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A climate-aware US ushers in a new era for clean energy

21 Jul, 2021 | Return|

By Stephen Freedman, Sustainability and Research Manager Thematic Equities at Pictet Asset Management

Biden's bold environmental plan will reinvigorate the global fight against climate change and turbo-charge the clean energy industry.

The election of Joe Biden as US President places the world’s biggest economy back at the heart of international efforts to limit global warming. The Democrats’ environmental agenda is as bold as they come. A pledge to re-join the Paris Climate Accord within a day of taking office and a promised USD2 trillion of new green investment are the pillars of a grand strategy that aims to make the US carbon neutral by 2050.

In the past few months alone, China, Japan and Korea have announced their own newly ambitious net-zero carbon goals while the EU has set aside EUR7 trillion to decarbonise its economy. In many ways, these developments testify to the success of the Paris accord. A key feature of that agreement is that it binds signatories to the ratcheting up of their commitments over time.

Yet having the world's largest economy back in the Paris club clearly changes the complexion of the battle against global warming. Nowhere more so than within the clean energy industry. Powered by the US's know-how and financial heft, the sector looks poised to enter a dynamic new era. Billions of dollars of new private and public investment can be expected to flow into green infrastructure and environmental technology. In other words, clean energy could become the key pillar of the 21st century economy.

Clean energy: the new race

For one thing, having the world’s largest greenhouse gas emitter commit to reducing emissions will benefit the entire planet.

The clean energy sector will be unrecognisable with the US’s full backing. Able to draw on American willpower, technological prowess and financial heft, the industry will be better funded and more innovative than ever before. This is crucial because reversing climate change requires money and imaginative thinking. A large infusion of US cash and tech know-how could, in turn, trigger a fierce clean energy race in which major economic powers compete to develop zero emission technologies and standards.

Electric vehicles appear to be crucial to the pursuit of a carbon-free economy for many countries.

Just a month after announcing its net zero goals, China unveiled a road map for phasing out conventional gas-burning cars by 2035. China, already the world leader in EVs, has said it would invest to build its own supply chain that will reduce foreign reliance. The US has ambitions to overtake China in the EV market by increasing federal procurement by USD400 billion for key car components such as batteries. Europe is not standing still, either. The region has just outpaced China in attracting investment for EVs and battery development, securing a record EUR60 billion in private and public funds last year, almost 20 times higher than the last calculation made two years ago.[1]

The alignment of the US’s climate change policy with those of other economies will provide a massive shot in the arm for the global clean energy industry. It will serve as a catalyst for billions of new private and public investments in the sector and set in motion what is certain to be a new clean energy race.

 

For more information about the clean energy transition:

Role of carbon prices in energy transition

Clean energy equity investing

 

[1] Transport and Environment

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