《拜登氣候計劃下的“必然的政策反應”》報告.pdf

Photo by Adam Smotkin on Unsplash November 2020 The Inevitable Policy Response Under Biden’s Climate Plan – The Stage Is Set 2 Acknowledgements The IPR is commissioned by the Principles for Responsible Investment with support from Lead authors Mark Fulton – Founder, Energy Transition Advisers ETA Jason Eis – cutive Director, Vivid Economics Eric Ling – Engagement Manager, Vivid economics Daniel Cronin – U.S. Press Rozs Moscovenko, 2020. The outcome of this US election has an important bearing on climate policy in the next four years and to the Inevitable Policy Response project that forecasts a forceful policy response to climate by 2025 which is the focus of this paper The incoming Biden Administration will provide substantially greater positive momentum around climate policy expectations and outcomes in the US and globally through renewed US leadership. Simply by using cutive powers combined with state and local action, a forceful Inevitable Policy Response to climate looks achievable in the US. The composition of the Senate is an important additional factor. If the Democrats were to hold the balance of power in the Senate, then a Biden Administration combined with Democrat Congress would be far more impactful. However, a Senate with a Democratic control of the balance of power currently is seen less likely than divided power. This would mean a check on the full ambitions of the Biden climate plan, although a significant increase in climate action is still very likely through direct cutive action, enabling of state-level action, and federal legislative action which better balances a Democratic agenda. 1Exit polls appear to show that his messages on climate change broke through with voters. Morning Consult found that 74 of Biden voters described climate change as “very important” to their vote, a sign that lack of action would potentially affect the new president’s base. Another exit poll by Fox News and the Associated Press determined that 67 of votersnot just those who cast ballots for Bidensupported “increasing government spending on green and renewable energy. The Inevitable Policy Response Under Biden’s Climate Plan – The Stage Is Set 4 Combining new impetus in the US with recent comments from President Xi Jinping on targeting Net Zero 2060 in China, Japan and Korea announcing a 2050 target and continued high ambition in Europe, global policy momentum is gathering pace. In terms of the Biden climate plan, we believe that the key points outlined below would be addressed fully if a unified democratic government were confirmed and, even without the Senate, many of the initiatives below should get enacted given cutive powers the EPA being crucial, support from states, and a new stimulus package that reflects a compromise more favorable to the Democrats’ agenda 1. Re-join the Paris Agreement – This can be achieved without Congress as was initially the case. 2. Seek greater global action through diplomatic, trade and financial channels – Expect global engagement on climate. The cutive has wide-reaching diplomatic authority. Relationships with the EU and China will be crucial relationships to leverage on climate. 3. Net zero emissions target by 2050 – This can be announced unilaterally by the administration. However, a credible commitment will require policy pathways including via legislature support, which is dependent on sufficient support in the Senate. 4. Zero carbon electricity system by 2035 – This can be regulated without consent of congress Mass. vs. EPA via New Source Perance Standards NSPS and other Clean Air Act regulatory authority vested in the Environmental Protection Agency EPA. The signal of strong intent will itself have some impact on markets, but implementation will take time, and legal challenges can disrupt the process. 5. Clean energy oriented interstate energy transmission regulation, permits and leasing of public lands – Federal permits and land leases for infrastructure, oil and some budget funds could be reallocated where not earmarked to support this. New funding will require legislation, but this is an area that has historically garnered broader bipartisan support. 8. Reduce the carbon footprint of the national building stock by 50 by 2035 – Further study is required to determine whether this is achievable without legislation. The DoE has regulatory authority to set some efficiency standards without congressional approval. States are also active here. Contributing to achieving this objective, President-Elect Biden has committed on day one to ensure through cutive action that all U.S. government installations, buildings, and facilities are more efficient and climate-ready. 9. Program of economy-wide decarbonisation policies supported by substantial Federal spending – President-Elect Joe Biden has committed to large fiscal spending to create jobs and support the net zero transition across the infrastructure, automotive, transit, power, buildings and agriculture sectors. While legislation will be required – with difficulties expected in the Congress – Biden could achieve some success in pushing these policies within stimulus packages where policies are popular in red states, and more broadly through public procurement rules. 10. We would add that many economists and business leaders have called for a carbon market potentially with Border Cost Adjustments BCAs – The US EPA can regulate GHGs, however, a full package including a tax and BCAs requires full Congressional approval. It is possible that border cost adjustments The Inevitable Policy Response Under Biden’s Climate Plan – The Stage Is Set 5 could be done through some emergency power granted to the president by congress previously. This would be difficult, but there are some potential pathways. Other factors that merit further review following the election are Financial policy and regulation - The cutive branch has wide-reaching authority over financial supervision, policy, and regulation. Signals from the Federal Reserve and U.S. Securities and Exchange Commission show increasing attention to much greater consideration of climate in financial oversight. ● The Federal Reserve has requested to join the NGFS ● Four more years of ongoing investor engagement with companies and capital recycling ● The continued fall in green technology costs A full review of IPR’s policy forecasts is underway by the IPR consortium and will be available in Q1 2021. Investors ACT NOW Covid-19 has already caused a great deal of volatility in financial markets in 2020. The five sectors in public equity markets identified as key in The Inevitable Policy Response Equity Market Results were Oil and Gas Utilities Transport Non-energy materials Industrials With so many variables in play regarding what might be priced into markets in term of climate policy driven value, we think that some stability is first required beyond the current volatility before we can more accurately assess the market pricing issue. Once the current political dynamics and COVID expectation have settled it will be easier for investors to view the climate thematic. However, we believe that the underlying principles of the IPR ology are still valid in terms of the thematic implications for portfolio construction. Figure 1 Asset Owner Thematic Strategy Source Energy Transition Advisers The Inevitable Policy Response Under Biden’s Climate Plan – The Stage Is Set 6 Contents Acknowledgements ........................................................................................................................... 