Decarbonization is on the Ballot this November
— September 30, 2020
By Paul Tice
In contrast to President Trump’s all-of-the-above energy approach, which leaves room for both fossil and renewable fuels while also promoting energy independence and U.S. competitive advantage, a Biden administration would move aggressively to decarbonize the U.S. economy over the next decade so as to hit a net zero greenhouse gas emissions target by the year 2050.
As laid out in the 110-page economic manifesto released by the Biden campaign over the summer, such a goal would be achieved by choking off fossil fuel demand from the power and transportation sectors, while simultaneously curtailing oil and gas production through heightened environmental regulation, the claw-back of federal lands and the cancellation of take-away infrastructure projects.
Every valid environmental permit issued by the EPA or Army Corps of Engineers over the past four years could potentially be at risk under a Biden administration, given the precedent set by the Obama White House. Previous Trump approvals for the Keystone XL and Dakota Access pipelines would be the first to be pulled.
For good measure, a new Office of Environmental Justice would be created under a Biden Department of Justice to hold corporate carbon polluters accountable by prosecuting C-suite executives at oil and gas companies—effectively institutionalizing the recent climate lawsuit trend while also making it personal.
While the Biden economic plan is carefully worded and deliberately does not mention hydraulic fracturing (fracking) at all, its meaning is clear through all of the climate-speak. No general election pivot is possible because this time is different.
A year ago, one of the first Democratic primary debates was held in Houston, the seat of the domestic oil and gas industry, where all of the presidential contenders (including the current nominee) publicly decried fossil fuel-driven climate change as a planetary threat. As political challenges go, it was the equivalent of President Reagan’s 1987 Berlin Wall speech.
For the Biden camp, there is no turning back from the Democratic Party’s charged climate rhetoric of the past, particularly over the last five years since the signing of the Paris Agreement. For all of the youth climate activists that have come of voting age in recent years, the Green New Deal embedded in the Democratic platform is their Lord of the Flies moment.
So, Americans should take the Democrats at their word with regard to their stated decarbonization plans, especially if the party pulls off a blue sweep of the White House and both houses of Congress in 2020. Climate-related initiatives are likely to feature prominently during the frenzied first 100 days of a Biden presidency, given the “fierce urgency of now” animating the green activists within the party.
Aside from the catastrophic loss of an estimated 10 million oil and gas jobs, it remains to be seen whether the highly-industrialized U.S. economy can be fully decarbonized without adversely affecting real GDP growth rates and American living standards. Academic studies have shown that carbon emissions positively cause economic growth; any decoupling or breaking of this historical relationship would require battery storage, carbon capture and various other energy technologies not in existence today.
To put some numbers on it, achieving a net zero U.S. economy by 2050 would require a reduction in net greenhouse gas emissions by 89% below 2005 levels. For perspective, pre-pandemic, the U.S. economy in 2019 was 64% larger than it was back in 2005.
Notably, most developing countries are not taking the same technological leap of faith with their energy policies. China, in particular, intends to ramp up its carbon emissions over the next decade as it pursues its Made in China 2025 economic agenda. Over the same period under a Biden administration, the U.S. would be rolling the economic dice while it takes the fight to atmospheric carbon dioxide.
The country has been coming to this fork-in-the-road for a while now. After decades of judicial activism and regulatory creep, Americans will finally be given a chance in 2020 to vote on the issue of climate change and a binary choice between two future energy paths. Hopefully, the public will be able to cut through all of the political noise and competing issues this turbulent election year to see what is at stake for the U.S. economy and the oil and gas industry this November.
Paul Tice is an Adjunct Professor of Finance at NYU Stern.