The Biden-Harris administration hosted a Leaders Climate Summit this week, convening political, corporate, and civil society leaders from around the world to encourage global actors to raise their climate ambitions. Several countries announced more ambitious emissions reductions targets over the course of the two-day summit. To analyze the highlights and implications of the summit, Global Energy Center experts have written a rapid response piece.
The promising pace of change
One of the more striking results of the Leaders Climate Summit is not necessarily associated with any sort of variable baseline year. Of course, there were several concrete pillars of good news: 50-52 percent US emissions reduction by 2030, an end to overseas Korean coal financing, and peak Chinese coal use by 2025. But amidst the many heads of state and race-to-the-top announcements, the quieter symbolism was stunning. Climate is once again a top-line global agenda item, and the United States is back onboard with climate action permeating every corner of its reach.
This is the Biden-Harris administration walking its walk. And what should not be lost amidst the excitement is the underlying importance of this quick reemergence of the United States as a global climate leader. A shift of this magnitude in such a short time is remarkable. In a period of weeks, even before the first one hundred days, the United States has gone from being a worldwide pariah on these issues to a global convener. Amongst the ambitious targets and announcements, which are certainly worth celebrating, there is also great hope to be found in the pace of change.
Kelsey Forren is an Assistant Director at the Atlantic Council Global Energy Center.
Climate summit signals US return to international climate leadership
The Climate Leaders Summit was a huge success in restoring the United States to the head diplomatic table, resurrecting momentum for raising ambition at Glasgow and generating focus on climate finance and innovation. The US whole-of-government show of force demonstrated its seriousness in raising its ambition and provided enormous credibility to that effort. The next steps—delivering the fine print on the United States nationally determined contribution, persuading China India and others to raise ambition, and adopting measurable means to verify compliance—will be infinitely harder. The focus and discipline of the Biden-Harris team, in general and on this issue, is formidable and impressive. It will create enormous optimism in the United States and abroad for historic success in Glasgow.
David Goldwyn is Chair of the Energy Advisory Group at the Atlantic Council Global Energy Center and Chief Executive Officer at Goldwyn Strategies.
New US climate commitment sets the stage for greater ambition
President Biden convened the Climate Leaders Summit this week, which centered around the announcement of the US nationally determined contribution (NDC). The new US NDC to reduce greenhouse gas emissions up to 52 percent by 2030 is a significant increase in ambition. It is a climate science-driven target that puts the United States on a path to meeting Paris Agreement objectives. It reinvigorates the trust in US. climate leadership and adds to the global race to net-zero. The US NDC prioritizes decarbonization of the power, transportation, industrial, buildings, and agriculture sectors. This level of ambition will have to be underpinned by a suite of legislative and regulatory actions across these economic sectors. Similarly, to the European Union’s economy-wide, holistic approach to climate neutrality, this is the first time the United States is taking an economy-wide transformative approach, focusing on decarbonization pathways far beyond the power sector and energy sector in general. At the same time, the achievement of the NDC still hinges on a national clean electricity standard. The United States. will have to back its ambition with a more detailed roadmap outlining an action plan on how the government plans to meet the target. Noticeably, the sustainability of the national finance sector was omitted from the announcement. The Biden-Harris administration also argues that the target is achievable without passing American Jobs Plan, the $2.3 trillion infrastructure plan that would finance investment in clean energy technology and research and development. While at the Climate Leaders Summit, International Monetary Fund Managing Director Kristalina Gerogieva urged governments to implement a robust carbon price and an international price floor for the largest emitters. The United States’ use of a nation-wide carbon price does not feature in the realm of viable possibilities at this stage. The major climate transformation has yet to run its course in the United States. to meet the global moment. An ambitious climate target is the first milestone.
Irina Markina is a Nonresident Senior Fellow at the Atlantic Council and a Global Sustainability Manger at Baker Hughes.
New US emissions reduction goal has potential to reconcile differences between environmental groups and labor unions
When President Biden announced the new US greenhouse gas emissions reduction target, his remarks focused largely on a topic that has come to define his early presidency: jobs. While investments in clean energy, electrification, and green infrastructure promise new opportunities, job creation in the energy transition will require the federal government to navigate competing priorities. Biden’s promise to create well-paying union jobs, secure critical supply chains, and pursue environmental justice has already sparked controversy among different stakeholders looking to benefit from the energy transition. The response to his cancellation of the Keystone XL pipeline—perceived as a clear win for environmental groups and a threat to union jobs in the pipelaying and fossil fuel industries—is one example. Biden’s goal to onshore aspects of supply chains for electric vehicles, nuclear energy, and other manufacturing processes pose similar challenges. However, as the United States explores domestic sourcing of metals and minerals critical to electric vehicles, renewables, and nuclear fuel alongside other efforts to “build American,” the new emissions reduction target provides an opportunity to reconcile differences between labor unions and environmental groups. When paired with Biden’s ambitious clean energy supply chain goals, the new target incentivizes a new definition of “American-made” by creating jobs that set global standards for historically emissions-intensive and environmentally hazardous supply chain processes previously pushed offshore.
