IMPLICATIONS OF PRESIDENT BIDEN'S PLAN TO COMBAT CLIMATE CHANGE - JANUARY 2021
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IMPLICATIONS OF
PRESIDENT BIDEN’S
PLAN TO COMBAT
CLIMATE CHANGE
JANUARY 2021
IMPLICATIONS OF PRESIDENT BIDEN’S
PLAN TO COMBAT CLIMATE CHANGE
During his campaign to be elected as President of the
United States, Joe Biden set out an ambitious climate plan
which, among other things, calls for a goal of net-zero
emissions in the U.S. by 2050 and actively combating climate
change. Below, we have outlined the implications of the
Climate Plan for the U.S. and the international community
under the new Biden-Harris Administration.
Domestic Implications that they are more energy efficient and
“climate-ready.” Specifically, the
We expect a Biden-Harris Administration
Climate Plan calls for energy updates
to initially implement its climate change
for four million commercial offices,
agenda through Executive Orders and
warehouses and public buildings,
administrative empowerment. Throughout
making two million homes more energy
his term, President Trump overturned
efficient and resilient to adverse
over 100 major environmental regulations
weather over a four-year period and
implemented by the Obama-Biden
introducing legislation to set net-zero
Administration. The new Biden-Harris
emissions for all commercial buildings
Administration will likely reverse President
by 2030.
Trump’s rollbacks aimed at boosting fossil
fuel production, and could reinstate and • Repositioning the auto industry
expand upon many Obama-era The Climate Plan aims to reposition
environmental regulations. the auto industry to focus on clean
vehicles and speed up the transition
Here are some of the commitments to electric vehicles, including
under the Climate Plan that could be expanding the investment in supply
implemented to tackle climate change chains and infrastructure for clean
in the U.S. vehicle production.
• Financial regulations
• Substantial investments in energy
President Biden has said he will sign an
efficiency
Executive Order requiring public
The Climate Plan calls for substantial
companies to disclose climate change-
spending in clean energy and
related financial risks and greenhouse
infrastructure (both onshore and
gas (GHG) emissions in their
offshore), committing to USD$2 trillion
operations, ensuring the U.S. joins the
in investments over four years. More
growing number of nations who are
specifically, Biden’s Climate Plan calls
already mandating, or preparing to
for increased development of
mandate, climate-related financial
distributed and utility scale renewable
reporting. We anticipate that U.S.
energy, including solar, onshore and
financial regulatory agencies will move
offshore wind, and hydropower,
to further assess and account for
among others, as well as an amended
climate change in policy, enforcement
regulatory framework for utilities
and guidance measures.
to source clean energy instead of
fossil fuels. • Public land leases
President Biden will pivot away from
• Smart infrastructure investments
the Trump-Pence Administration’s
to withstand the impact of
approach toward leasing public lands
climate change
to oil and gas companies (including
Biden’s Climate Plan intends to
President Trump’s recent Executive
upgrade the commercial building sector
Order permitting drilling on federal
by retrofitting buildings, upgrading
lands in Alaska) and is likely to
schools and improving energy efficiency
re-evaluate various agencies’ review
in homes across the country to ensure
2 CLIFFORD CHANCE
IMPLICATIONS OF PRESIDENT BIDEN’S PLAN TO COMBAT CLIMATE CHANGE
of environmental impacts of energy Global implications At a glance
exploration and development efforts.
The Biden-Harris Administration’s focus
It is anticipated that this will favor • The Biden Climate Plan contains
on climate change will also have
development efforts in offshore ambitious proposals for a clean
significant global implications. Here are a
wind while disfavoring oil and energy/low carbon future, but the
few likely impacts that the new
gas development. most ambitious measures are likely
Administration could have on global
to be challenging to implement if
• Civilian climate corps efforts to tackle climate change and
faced with a Republican Senate.
The Climate Plan includes the potential opportunities for international
The new administration is likely to
establishment of a civilian conservation parties with an interest in investing in the
make maximum use of Executive
corps to find nature-based solutions to U.S. energy market.
