Can Biden Be The Climate Maestro?

by | May 3, 2021

The U.S. recently declared itself a climate champion again, a role it last claimed in the 1980s. Joe Biden is leading the way, and at his recent two-day summit with world leaders, he accomplished more than the United Nations did all of last year. It is a good start, but much more is needed, 

It helps to put matters in context. 

In December 2019, the European Commission decided on the big “European Green Deal”. By 2050, net emissions of greenhouse gases within the European Union are to be reduced to zero. Residual amounts of CO2 that will then still be emitted by humans must be offset by measures such as CO2 storage and reforestation. This would make Europe the first climate-neutral continent. 

To achieve this goal, by 2030 European CO2 emissions must be reduced by 55 percent relative to the base year 1990. This is an ambitious undertaking, and to support it the EU plans to invest one trillion euros over the next nine years. 

The EU Parliament had actually wanted even more, namely a 60 percent reduction in greenhouse gases and a more stringent calculation method. There was also considerable debate about whether, and to what extent, carbon dioxide stored by forests, plants and soils should be included in the EU goals. By April 2021, CO2 targets were enshrined in law, with 15 climate experts charged with independent verification and reporting. Only a few months after the EU Commission announced its plans, China followed suit, stating its intention to reach a zero net emission target by 2060. 

President Biden now wants to bring the US along and make climate policy the center of US foreign policy. As part of this, he wants to eliminate government subsidies for fossil fuels. 

At the Virtual Global Energy Conference that he convened last month, President Biden announced that the United States will reduce its greenhouse gas emissions by 50-52% below 2005 levels by 2030. Other countries quickly fell in line:

  • Canada raised its CO2 reduction targets from 30 to 40 to 45 percent for 2030, compared to 2005;
  • China held out the prospect of reducing coal consumption from 2025;
  • Japan plans to reduce its CO2 emissions by 46 percent by 2030 compared to 2013, up from just 26 percent previously;
  • The UK had already jumped ahead with an announced 78 percent CO2 reduction by 2035.

The European initiative has thus become a global driver of environmental policy change. Still, unlike in Europe, climate intentions elsewhere are yet to be enshrined in law. For them to have maximum effect, two general problems confronting Europe must be addressed elsewhere:

First, 40% of the energy consumed in Europe is used to heat and cool buildings, of which four-fifths is used for heating. Yet appropriate thermal insulation of old buildings lags. If the rate of renovation does not increase significantly, it will take another hundred years to get heat loss from poorly insulated buildings under control. More needs to be done.

Second, there is still a lack of cross-state cooperation. Modernizing the European electricity grid represents a key task. Connecting wind-rich regions of northern Scandinavia, the North Atlantic/North Sea and the Balkans, alongside the sun-rich regions of southern Europe, by means of high-voltage direct current lines would significantly reduce uncertainties in the availability of wind and solar energy across the EU.

It is encouraging to see that as Europe and China increase their willingness to address climate problems, their economies do not appear to be suffering from their determination. Indeed, the move towards clean energy presents attractive prospects for new job creation. 

No wonder Biden is pushing climate policy so hard. America’s notoriously poor infrastructure, decaying for decades, has undermined US competitiveness. Yet infrastructure renewal offers tantalizing opportunities to right two wrongs—transportation and carbon emissions. 

Consider China, which has expanded its rail system to a breathtaking degree in the last 20 years. It is possible to travel the1300 kilometers between Beijing and Shanghai in 4h30min by train. Meanwhile, no direct rail service even exists between San Francisco and Los Angeles, making the journey by train a 13-hour ordeal at half the distance of Beijing to Shanghai. 

Biden’s chief legislative problem will be the opposition from Senate Republicans, compounded by the Senate filibuster rule. Behind the politics of division resides historic, but somewhat misplaced, faith that problems are best solved by markets and individuals, not government. Misplaced because the neo-classical model of low taxes and unfettered markets has failed spectacularly twice in the past decade. Moreover, decisive government action successfully counteracted the worst of the global financial crisis and the pandemic. As a result, attitudes about the limitations of markets and the role for government are changing everywhere, even (or maybe especially) in the US. Biden senses an opportunity and he is seizing it.

The climate challenges we all face, no matter where we reside, are immense. Collectively, it is difficult to recall in recorded history a non-wartime risk as large and a collective need as great as that posed by climate change. 

Cometh the hour, cometh that woman (and the man). Europe, China and now the US – thanks to President Biden – are beginning to coordinate their actions to tackle climate change. Much separates them, but on this issue they are beginning to move together. It is not yet an orchestra, and Biden is not yet a maestro, but the tune is right. 

Let’s hope it is not too late and that their actions are up to the challenges.

About the Author

Lars Jaeger is an interdisciplinary book author, tech investors, and alternative investment entrepreneur and has worked on technological development and its social consequences as well as on hedge funds and their return sources in the financial industry. He studied physics, math and philosophy and history in Bonn, Germany, and Paris, France, and received his doctorate in theoretical physics. He is currently Head of Alternative Risk Premia at GAM in Zurich.

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