Enacting climate agenda before 2022 elections likely a Biden priority

The Biden administration will likely use the next 18 months to enact regulations that will impact transportation and energy use for the coming decades, with both the current pricing climate in energy and Democratic majorities in Congress aiding such efforts, according to Kevin Book, who heads the research team at Clearview Energy Partners.

Speaking at the OPIS Fuel Price and Profitability Outlook virtual event on 9 February, Book said President Joe Biden is likely to move to enact policies, regulations, and laws aimed at combatting climate change before midterm congressional elections in 2022.

While past government efforts have aimed at improving vehicle efficiency and promoting biofuels, Biden's efforts will be more focused on decarbonization of transportation and promoting electric vehicle (EV) use, he said.

Biden's efforts are likely to be aided by the current low prices for gasoline and other fuels, Book said. When looking at gasoline costs as a share of a family's disposable income, prices today are about half what they were in 2012, Book said. Policymakers are not worried about the pump price, "which means they are at liberty to address things that could potentially influence it," he said.

Low gasoline prices have given Biden the ability to talk about a vigorous and aggressive climate strategy, "one far more green and far broader than any proffered before," Book said.

Book said he expects the Biden administration to pursue tough standards for regulating the environmental impact of fossil fuels and accelerate the transition to the electrification of transportation. On his first day in office, Biden ordered a review of more than 100 rules promulgated by the Trump administration, including changes his predecessor ordered in fuel economy standards (see IHS coverage here).

With Obama-era efficiency standards in place, Clearview expects gasoline demand to return to pre-pandemic levels in 2023, but then start to decline due to government-ordered increases in vehicle mileage.

Under the Trump administration's Safer Affordable Fuel Efficient (SAFE) Vehicles standards, demand would decline by about 12 billion gallons per year while under Obama-era Corporate Average Fuel Economy (CAFE) standards, the annual decline would be about 18 billion gallons.

Efficiency standards included in a 2019 deal between the state of California and automakers would see the annual decline fall about midway between the Obama-era and Trump standards, and that deal is likely to serve as the framework for interim standards adopted by the Biden administration, Book said.

Meanwhile, the relatively small percentage of electric vehicles in the US fleet means that increased adoption is unlikely to have a large impact on fuel savings. But, increasing EV adoption is more important when it comes to efforts to decarbonize transportation and reduce greenhouse gases, particularly as US electric generation reduces its carbon footprint, Book said. Even when using electricity generated by coal-fired plants, a Tesla still performs better than internal combustion engine passenger vehicles, Book said.

The generation of green jobs figured prominently in the 2009 economic recovery, and Biden's plans for a recovery from the COVID-19 pandemic also relies on creating new, green jobs, Book said.

While Book said he expected Democrats to use congressional rules to force through legislation aimed at promoting green jobs and targeting carbon emissions, he said it remains to be seen if they will take the more aggressive step of eliminating filibuster rules in Congress to stop Republicans from blocking environmental initiatives.

Reporting by Steve Cronin, OPIS.