By Garry White, Chief Investment Commentator, Charles Stanley
Following Joe Biden’s win, the seismic changes his policies will bring are now urgently in need of attention. The Trump administration has been a standard bearer for the US hydrocarbon industry for the last four years, but all that will change now. From his attempts to resuscitate America’s dying coal industry – to his encouragement of the old Republican mantra of ‘drill baby, drill’ – Trump’s ‘anti-green’ agenda was never hidden from view. His dumping of the Paris Agreement, a global climate accord, in July last year was an act of political theatre that didn’t really shock. The drama was obviously coming.
Equity markets overall are unlikely to cheer a Biden win. His proposals for increasing corporate taxes will easily see to that. But it is his environmental agenda that could end up changing the world – with America realigning its energy policies with those of Europe and China.
The world’s greatest powers will be implementing their energy strategies in apparent unison, if all goes to plan for the Democrat campaign. A real ‘green revolution’ may be on the cusp of reality.
This change in policy direction will significantly change global flows of capital. The shift will result in even more pain for Big Oil and its growing portfolio of stranded assets – as trillions of dollars flow into alternative-energy projects.
Sleepy Joe’s energy transformation
Biden’s win will give American energy policy a 180-degree makeover, with the ‘clean-energy’ sector benefiting from the largess of the Fed’s money-printing machine. The soon to be president has said he will set aside $2 trillion to be spent over the next four years to turbocharge climate policy – and drag the economy out of the pandemic-induced doldrums at the same time. For American energy policy, this is truly revolutionary – and the oil industry is unlikely to take the move lying down.
Mr Biden’s plan will significantly escalate the use of clean energy in the transport, electricity and building sectors. It is part of a suite of sweeping proposals designed to create economic opportunities and strengthen infrastructure, while also tackling climate change. The prospective president wants to achieve ‘net-zero’ carbon emissions by 2050.
The European Union’s (EU’s) ‘Green Deal’ plans to transform the bloc from its current status as a high-carbon economy into a leader of a cleaner future. It aims to use some EU’s money earmarked for job creation to encourage a sustainable, green shift – creating work for those suffering from harsh economic reality – while simultaneously building the infrastructure of tomorrow.
Earmarking €1.8 trillion, with hopes to raise a further €1.0 trillion from the private sector, the EU plans to develop greenrevolution technology such as hydrogen and fuel cells. It wants to encourage sustainable industry while cutting pollution too. It wants to achieve ‘net zero’ by 2050.
The EU was first to declare its greenrevolution target, but China had a surprise up its sleeve. In September, Beijing announced an unexpected and dramatic shift in its strategy. President Xi Jinping declared that China would be ‘carbon net-zero’ by 2060, just ten years after the EU’s stated target and Mr Biden’s pledge to American voters.
What do they mean by ‘net zero’?
The main aim of ‘net zero’ is to slash damaging, human-caused emissions to as close to zero as possible. Any remaining polluting gases pumped into the atmosphere will be balanced with an equivalent amount of carbon and other pollutant removal. This could be achieved through forest expansion or by using new carbon-eliminating technology. The – arguably nebulous – concept of ‘net-zero emissions’ is a vague attempt to achieve a form of ‘climate neutrality’.
What is – and what isn’t – ‘climate neutrality’ will be endlessly debated. But clearly this is yet another trend that Covid-19 appears to have accelerated. Without the pandemic, this enormous pot of money directed at industry to encourage investment in green technology almost certainly would not have existed.
If a large chunk of the pandemic-related stimulus money creates jobs by building renewable infrastructure projects, dreams of a ‘green revolution’ will start to look more likely. And, if Joe Biden wins the presidential race, America would have caught up with Europe and China – and the businesses that drive the green revolution will be part of one of the most important investment trends around.
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