Orders and administrative
address climate change, reduce
empowerment to reverse numerous
leakage of toxic chemicals, methane, Rejoining the measures aimed at facilitating fossil
and other wastes from oil and gas wells
Paris Agreement fuel development.
and restoring and reclaiming
President Biden has pledged to rejoin the • Major domestic green economy
abandoned coal, hardrock, and
Paris Climate Agreement on his first day investment is expected in areas
uranium mines.
in office, calling climate change an of energy efficiency, smart
• Clean energy research and “existential threat to humanity.” The infrastructure, clean vehicles, and
innovation Biden-Harris Administration will have to related research and
The Climate Plan would represent “the determine new climate targets once it innovation efforts.
largest-ever investment in clean energy rejoins the Paris accord. The Climate Plan
research and innovation,” at an includes the goals of net zero emissions • President Biden has committed to
estimated cost of USD$400 billion over by 2050, and for all electricity to be the U.S. rejoining the Paris
ten years to increase federal emissions-free by 2035. Key questions Agreement on his first day in office,
procurement for the purchase of key will be whether the commitment will cover and has pledged a net carbon
clean energy inputs such as batteries all GHGs and the extent to which the neutral U.S. by 2050, with emissions
and electric vehicles. U.S. will rely on domestic action to meet free electricity by 2035.
the net zero goal. The Paris Agreement • U.S. re-engagement in international
Prospects for the will also require that the U.S. sets climate climate action is likely to encourage
implementation of the targets for 2030, a nearer-term goal greater international carbon
which is likely to require near term action, reduction and climate finance efforts
Biden/Harris domestic immediately testing the robustness of the at the COP 26 meeting, and could
climate agenda U.S. commitment. Rejoining the Paris help unblock continuing impasses
Aspects of the Climate Plan such as Agreement will also re-establish the U.S. on the development of a carbon
increasing investments in energy storage, commitment to, and participation in, market mechanism.
clean hydrogen and carbon capture climate finance, a collective commitment
incentives are likely to garner bipartisan for developed countries to provide finance • Biden-Harris Administration’s plans
support, whereas other aspects of the to developing nations for climate for measures to penalize high-
Climate Plan, such as gradually mitigation and adaptation efforts by at carbon imports are likely to find
eliminating fossil fuel production, may not. least USD$100 billion per year. favor with the EU in light of their
similar plans, but could well open
up a new trade dispute front
In order to fully implement and achieve U.S. role in the United with China.
certain goals set out in the Climate Plan,
Nations Climate Change
the Biden-Harris Administration will also • Significant opportunities are
have to win support and buy-in at the Conference (COP26) anticipated for international
state level, as the ability for the federal The COP26 summit in November 2021 investment in U.S. domestic climate-
government to undertake broadscale will bring parties together to accelerate related projects, in particular in the
change on its own is ultimately limited. action towards the goals of the Paris renewable energy field.
Notably, clean energy projects are Agreement and the UN Framework
booming in certain Republican leaning Convention on Climate Change. Since
states, for example, Texas, North Carolina President Biden has pledged to rejoin the
and Oklahoma, and generally, bi-partisan Paris Agreement, among other
support for renewables at the state commitments, we would expect that the
legislature level continues to grow. U.S. will attend the COP26. These COP
meetings are a key opportunity (and
For more details about President Biden’s catalyst) for countries to announce or
Climate Plan, please see our July 2020 agree to GHG reduction targets, and U.S.
client briefing on the topic here. participation and leadership is key to
building momentum for this process.
CLIFFORD CHANCE 3
IMPLICATIONS OF PRESIDENT BIDEN’S PLAN TO COMBAT CLIMATE CHANGE
Given its global influence, setting a target discretion and independent powers when
for meaningful emissions reductions it comes to international policy. When Joe
in the U.S. could well lead to other Biden was elected, UK Prime Minister
countries that have so far been less Boris Johnson noted that climate change
ambitious in their GHG pledges would be an important area of
establishing more stringent targets in cooperation between the new U.S.
alignment with the goals of the Paris Administration and the UK, alongside
Agreement. The U.S. presence at the trade and security.
table is also likely to be a major boost to
efforts to ramp up international climate We expect that a Biden-Harris
finance for developing countries, which Administration will leverage its authority to
have languished during the years of the integrate its climate change initiatives into
Trump-Pence Administration. U.S. foreign policy, national security,
trade and other international agreements.
