Despite the Trump campaign’s much-anticipated filing of lawsuits challenging the election results, a Biden victory now seems all-but inevitable. Yet his win did not prevent the withdrawal of the U.S. from the Paris Agreement on 4 November, over three years after Donald Trump signed an irrevocable timetable for an “America First” departure.  Biden has vowed to rejoin Paris after taking the presidential oath on 20 January, but with a likelihood of a Republican-controlled Senate, how far would a Biden administration be able to reverse Trump’s climate change rollbacks?

The failure of the Democrats this week to wrest decisive control of the U.S. Senate from the Republican party poses significant challenges for the Biden Administration to pursue its climate and energy policy with legislation. The Democrats have an outside chance of eking out effective Senate control come January via run-offs for Georgia’s two seats, but they face an uphill battle.

However, the White House wields significant executive power and can accomplish at least some of the Biden agenda without cooperation from the Senate.

Route 1 to net zero?

The Biden election platform included a climate plan to invest $2 trillion over four years in clean energy, low-carbon transport, building energy efficiency and infrastructure. The plan targeted zero-emissions power generation by 2035 and a net-zero economy by 2050. It is heavily orientated towards job creation.

For example, it seeks to create 12 million jobs by upgrading 4 million buildings and weatherizing 2 million homes. Its goals of building 500,000 new electric vehicle charging stations, invest in transport, water, electricity and broadband infrastructure, and clean up brownfield sites and exhausted fossil fuel wells and mines would also create millions of new jobs.

If the Republican Senate leadership reverts to its strategy during the Obama years – of an outright refusal to work across the aisle on any legislative proposals – then an overwhelming majority of this agenda is likely to be compromised. The main constraint on Biden’s agenda, with the Senate staying red, would be through appropriations.

However, given that the US is facing significant ongoing economic disruption caused by the Covid pandemic, there is a serious prospect of some elements of the Biden plan passing the Senate in the form of elements embedded in an early Covid relief/recovery effort.

A Covid recovery bill under a Biden Presidency is likely to look very different to recent stimulus proposals and will almost certainly include environmental elements linked to job creation, in line with the approach in the Biden climate plan. Infrastructure spending, in particular would create employment across the country, including in Republican-leaning areas where Senators will come under political pressure to support additional fiscal stimulus. While legislation is unlikely to be passed until after the inauguration in January, work on the shape of the package will start over the coming weeks.

We’ll always have Paris

Moreover, the White House retains significant executive powers that a Biden presidency will exercise in pursuit of its climate and energy objectives.

In a tweet on Wednesday, Biden confirmed that his Administration would rejoin the Paris Agreement on climate change on the day of his inauguration. That agreement – from which the U.S. formally withdrew on 4 November – was carefully designed not to require Congressional approval.

Such a move would be positive for the international climate effort. While other leading countries and regions have doubled-down on their commitments to tackle climate change – note the net-zero pledges by the EU, China, Japan and South Korea – a lack of leadership from the US has undoubtedly slowed progress. For countries such as Brazil, it has provided cover for reversals in climate action.

On the domestic front, the measures spelt out in 2015 by the Obama administration to meet its Paris goal – a 26-28% reduction in greenhouse gas emissions by 2025 compared with 2005 levels – were designed to be achievable through executive action alone.

The Biden White House would likely restore some version of Obama’s Clean Power Plan, which attempted to reduce power sector emissions and promote renewables. It could also take additional emissions-reducing executive actions, such as improved vehicle energy efficiency standards and reductions in methane emissions from the oil and gas sector.

The White House could also advance its climate agenda through the federal government’s enormous procurement spend. This could extend to the U.S. military – which has increasingly expressed concerns about the security implications of climate change.

And the presidency can also wield significant influence through personnel appointments. Across the federal government, Trump appointees have undertaken an extensive roll-back of environmental regulations and a gutting of federal agencies’ ability to pursue their mandated roles. The Biden administration’s appointees will move aggressively to reverse this process.

It is worth bearing in mind that the clean energy sector has managed to thrive despite four years of indifference at best and opposition at worse, from the Trump administration. Technology cost reductions, supportive state-level policy and strong demand from corporate consumers responding to customer pressure have all helped renewables grow significantly with extremely limited federal support. While ambitious legislative support would provide a significant accelerant, its absence will merely slow, rather than reverse, the sector’s growth.

Beyond climate

More broadly, the sustainable investment community is hopeful that a Biden presidency will reverse the current Administration’s hostility towards ESG integration and disclosure. For example, new leadership at the Department of Labor would likely scrap its proposed rule requiring plan fiduciaries to prioritise the financial considerations of beneficiaries over social and public policy objectives – a move seen by many plan providers as preventing consideration of ESG factors.

Similarly, new commissioners at the Securities and Exchange Commission would likely be supportive of mandating ESG disclosures by companies, although it is uncertain whether this will include the disclosure of climate-related risks under TCFD. They would also be likely to undo the Trump Administration’s attempts to make proxy voting more onerous and expensive and to make it more difficult for shareholders to file shareholder proposals.

There is also an opportunity for a Biden administration to go further than the Obama White House in actively promoting the sustainable finance sector. The U.S. Social Investment Forum has proposed, among other things, a White House Office of Sustainable Finance and Business to act as “a focal point in the administration” to promote “the continued growth of sustainable investment and accelerate the shift from a shareholder-centric company model to a multi-stakeholder model”. It should be noted as well that Ceres is currently drafting a similar transition document with proposals more narrowly focused on climate and environmental issues.   

Certainly, the inability of the Democrats to seize power in the Senate this week will disappoint advocates for clean energy and climate action. But there is much that a Biden Administration can do to address the profound sustainability challenges facing the U.S. and the world – challenges that a re-elected President Trump would most likely have continued to ignore.

Joseph Keefe

President

Joe Keefe is President of Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds. He is responsible for U.S.‑managed strategies as well as distribution of Impax’s full capabilities across North America.

Prior to joining the firm in May 2005, Joe was President of NewCircle Communications, a strategic consulting and communications firm specializing in corporate social responsibility and public policy communications. He served as Senior Advisor for Strategic Social Policy at Calvert Group from 2003-2005 and as Executive Vice President and General Counsel of Citizens Advisers from 1997-2000. He is a former member of the Board of Directors (2000-2006) of US SIF, the trade association representing asset managers and investors engaged in sustainable investing throughout the United States. Before entering the investment management industry, Joe worked in private law practice for 16 years.

Joe holds a Juris Doctor from the University of Virginia School of Law and a Bachelor of Arts in philosophy from the College of the Holy Cross.

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