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What does a Biden presidency mean for the 'green revolution'?

27 November 2020

Phoebe Stone, Partner and Head of Sustainable Investing

Over the past two months, we have seen some stunning and potentially transformational climate-related announcements from the world's superpowers. Under President-elect Joe Biden, the US will be re-joining the Paris Agreement on 20 January 2021, signalling a clear departure from Trump's climate change skepticism. Meanwhile, China has committed to net-zero ambitions by 2060 and Putin has formally ordered cuts of 30% of greenhouse gases (GHG) by 2030 for Russia. Looking closer at these announcements, we can find some interesting and promising details, particularly from the world's two largest economies: the US and China.

Countries by their participation in the Paris Agreement (as at 4 November 2020)

Countries by Paris agreement

Source: UNFCC, statista

Biden's election as the next US President looks to deliver altogether more ambitious and detailed climate goals for the US, one of the greatest emitters of carbon dioxide. Biden hopes to commit the US to becoming carbon neutral by 2050, and for the economy to be both more resilient and more sustainable. On Biden's first day in office, he has said he will take the US back into the Paris Agreement, although this is likely to be the easy bit.

To deliver his carbon neutral ambitions, Biden is targeting $2 trillion of infrastructure. If approved, the spending will be focused across a range of sectors:

  • Infrastructure: investment projects such as roads, bridges, green space and water systems to ensure they are able to withstand the impacts of climate change and to improve public health including access to clean air and clean energy.
  • Transit: Biden wants to provide every US city with more than 100,000 residents with high quality, zero-emission public transportation by 2030. There are also plans to install 500,000 electric vehicle charging stations, and to ensure all US built buses are producing zero emissions by 2030, including converting all 500,000 school buses to zero emissions.
  • Power sector: the creation of a carbon pollution-free power sector by 2025 by spurring the installation of millions of solar panels and tens of thousands of wind turbines.
  • Buildings: spur the building retrofit and efficient-appliance manufacturing supply chain by funding direct cash rebates and low-cost financing to upgrade homes and appliances.
  • Innovation:drive dramatic cost reductions in critical clean energy technologies, including battery storage, negative emissions technologies, the next generation of building materials and renewable hydrogen. Increase research investments and tax incentives for technology that captures carbon including lowering the cost of carbon capture retrofits for existing power plants, ensuring the market can access green hydrogen at the same cost as conventional hydrogen within a decade.
  • Agriculture and conservation:create jobs in climate-smart agriculture, resilience, and conservation, including 250,000 jobs plugging abandoned oil and natural gas wells and reclaiming abandoned coal, hard rock, and uranium mines.

Biden is also planning the creation of a new Advanced Research Projects Agency for Climate; this new cross-agency looks to target affordable, game-changing technology to get the US to their 100% clean energy target.

Similarly, China is planning for carbon neutrality by 2060, which will mean reducing carbon emissions by as much as 90% and offsetting the rest through natural systems or through technology that absorbs carbon. Whilst China is the world's largest producer of carbon, the country is also by far the largest investor[1], producer[2] and consumer[3] of renewable energy. One out of every three solar panels and wind turbines in the world are in China[4]. By 2025, its battery facilities will be almost double the capacity of the rest of the world combined[5].

Meanwhile, a couple of weeks ago, Putin formally ordered the Russian government to cut GHGs by 30% by 2030, from 1990 levels[6]. Whilst Russia is economically dependent on fossil fuels (energy products are by far the country's largest export), climate change is a threat to Russia. 65% of Russia's landmass is the Arctic, representing 10% of Russia's GDP, according to The Arctic Institute.

One of the major investment themes we are seeing in sustainable investing is that of the 'green revolution'. Although many people think of the first derivative trade to tap into the trend, there is actually a multitude of investment opportunities across the entire lifecycle of the green transition - from electrical vehicle manufacturing, to lithium recycling plants, to renewable energy.

Since the start of the year, momentum behind the green transition has continued to gather pace. We believe this is part of a sustained long-term trend that will continue to attract attention from policy makers and increasing numbers of investors.

[1] https://www.statista.com/statistics/799098/global-clean-energy-investment-by-country/

[2] http://geopoliticsofrenewables.org/assets/geopolitics/Reports/wp-content/uploads/2019/01/Global_commission_renewable_energy_2019.pdf

[3] https://www.statista.com/statistics/237090/renewable-energy-consumption-of-the-top-15-countries/

[4] https://chineseclimatepolicy.energypolicy.columbia.edu/en/solar-power

[5] https://www.supplychainbrain.com/articles/31962-are-batteries-the-trade-war-chinas-already-won

[6] https://uk.reuters.com/article/uk-russia-climatechange/putin-orders-russian-government-to-work-towards-paris-climate-goals-idUKKBN27L2B8

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