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Domestic realities unable to temper a strong US comeback at COP26
President Joe Biden's plan to make a strong US comeback at the UN COP26 climate change meeting that begins 31 October may be tempered by domestic political roadblocks and global energy price surges, analysts say.
The meeting, which was postponed by a year owing to the COVID-19 pandemic, takes place in Glasgow, Scotland, against a backdrop of global energy price surges correlated with supply shortfalls and shipping price spikes.
"The pace, scale, and shape of the energy transition—and the related capital transition in financial markets—are all set to bifurcate at COP26 between competing views of the current crisis in energy pricing, with implications for the future of economic planning and infrastructure funding for years to come," IHS Markit Cleantech and Climate Executive Director Peter Gardett wrote in a 25 October note.
Despite the legislative roadblocks and global events, Biden has taken more steps to tackle the climate crisis in the 10 months since he took office than any other US president before him, and some analysts say this puts him in a position to demand commitments from other major economies.
There is no question that Biden's presence as a participant and a key player at the COP26 meeting, which his predecessor shunned, is "likely to be the most significant accomplishment to date," IHS Markit Chief Energy Strategist Atul Arya told Net-Zero Business Daily.
President Trump shunned global climate meetings during his term in office and disliked multilateral agreements in general, preferring that the US to deal with countries on a bilateral basis.
Back in the game
"The US is definitely back in the game on climate change," as is evident from the many actions Biden has taken since he assumed office 10 months ago, Zach Friedman, federal policy director for Ceres, a nonprofit sustainable network of institutional investors, told Net-Zero Business Daily 28 October.
Friedman and others pointed to the Biden administration's re-entry into the 2015 Paris Agreement shortly after taking office, its commitment to halving US GHG releases by 2030 and to reach a net-zero economy by mid-century, and the series of executive orders requiring all federal agencies to tackle the deleterious effects of climate change across all aspects of the economy, including the financial and housing sectors.
Past US administrations have largely focused on regulations to curb GHGs from the power and transportation sectors, while the Biden administration has pushed the federal government to assess the risk that climate change is having on all aspects of business.
Actions lag rhetoric
Although IHS Markit's Arya agrees the narrative on US government's response to climate change has shifted dramatically in 2021, he said "specific actions lag the rhetoric so far."
Progress on the regulatory front remains slow and somewhat stymied by courts, Arya said, while noting that "US public opinion continues to shift in favor of taking action but the willingness to pay for these actions remains elusive."
In Glasgow, Arya said, "Biden could argue that a glass half-full is better than an empty glass. How the world responds remains to be seen."
Most observers like Arya expected Biden would attend this conference with his signature Build Back Better agenda in place, offering billions of dollars in funding and new policies for decarbonizing the economy and tackling the climate crisis.
However, the Build Back Better agenda, which was to be implemented through two key pieces of legislation (the infrastructure package and the budget reconciliation measure), has been tied up in the US Congress, owing to objections from various wings of the Democratic party.
The $1.2-trillion bipartisan infrastructure legislation, which the US Senate approved 10 August, remains stuck in the US House of Representatives, where the progressive wing of the Democrats is preventing a vote.
The infrastructure legislation, once approved, would offer $500 billion in new funding to create a national network of electric vehicle (EV) charging stations, purchase zero-emissions school buses, and shore up the nation's roads, bridges, ports, and transit systems as well as water and wastewater infrastructure against the vagaries of climate change.
Key decarbonization program removed
To appease the more conservative members of his party, notably Senators Joe Manchin, of West Virginia, and Kyrsten Sinema, of Arizona, Biden also agreed to slash the price tag of the $3.5 trillion reconciliation measure that included funding and policies to implement the climate goals not included in the infrastructure package.
Biden on 28 October agreed to pare back the price tag for the reconciliation measure to $1.75 trillion, which included removing a new Clean Electricity Payment Program (CEPP) that was supposed to anchor Biden's plan for a carbon-free US grid by 2035.
The CEPP, which would have paid or penalized utilities for their success in meeting 4% annual increases in clean energy sourcing, was opposed by Manchin, whose home state is heavily dependent on coal and natural gas production. Manchin also objected to the methane fee sought in the original measure that would have offset the cost of implementing the measures.
In a 28 October tweet, Sinema welcomed Biden's revised price tag and his good-faith efforts to compromise. Manchin didn't comment on the provisions that were left out of the revised deal, but he too tweeted that the product was the result of good-faith negotiations.
In a speech, Biden for his own part acknowledged that "no one got all they wanted," but added that such was the nature of compromise.
Jennifer Turner, director of the China Environment Forum at the nonprofit Wilson Center, described the deal Biden reached on his signature legislation as "woefully inadequate" in the face of the dire predictions made about global warming in the latest UN report.
Progress on regulations
Despite the legislative setbacks, the Biden administration has made strides in tackling the climate crisis through agreements in the international arena and regulations on the domestic front.
In September, the US and EU pledged to cut global levels of methane, a potent GHG gas, by 30% by 2030. In the US, this pledge would be implemented through regulations that the US Environmental Protection Agency (EPA) is poised any day to release to cap methane releases from extracting, processing, distributing, and transporting oil and gas products from new plus existing operations. The rules were originally due in September.
The US Department of the Treasury for the first time is working to assess the risk that climate change poses to banks and insurance companies, and is directing multilateral development banks, where it has veto power, to direct financing towards projects geared toward capturing methane and carbon releases from industrial activities. The US Federal Reserve Bank is studying how best to incorporate climate risk into stress tests for banks, and the US Securities and Exchange Commission is crafting a proposal, which is to be released by the year's end, to mandate climate risk disclosures by publicly traded companies.
Thanks to measures like these, the US is coming into COP26 with "a pretty strong hand," Ceres' Friedman said.
He added that it is possible regulation could be published and/or legislation approved before the Glasgow meeting ends, adding further momentum to the US effort.
Ben Finzel, a former congressional staffer and President Clinton appointee, said Biden has accomplished more in the first 10 months in office than he has been given credit.
Besides, "there is work required to fix four years of malfeasance and malpractice," said Finzel, who heads RENEWPR, a public relations company focused on energy and environmental solutions. "I think there is too much Monday quarterbacking going on when it is only Friday," he said about criticism that Biden has not been able to move his signature legislative priorities across the finish line yet.
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