at home that is receptive to its message.
As per "Preliminary U.S. Greenhouse Gas Emissions Estimates for 2020" (Rhodium Group, January 2021).
"10 surprises about the S&P 500 for Earth Day", April 21, 2021.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.
©2021 Bloomberg L.P.