The Greening of America

The new Administration in Washington is committed to a clean-energy economy. How successful will it be?

Joe Biden

Published Feb 19, 2021 3:29 PM by G. Allen Brooks

(Article originally published in Jan/Feb 2021 edition.)

As Joe Biden settles in as the 46th President of the United States, his agenda will emphasize combating COVID-19 while also making America green and just. His governing principle in enacting climate change policies will embrace “environmental justice.” Optimism is high for a radically different economy – cleaner with more jobs and cheaper energy. Will it really happen? 

When campaigning for the Democratic nomination, Biden proposed spending $1.7 trillion over 10 years with the goal of achieving net-zero emissions for the country’s electricity system by 2050.  After securing his party’s nomination, he was pressured to make climate a key plank in his campaign.  

He subsequently unveiled a $2 trillion green energy plan – but not the Green Energy Plan of the ultra-left wing of the Democratic Party. His plan will significantly increase the use of clean energy in the transportation, electrical and building sectors as part of a strategy to create economic opportunity and strengthen the nation’s infrastructure. It tackles climate change as well but eschews most of the radical steps advocated by the ultra-left. 

Carbon-free electricity by 2035 is the goal.  

The Obama Legacy

The U.S. is rejoining the Paris Climate Agreement that President Donald Trump had previously had the country exit. President Barack Obama, a key participant in the 2015 negotiations, had called it “an enduring Agreement that reduces global carbon pollution and sets the world on a course to a low-carbon future.”  

Obama hailed America’s leadership in helping forge the Agreement and said in his speech commemorating its announcement, “In my First Inaugural Address, I committed this country to the tireless task of combating climate change and protecting this planet for future generations.”  Unfortunately, the Obama Administration’s environmental record was littered with disasters and mandates that boosted people’s cost of living.  

Biden hopes to carry on the Obama climate legacy. He has pledged to convene “the leaders of major economies for a climate summit within my first 100 days in office.” To lead his environmental charge, the President has hired a bevy of key players from the Obama Administration including former Secretary of State John Kerry and former EPA chief Gina McCarthy, who are set to be his international climate envoy and domestic climate czar, respectively. This guarantees Obama 3.0.  

Five years after the Paris Agreement, only two countries – Morocco and Gambia – are on target to meet their 1.5-degree climate commitment according to Climate Action Tracker. U.S. carbon emissions, on the other hand, are estimated to have fallen by over 10 percent last year due to the pandemic and the continued shift away from coal, according to the Rhodium Group, a private data analytics firm.  

This is the single biggest decline in annual carbon emissions in the post-World War II era, putting the U.S. firmly on the path to its Paris commitment. The last major decline was related to the economic recession in 2009 when U.S. emissions dropped 6.3 percent.  

The Biden Plan

What will be different under the Biden Administration? He may cancel the upcoming March 2021 Gulf of Mexico lease sale. That would be in keeping with his campaign pledge to ban drilling on federal lands. Banning the Gulf sale would be proof of the new Administration’s seriousness about curbing fossil fuel use.  

Preparing for this possibility, the oil and gas industry began stockpiling drilling permits.  According to the Associated Press, in a three-month period encompassing the November election, the petroleum industry submitted over 3,000 drilling permit applications, of which over 1,400 were approved. For all of 2020, the industry secured 4,700 new drilling permits, comparable to annual approvals when oil prices were over $100 a barrel.  

So while the media will be covering the “greening” from banning offshore lease sales, the industry will be drilling away on its stockpile of permits!  

Another high-profile action was the termination of the Keystone XL pipeline permit to operate across the U.S.-Canada border. Rejecting this high-profile project to haul Canadian bitumen to the Gulf Coast will please environmentalists after 12 years battling it. It will also upset our northern neighbors and lead to an increase in trains and trucks hauling the oil with greater environmental risk than the pipeline, 

Biden’s climate team will be frantically working to unwind regulatory changes the Trump Administration made. Emissions rules, fuel economy standards, appliance efficiency targets and energy infrastructure permitting policies will be targets for reversal. The federal government will begin to mimic state governments in places like New York, New Jersey, California and Washington where anti-fossil fuel agendas are the norm. Attacking energy infrastructure has proven to be a successful strategy in battling the petroleum industry. 

