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Existing Financial Regulations Could Help Make Biden the ‘Climate President’, Analyst Says

With the editors of the Washington Post urging U.S. President-elect Joe Biden to step up as the country’s “climate change president”, an analysis for Greentech Media says the new administration has precisely the legislative tool it needs to drive faster, deeper carbon cuts—whether or not Senate Republicans approve.

“On the heels of a historic election that saw Joe Biden use climate as the single biggest motivator to turn out the youth vote in record numbers, expectations for action are high,” writes Justin Guay, director of global climate strategy for the Sunrise Project, in a post for Greentech last week. And “as it turns out, one of the most powerful pieces of climate change legislation the Biden administration will need has already been passed: the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.”

The bill that established the U.S. Consumer Financial Protection Bureau and set tougher safeguards against the financial practices that brought on the 2008/2009 economic crash “empowers key agencies including the Treasury Department, the Federal Reserve, and the Securities and Exchange Commission to limit systemic risks to financial stability,” he adds.

Click here for our Special Report on climate and the U.S. election.

That’s because the climate change is “the largest systemic risk of them all,” Guay says. And it’s “driven by reckless investments in fossil fuels, exactly the kind of speculative activities Dodd-Frank was designed to bring to a halt in order to prevent a repeat of the 2008 financial crisis. That means Dodd-Frank gives the Biden administration the power to inhibit or prohibit investments in fossil fuels—a power that could be critical for achieving his pledge of delivering a carbon-free power sector by 2035.”

That administrative authority could include setting tougher capital requirements for banks that lend money to fossil projects, or using the kind of “credit guidance” policies governments introduced during the Second World War to direct industrial policy.

“That could play a major role in redirecting climate-unfriendly investments such as the estimated US$100 billion in new natural gas plants being planned by utilities across the U.S., which if built could make Biden’s carbon-free goal impossible,” he writes. “But the struggle to provide a Biden administration with the political space to wield this kind of power has only just begun. Industry is lining up on one side, with the climate community on the other. It’s a battle that few would have predicted even just several months ago, but it’s already rapidly heating up.

Guay goes deep on the factors over the last few years that would give the Biden-Harris administration the authority to take action under Dodd-Frank from the moment it takes office January 20. The Washington Post editorial suggests that at least one major U.S. newspaper would be supportive of that action—although the Post’s prescription focuses more on carbon pricing and regulatory authority under the U.S. Clean Air Act, as opposed to the broader financial regulatory approaches in Guay’s analysis.

“Exit polls showed that two-thirds of 2020 voters—including a massive chunk of Trump voters—think climate change is a serious problem,” the Post writes. “Many voters backed the president in spite of, not because of, his position on climate change. Meanwhile, educated suburban voters, once the keystone of the Republican coalition, recoiled from Trump’s efforts to accelerate the GOP’s transformation into what then-Louisiana governor Bobby Jindal (R) termed ‘the stupid party’. Many Republican senators still represent these suburban constituencies. They should seek ways to show that they are more thoughtful than the president the suburbs just rejected.”

The Post editors suggest legislators do that “by supporting a bipartisan climate plan that is neither the Green New Deal nor the do-nothing-ism that has so long prevailed. A proposal backed by senior Republican luminaries James A. Baker III and George P. Shultz, along with a massive swath of corporate America, would put a steadily rising fee on carbon emissions and rebate the proceeds back to Americans.” Biden can also pursue methane, power plant, and vehicle efficiency standards under the Clean Air Act, “restart U.S. climate diplomacy by immediately re-entering the Paris climate agreement,” and “integrate climate considerations into the exercise of every other executive authority he commands,” they write.

“In the past four years, the economics of clean energy have improved vastly, foreign countries have upped their game, and demand among businesses for federal action has shot up,” the Post editors conclude. “If that still does not translate into passing a big climate bill, it may be that Mr. Biden can nevertheless cobble together enough smaller initiatives that, added together, lead to large reductions in greenhouse gas emissions.”

While most of the U.S. climate and energy conversation is moving on from the Trump years to focus on the positive steps the country can now take, the former reality TV star now desperately clinging to his hold on the White House is still working on one last gift to his fossil industry benefactors. His administration is laying last-ditch plans to offer up oil and gas drilling rights in the ecologically precarious Arctic National Wildlife Refuge, likely just days before Biden and Harris take office. The question is whether anyone in the fossil industry will actually bid on the leases.

Participation in lease sales is traditionally shrouded in competitive secrecy until the last minute, The Canadian Press reports. But “some industry analysts believe there is a measure of uncertainty and risk that could lead to limited interest in a lease sale within the next two months. The coronavirus pandemic and an oil price war have hit the oil industry hard. Oil prices remain low, and there are high costs and difficulties involved in Arctic exploration,” not least that “public criticism of drilling in environmentally sensitive areas could weigh heavily on publicly traded companies.”