The 2020 election was exhausting to say the least. Agonizingly slow ballot counts across key battleground states, coupled with vicious political mud-slinging across the aisle, reduced the nation to a nervous wreck. But while the uncertainty of election week had everyone anxious, including the energy markets, Joe Biden’s eventual election was able to offer us a clearer glimpse into America’s future — at least, as far as energy goes.
The President-elect has proposed an extensive clean energy plan, which suggests a significant deviation from the nation’s current trajectory.
According to this plan, a Biden presidency will see the onset of a profound shift toward…
- increased regulation of fossil fuels
- push for efficiency
- long-term climate goals.
Biden’s Plan To “Build Back Better”
In contrast to President Trump’s energy policies, which have historically played in favor of the U.S. oil and gas industries, the Biden/Harris campaign has promised to take a different approach. The President-elect’s campaign has run on a pledge to “build back better,” tackling the coronavirus crisis and reviving the American economy in tandem. Under Biden, the U.S. will strive to achieve net-zero emissions, economy-wide, by no later than 2050. In addition, the administration aims to create a pollution-free power sector in the next 15 years. Biden’s combined COVID-19 economic recovery and clean energy investment strategy is projected to funnel $2T into these initiatives within his first term.
As part of his campaign’s broader plan to shift away from fossil fuels in the near future, Biden has also stated his intent for installing 500,000 new electric vehicle charging stations throughout the country. A Biden presidency will also support significant renewable energy and sustainability stimulus funding, which could include the extension of federal incentives to make it more attractive for corporations to choose renewable energy.
Uh-Oh For Oil And Gas
By the same token, it’s likely the new administration will end subsidies (often in the form of various tax credits and write-downs of assets and infrastructure) for the oil, gas and coal industries. The coal industry can also expect a return to Obama-era regulations under Biden, given the administration’s plans to continue phasing out coal out of the power mix in favor of natural gas and renewables.
”Under Biden, the U.S. will strive to achieve net-zero emissions, economy-wide, by no later than 2050 and create a pollution-free power sector in the next 15 years.
When it comes to natural gas, Biden has made clear he will not issue new permits for drilling on federal land. Increasing regulation on existing operations is also on his to-do list as president. But while he’s stated that his intent to move away from natural gas production via fracking, he hasn’t provided a clear timeframe or strategy for accomplishing that goal.
Though Biden’s proposal to limit drilling on federal lands could smite production, ballooning prices could make gas exports more profitable. What’s more, possible improved relations with China could open a door to a major world market for exporters.
Overall, renewable energy implementation is set to expand under a Biden administration, while fossil fuel energy generation is likely to diminish. But Biden’s election doesn’t signal a complete downturn for U.S. oil and gas. The Senate is projected to remain majority controlled by Republicans, meaning any legislation proposed by the new administration to restrict those industries will be hard to sign into law.
A Biden Win Has International Implications
This year’s election results also have implications that extend beyond America’s borders. Notably, the U.S. will be returning to global decarbonization efforts, as Biden has committed to rejoining the Paris Climate Agreement upon his inauguration.
Biden has also expressed interest in returning to the Iranian Nuclear Deal. Though the road to reinstatement will be rocky, it could mean that Iranian oil exports eventually rejoin the global market. Iran is the world’s seventh largest producer of crude oil; should it be relieved of its economic sanctions, the nation could add roughly 200M barrels of oil to the global market per day. But Iran’s potential reunion with the global oil market has key members of OPEC — the Organization of the Petroleum Exporting Countries — wringing their hands. Should Biden relax measures on Iran (and fellow sanctioned nation Venezuela), it could be harder for OPEC to balance supply with demand. According to a recent Reuters article, “any developments that threaten the future of the alliance could weaken the market, with significant implications for OPEC and other producers, governments and traders.”
Preparing For A New President
In preparation for a Biden presidency, businesses should expect increased pressure and incentives from the federal government to adopt clean energy and commit to climate targets. As a result, embedding climate solutions into their business strategy is crucial for companies that want to maintain a competitive edge.
As the Biden/Harris administration ushers in an era of clean energy initiatives, fossil fuels will bear the brunt of this transition, but will hang onto their lifeline with their allies in the Senate. OPEC members will keep a weather eye out on Biden’s relations with Iran, but will enjoy considerable time to readjust its production strategy before the administration is able to lift measures against sanctioned states. Meanwhile, American companies can prepare for the coming age of clean energy policies by implementing aggressive sustainability targets across the board.