Blocking new or expanded pipelines hauling gas to New England utilities is an example. The problem is that during winters when natural gas is prioritized for home heating and away from electricity generation, utilities are forced to restart coal-fired and oil-burning plants to provide electricity at higher costs and greater pollution.  

Massachusetts’ clean power plan had a wrench thrown into when New Hampshire blocked approval of a transmission line that would deliver clean Canadian electricity. Not everyone embraces clean energy at any expense as New Hampshire residents valued their scenery more than Massachusetts’ clean air.  

Elsewhere, pipeline battles have raged in Midwest and Mountain states. Besides Keystone, Native Americans and environmentalists have fought to shut down the Dakota Access Pipeline bringing crude oil from North Dakota’s Bakken Region to refineries in Illinois. Questioning the final environmental review 10 years after the pipeline began operations seems extreme.  

A high-profile pipeline battle the Biden Administration could join is Michigan’s effort to shut down Enbridge’s Line 5 immediately until its replacement is built. However, approvals for the new line have delayed its construction, suggesting it might not begin operating for 7-10 years. That means the current 70-year-old Line 5 needs to operate for many more years. Shutting down Line 5, which brings Canadian oil to refineries in Michigan and Ontario, would create fuel supply shortages for both regions. Supporting Michigan could spark another international battle.  

The Biden Administration can be counted on to leverage environmental provisions within the economic stimulus legislation enacted at the end of 2020. The law extended subsidies for wind and solar power and electric vehicles, something they all need. It also extended the 30 percent investment tax credit for new wind farms built by 2025. That will help the offshore wind farms targeted to start operating by 2024, who would have lost that tax benefit without the new law, ruining their economics.  

California Dreamin’?

The biggest winner with the arrival of the Biden Administration is California. The Los Angeles Times trumpeted “Make America California Again?” California has led many of the nation’s social and economic trends over the years. Last year, it banned the sale of internal combustion engine cars by 2035.  Only alternative-fuel vehicles – think electric cars – will be sold.  

Besides leading the nation in EV sales and registrations, California is home to Tesla’s vehicle assembly plant as well as 95 percent of the nation’s fuel cell vehicles. However, skeptics see California in 2035 resembling Havana with its fleet of classic cars because there will be no new ones!  

California also has a mandate requiring that all new homes have solar panels. Inflating new construction costs has further stoked the state’s housing crisis. Due to mismanagement of California’s forests and dismantling power-generating dams in favor of spawning salmon, the government has fostered an environment of rolling power blackouts. 

All of this, coupled with high taxes and expensive electricity, has fostered a mass exit of Californians.  

Mandates & Subsidies

Under the Biden Administration, energy markets will be governed by mandates and subsidies. The energy successes of the Trump Administration will be wiped away. 

There goes the geopolitical power that accrued to the U.S. as it was no longer captive to Middle East oil producers. There goes the might of the petroleum industry, which pulled the U.S. economy out of the Great Recession. And there goes our role as a leading oil and gas exporter that produced historically low energy costs and generated earnings for the government.  

The new Administration says its environmental agenda will create millions of jobs and save consumers money. So far, the growth in renewable fuels has not reduced electricity costs. That may be because the metrics supporting cheap renewable fuels fail to fully reflect their total costs. 

Moreover, this will be the first energy transition in which energy density declines. Yes, we may add more jobs, but they will produce less energy per manhour, inflating energy’s cost. That is not a recipe for lower costs and more high-paying jobs, despite what politicians say.  

The Greening of America

The greening of America has begun, but this time with greater government involvement. Rather than allowing market forces to drive the energy transition, mandates, subsidies and political choices will be the engine.  

With many former Obama Administration officials driving the effort, the next four years will extend the climate change initiatives of 2008-2016 – except this time on steroids! Watch for spectacular successes but also spectacular failures. We wish we could know which in advance. – MarEx   

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.