Another area where US re-engagement In particular, President Biden notes in his
could help kick start international action Climate Plan: “We can no longer separate
at COP 26 under the Paris Agreement is trade policy from our climate objectives.
in the area of emissions trading. Article 6 Biden will not allow other nations,
of the Paris Agreement provided for a including China, to game the system by
future global carbon market mechanism becoming destination economies for
to offer a replacement for the Kyoto polluters, undermining our climate efforts
Protocol (which allows for a carbon and exploiting American workers and
market to help countries reach their businesses. As the U.S. takes steps to
targets by reducing GHG emissions in make domestic polluters bear the full cost
other countries, and encourages the of their carbon pollution, the Biden
private sector and developing countries to Administration will impose carbon
contribute towards emissions reductions). adjustment fees or quotas on carbon-
Since the Paris Agreement, little progress intensive goods from countries that are
has been made on the design for such a failing to meet their climate and
mechanism and it is hoped COP26 will environmental obligations.” This will be a
bring a breakthrough in this regard. Major welcome boost for policymakers in the
disagreements remain: Key outstanding EU and elsewhere where green goals are
issues relate to the carryover of legacy increasingly becoming a question of
credits from the former Kyoto Protocol’s trade, and not simply domestic policy.
Clean Development Mechanism/Joint For example, under the ‘European Green
Implementation projects; accounting rules Deal’, the EU is planning its own
around double-counting of emissions; legislation on a ‘carbon adjustment
and how the trading mechanisms would, mechanism’ to be implemented at the
in fact, lead to a reduction in global EU border for ‘selected sectors’ to
emissions rather than simply shifting them reduce the risk of carbon leakage (i.e.
around the globe. A robust resolution higher regulatory standards in the EU
of the outstanding issues could see leading to production being displaced to
significant incentivization for private outside the EU, or import of products
sector companies able to aid in the with higher carbon content – see our
transition to net zero, and therefore briefing on the European Green Deal).
commercial opportunity. The development of a robust carbon
adjustment fee or quota domestically in
Global cooperation the US would be likely to facilitate US/EU
trade, and thereby alleviate possible
and trade
political tensions.
Given that President Biden has pledged
to focus on combating climate change, How this will translate for U.S. trade with
we can expect more stringent pollution China remains to be seen. On the one
controls across various sectors and in hand, President Xi Jinping’s
trade arrangements. Unlike domestic announcement in September 2020
policy, where the new Biden-Harris committing China to have carbon
Administration may be limited in creating emissions peak before 2030, and
new climate change legislation without targeting carbon neutrality by 2060,
bipartisan support, in some respects, the creates a landmark boost to global
U.S. President generally has greater
4 CLIFFORD CHANCE
IMPLICATIONS OF PRESIDENT BIDEN’S PLAN TO COMBAT CLIMATE CHANGE
carbon reduction efforts. On the other incentives to support the development of
hand, China’s targets would put it on a the renewable energy market, this will
slower trajectory towards carbon create opportunities for international
neutrality than the U.S. and many other market participants to invest in the U.S
countries. Tough EU/US carbon energy, auto and technology markets.
adjustment measures could have an For example, given that offshore wind is
impact on China (and other major currently in its infancy in the U.S.
developing country manufacturing hubs) compared with the rest of the world, and
significantly triggering a major new front in the industry already has bi-partisan
potential trade disputes. support among coastal state legislatures,
offshore participants with expertise in the
Investment opportunities area, as well as suppliers, and service
providers could naturally have a
in the US renewable
competitive advantage in this burgeoning
energy market, including industry in the U.S. It is expected that the
the offshore wind market new Administration will reverse a number
Biden’s Climate Plan aims to dramatically of the Trump-Pence Administration’s
increase spending on development and trade tariffs imposed on solar modules
corresponding infrastructure designed to and development materials. As a result,
both reduce carbon emissions and development costs are likely to drop, and
withstand the impacts of climate change. greater stability is likely to fortify the U.S.
Given that the Climate Plan includes renewables market.
measures for federal support and
CLIFFORD CHANCE 5
IMPLICATIONS OF PRESIDENT BIDEN’S PLAN TO COMBAT CLIMATE CHANGECONTACTS This publication does not necessarily deal with every important
topic or cover every aspect of the topics with which it deals.
It is not designed to provide legal or other advice.
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