As Joe Biden takes the reins of a tumultuous America, analysts have tempered expectations about the ability of the new US administration to closely align with Europe on climate change.
Although the Biden administration marks America’s return to the global diplomatic stage, experts are unsure whether the EU and US will cooperate or compete on climate and energy policy.
Probably, it will be a mixture of both.
On the positive side, Biden has pledged to rejoin the Paris Agreement on his first day in office and set a target of reaching net-zero emissions by 2050, a move that mirrors Europe’s own commitments.
“I am very optimistic about what we can achieve,” said Frans Timmermans, the EU Commission’s executive vice-president for the European Green Deal.
“I’ve been speaking to US senators on both sides and was surprised by the fact that, on the Republican side, there is deep understanding of the need to transform our economy and our energy systems,” he told an online event hosted by consultancy Global Counsel on Monday (18 January).
The European Commission has proposed an “transatlantic green trade agenda” in the wake of Biden’s election and suggested an EU-US summit in the first half of 2021, saying the two sides “can lead the world towards a green, circular, competitive and inclusive economy”.
‘Carbon trade war’
However, there is ground to catch up on international relations and a sense of mistrust spawned by the trade war waged against Europe by the Trump administration.
“I honestly believe we have a huge opportunity, but we also have to take into account that the US coming back to the international scene and wanting to contribute to multilateralism comes at a very different time,” said Timmermans.
“Something has really changed in that [transatlantic] alliance and, as we have seen, the country is deeply divided,” Timmermans added, referring to Trump supporters and parts of the Republican Party who still refuse to accept Biden’s victory in the US presidential election.
The defining issue for the transatlantic relation on climate change is whether the US will introduce carbon pricing policies or not at federal level.
While Biden’s campaign highlighted the success of carbon trading schemes in states like Oregon, the new US President has not indicated plans to introduce carbon pricing at the federal level.
Failing to do so, Europe has already made clear that it will introduce a carbon levy at the border, aiming to restore fair competition for EU manufacturers who will be facing growing CO2 costs as Europe adopts tighter climate targets for 2030.
“I think the initial hopes of cooperation will be quickly scuttled. Unions won’t be eager to have restrictions on their exported goods and will probably push back very ferociously,” said Kevin Book, ClearView Energy Partners, a Washington-based research and investment advisory firm.
“We’re in a trade war now, but a carbon trade war is where we go next from here,” Book told an online briefing earlier this week.
Carbon pricing
Still, there are hopes that healthy competition between the two sides could develop and become a driver for climate action worldwide. For instance, if the EU successfully introduces a carbon border levy, it may force US industry to lobby for change, some argue.
On carbon pricing, the US will need to choose whether to go for an EU-style emissions trading scheme or command-based measures like car emission standards, said Samantha Gross, director for energy security and climate at the Brookings Institution in Washington.
“When you have a carbon price, it’s very obvious what the price is. Whereas when you do things through a command-and-control and regulatory scheme, you can hide the price. Often hiding the price is a popular way of doing it,” she added.
Explicit carbon pricing policies are not popular in the US. Even one of the greenest US states, Washington State, failed to put a price on carbon as low as $15 dollars per metric tonne, which would have been “less than a latte a month for most of the residents,” Book remarked.
Meanwhile, fossil fuel companies continue to exert tremendous influence over US policy, with the oil and gas sector donating $121,878,372 in the 2020 election cycle, 84% of which went to the Republicans.
Biden, experts say, is more likely to push standards to cut off carbon-intense supply and speed up demand with incentives. The new US President is expected to make early statements related to his pledge to zero out carbon emission from the power sector by 2035 and decarbonise the nation’s transportation system.
Similarly to Europe, Biden has also announced policies to protect the US economy against environmental dumping, saying his administration “will impose carbon adjustment fees or quotas on carbon-intensive goods from countries that are failing to meet their climate and environmental obligations”.
In the EU’s proposal, the Commission appears optimistic about the US implementing carbon pricing and a carbon border levies, saying the two powers should work together to avoid “carbon leakage” whereby industries relocate abroad to countries with lower environmental standards.
Troublesome pipelines
On energy, Biden will immediately face tough choices, with two pipelines causing him headaches.
The first is on US soil – the Keystone oil pipeline linking Canada to the US. Trump gave the project a go-ahead and construction began in April 2020, despite protests from indigenous groups and environmentalists. Biden is now expected to cancel the permit for the $9bn project on his first day.
The second is Nord Stream 2 – the gas pipeline running from Russia to Germany under the Baltic Sea, which is almost complete. Under Trump, the US has adopted sanctions against companies involved in the construction of the pipeline, which the US sees as a threat to energy security that will increase Europe’s reliance on Russian gas.
Simultaneously, the Trump administration also boosted America’s exports of liquefied natural gas to Europe, and cut deals with countries like Poland to sell a product it labelled “freedom gas“.
Biden will now need to decide whether to enforce sanctions against Nord Stream 2 or lift them. If he does, he will smooth relations with Europe, but he will also risk looking soft on Russia, analysts predict.
US polarised
Biden will also come under scrutiny over environmental legislation more generally.
By October 2020, Trump had rolled back 125 environmental standards, including some that allowed logging in Alaska’s Tongass National Forest, one of the world’s largest temperate rainforests.
Biden has promised to take action to slow biodiversity loss and protect 30% of America’s lands and waters by 2030, matching the EU’s own biodiversity strategy and pledges made by 50 countries at the recent One Planet Summit in Paris.
It is one of many executive orders Biden intends to enact on his first day in office.
Biden could follow Barack Obama’s example and rely on executive orders, which bypass Congress but have limited scope. Or he could announce a national emergency to unlock more powers, as Trump did for his border wall.
If not, he will need to pass legislation through Congress. While the Democrats have a one vote majority in the Senate, all eyes will be on Joe Manchin, a Democratic Senator from West Virginia – a famously conservative and coal-reliant state.
“We will face challenges getting climate legislation done because the country is so polarised,” said Gross.
“I would love to see us having conversations from the left and the right about market solutions versus more command-and-control solutions. Instead, we’re arguing about science,” he said.
[Edited by Frédéric Simon]
