By Laura Gillies
Public opinion, in the US, as to whether carbon emissions are impacting our environment or indeed whether any action taken by man can have any meaningful impact has historically been split along partisan lines. Covid-19, along with extreme changes in weather patterns, have caused many to reconsider the impact that mankind has had on our environment. Climate change sceptics have become more muted and climate change believers have become more vocal. This changing face of public opinion has already directly impacted the direction of politics in the US.
The US, under President Biden’s leadership, has chosen to regain its global leadership position in climate change. Firstly, the creation of the post of U.S. Special Presidential Envoy for Climate was a strong signal of their intent. Perhaps more meaningfully was the appointment of John Kerry to the role, being the former Presidential Candidate and Secretary of State in the Obama administration. Politically, the US has aligned with most other countries by defining the desired direction of travel towards Net Zero by 2050 so warming can be maintained at less than a 1.5 Celsius increase relative to pre-industrial levels.
However, like every other country, the US alone cannot tackle this global problem. John Kerry has been actively supporting the UK in preparing for and promoting a successful outcome to the upcoming COP26 conference in Glasgow later this year. His role is being made easier by the fact that the US is taking several steps to accelerate the pace of climate policy at home.
The first tangible steps the administration took was to rejoin the Paris Accord which former President Trump had unilaterally withdrawn from. The second step came when the Senate approved a $1.2 T\trillion infrastructure bill, which contained hundreds of billions of dollars of support for clean energy and infrastructure provision. Going forward, the Biden administration has presented a separate multi-trillion-dollar budget bill, which addresses many of the provisions left out of the infrastructure bill as well as support for many other climate mitigation policies.
Perhaps even more significant has been the growing commitment by the financial community to Environmental, Social and Governance (ESG) goals. This has led to commitments by large financial institutions such as pension funds and college endowments to make themselves Net Zero and not invest in fossil fuels. Large institutional banks, not wanting to be left behind have then followed suit, driving a whole new set of investment criteria which are flowing through the entire US financial system.
The most considerable impact of the change in public sentiment towards the climate, which is driving political sentiment, which in turn is driving financial and investment sentiment, has been the staggering magnitude of the inflow of capital into the sector thus far in 2021. According to BlackRock, the ‘ESG sector’ as it has been named is widely anticipated to be a trillion-dollar sector by 2030 with a couple of decades of growth forecast.
However, there is no doubt that what is in front of us is a considerable challenge. The International Energy Authority (IEA) recently published its World Energy Outlook 2021. What it demonstrates is that despite all the talk of action over the last two decades, emissions have continued to rise, with the only dislocations coming from the 2008 financial and covid crises. More encouraging is that firstly stated policies, providing they were adhered to, would limit emissions at the current levels. Announced pledges by governments all around the world would lead to a significant fall. However, to get us on a sustainable path to Net Zero there is a requirement for significant policy development on a global basis: there is little value in some countries accelerating ahead of others and potentially leaving them less competitive in an international sense. This really illustrates the importance of COP26.
What is also important to remember is that there is little appetite amongst the global community for people to have to compromise their standard of living and everyday comforts, therefore it is essential that solutions come forward that broadly allow us to maintain our lifestyles—especially for those in developing countries who are just beginning to enjoy the comforts of electricity and heat that developed countries have enjoyed for decades. Similarly, there will be continued demand for industrial products and transportation as communities are increasingly mobile or looking to at least sustain their mobility. The obvious dependency on fossil fuels is a fundamental issue for these sectors. We must either stop using them, which means replacing them, or find ways to use them by separating and storing the carbon with technologies such as Carbon Capture and Storage (CCS) through a transitional period. We must also be careful not to be wasteful with our energy and the buildings we occupy must become more than glass carbon factories using new materials and insulation. Technology and Innovation are fundamental to our future. Solutions will come from engineers and scientists and entrepreneurial innovation. This ultimately is the point where the rubber hits the road: public opinion drives policy development, which drives an economic benefit from not emitting carbon, which in turn attracts capital and is placed in the hands of the scientists and engineers to allow them to innovate, which in turn drives the entrepreneur.
The cost of this transition is considerable, our ability to get them as a global community is without doubt. Many commentators say the time is now or never and that the cost of inaction will ultimately be more than the cost of action. The political system in the US is providing the platform for global leadership and demonstration of this technology and innovation, but the US will move at the pace the world agrees which is why the COP 26 summit in Glasgow later this year is so globally significant.
The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.