2 1 The Inevitable Policy Response IPR Context .................................................................................... 7 2 Prospects for climate policy and action under a Biden administration ............................................. 9 3 US President Elect climate policy review ......................................................................................... 13 Appendix 1 Carbon Tracker - Climate’s Most Powerful Person In The World............................... 21 Appendix 2 Carbon Tracker - 50 States of Play ............................................................................... 24 List of figures Figure 1 Asset Owner Thematic Strategy ........................................................................................................ 5 Figure 2 Momentum Based Drivers ................................................................................................................. 7 Figure 3 Fundamental, High-impact Triggers .................................................................................................. 8 Figure 4 Forecast Policy Levers ....................................................................................................................... 8 The Inevitable Policy Response Under Biden’s Climate Plan – The Stage Is Set 7 1 The Inevitable Policy Response IPR Context The Inevitable Policy Response IPR commissioned by PRI and researched by a consortium led by Energy Transition Advisers and Vivid Economics is predicated on a set of forceful policy responses to climate change across the world and announced by the 2025 Paris Ratchet. The leaders in any attempt to reduce global emissions have to be China, the US and Europe. The US election therefore is an important event as it affects the next four to five years. Government action to tackle climate change has so far been insufficient to achieve the commitments made under the Paris Agreement. Yet as the realities of climate change become increasingly apparent, it is inevitable that governments will be forced to act more decisively than they have so far. The question for investors now is not if governments will act, but when they will do so, what policies they will use and where the impact will be felt. The IPR project forecasts policy responses announced by 2025 that will be forceful, abrupt, and disorderly because of the delay we have seen in recent years. The policy response is driven by the factors laid out in figure 2 and figure 3 below Figure 2 Momentum Based Drivers Source Energy Transition Advisers The Inevitable Policy Response Under Biden’s Climate Plan – The Stage Is Set 8 Figure 3 Fundamental, High-impact Triggers Source Energy Transition Advisers PRI, Vivid Economics and Energy Transition Advisers are in the process of updating the detailed policy forecasts as laid out in IPR Policy Forecasts expected to be announced by the 2025 Paris Ratchet and mostly implemented by 2030-35. The US election plus other recent announcements puts more focus on COP26 in December 2021 to accelerate climate policy and this is a key consideration for a forecast such as IPR. Figure 4 Forecast Policy Levers Source Vivid Economics The Inevitable Policy Response Under Biden’s Climate Plan – The Stage Is Set 9 2 Prospects for climate policy and action under a Biden administration Section two lays out in detail the Biden climate plan, the highlights of which are 1. Re-join the Paris Agreement 2. Seek greater global action through diplomatic, trade and financial channels 3. Net zero emissions target by 2050 4. Zero carbon electricity system by 2035 5. Clean energy oriented interstate energy transmission regulation, permits and leasing of public lands 6. Tighter fuel economy standards and enabling state action 7. Major clean energy innovation program 8. Reduce the carbon footprint of the national building stock by 50 by 2035. 9. Program of economy-wide decarbonisation policies supported by substantial Federal spending 10. We would add that many economists and business leaders have called for a carbon market with Border Cost Adjustments BCA The ease with which these can be implemented depends on the structure of the whole government and some of the key rules as to how it operates. 2.1 Importance of Congress – legislation is important For climate policy and action at the Federal level, the composition of the Congress is important. The House remains Democrat, so the big question is whether the Senate swings Democrat as well. This depends on the outcome of the Georgia senate run-offs which take place on January 5th where the consensus seems to be the Republicans are more likely to win at least one of the two seats. A clean sweep by the Democrats of the White House, House of Representatives and Senate would be a good start to seeing all of the Biden plan listed above being addressed. However, the Senate Filibuster would need to be eliminated for this to be more certain and even then, there would be challenges to elements through the courts. Indeed, the ambitious plans outlined by Biden, especially for 100 renewable energy by 2035, would be significantly aided by the type of support only Congress can give via tax and spending policies. As remains the key issue for any President, getting both the House and Senate to act in unison is never easy and often ends up in complex negotiations, bargaining or concessions. The stimulus packages that are expected to be a key feature of 2021 will be a test for this. Looking to the future, if a Biden Administration was to consider a carbon price with a Border Carbon Adjustment, broadly supported by US economists Border Adjustments, 2020, having a fully Democratic Congress would be a prerequisite and even then the filibuster remains a potent weapon which would probably need removing. 2.2 Implications of a divided government – cutive powers Alongside Congressional based policy and even alternatively in the face of a hostile Senate, as both Obama and Trump showed, there is a lot of energy and climate policy that can be carried out by an Administration through cutive powers. Biden can re-join the Paris Accord without Congressional approval. The Inevitable Policy Response Under Biden’s Climate Plan – The Stage Is Set 10 Most obviously there is the EPA where for instance Obama implemented his Clean Energy Plan – but only to have it rolled back by Trump. Federal Energy Regulatory Commission FERC can prove an important aspect of electrical power systems and can be heavily influenced by the Administration. Federal Efficiency Standards are important such as vehicle emissions. Further discussion on cutive Powers from Carbon Tracker is contained in Appendix 1. In terms of the Biden plan we would put the most likely outcome under a divided government on 1. Re-join the Paris Agreement – This can be achieved without Congress as was initially the case. 2. Seek greater global action through diplomatic, trade and financial channels – Expect global engagement on climate. The cutive has wide-reaching diplomatic authority. Relationships with the EU and China will be crucial relationships to leverage on climate. 3. Net zero emissions target by 2050 – This can be announced unilaterally by the administration. However