Emily Burlinghaus is an Assistant Director at the Atlantic Council Global Energy Center.
Climate action can spur inclusive economic growth
In the next five years, the global clean energy market is estimated to grow to$1.9 billion. As the world economy begins to recover from the pandemic, green industries have the potential to drive re-employment, create jobs, and generate growth, especially in developing and emerging economies seeking to diversify and create opportunities for growing workforces. These realities were not lost on global leaders this week as they put supporting low- and middle-income economies, reinvigorating youth labor markets, and getting women back into the workforce front and center on the climate agenda. It is important to see President Joe Biden leading the way, announcing international climate financing commitments aimed at ensuring developing countries are able to invest sufficiently in human capital, technology, and governance to realize inclusive, sustainable green gains.
Nicole Goldin is a Nonresident Senior Fellow at the Geoeconomics Center.
Net Zero Producers Forum: A huge step forward with lots of questions
The announcement of the Net Zero Producers Forum marks a huge step forward in real climate action. No serious modeling predicts a net-zero world that does not include oil and gas, though with significantly lower demand. It is crucial that the oil and gas that is consumed as the world moves to net zero and even after it arrives there is as low-emissions as possible.
The commitment today from Saudi Arabia, Qatar, Norway, Canada, and the United States – representing roughly 40 percent of both global oil and gas production (more than the Organization of Petroleum Exporting Countries) – helps put the world on track to a lower-carbon future and sets an example for other countries. Expect more producers to join this group in the coming months. An even larger group could exert significant pressure in a world of shrinking demand, something other oil and gas producers should watch closely.
The Forum’s aggregation of significant industry expertise and technological leadership will be critical to fast-tracking the development and adoption of the tools needed to decarbonize oil and gas production and ensure that continued (though steadily reduced) hydrocarbon consumption will support ambitious climate goals.
However, a pledge is different from a plan, and there are lots of details to be worked out. Scope 3 emissions immediately come to mind, a question that has bedeviled company-level net-zero pledges.
The challenges in implementing these goals will also vary from country to country. It may be easier to implement vast change in centralized Saudi Arabia (if it wants to) than in the United States, with its large number of companies and a patchwork of federal, state, and local regulations. The variation in resources will also bring different challenges. The high-carbon Canadian oil sands will be harder to bring to net zero than low-carbon Saudi crude production. At the same time, Saudi Arabia will need to stop burning oil for power generation.
Perhaps the largest question for the group will come from some parts of the environmental community, who will question the sincerity of these actions and will label them as “green washing.” That is surely a risk, so concrete actions will need to be announced soon. But even Saudi Arabia, who is likely to be portrayed as the least sincere of the bunch, has shown real leadership on climate over the past year through its G20 Presidency where it developed its concept of the “circular carbon economy,” and has highlighted plans to establish a national framework to apply the circular carbon economy principles domestically. All signs suggest that this is a sincere effort, and that funding is flowing to the projects necessary to achieve the Kingdom’s goals.
In a summit marked by huge ambition, the announcement of the Net Zero Producers Forum will likely be overshadowed by announcements such as the United States’ new nationally determined contribution. But this is an important piece of the puzzle, and shows just how seriously, practically, and comprehensively the Biden-Harris administration is approaching climate action. As President Biden noted in his closing remarks at the summit, it is “time to get to work.” The world will be watching closely for strong implementation.
Carbon border adjustment begins to take center stage
Its unsurprising that as the summit pushed for increased ambition around climate commitments, consideration for enforcement tools to strengthen those commitments followed as well.
One such policy brought up by several leaders at the summit (most notably the Europeans) is a carbon border adjustment mechanism (CBAM), which would effectively tax imports that have a higher emissions profile than similar goods produced domestically.
The United States did not mention CBAM during the summit, but did include it in the new Nationally Determined Contribution. The key language is as follows: “The United States will work to ensure that our firms and workers are not put at an unfair competitive disadvantage and cooperate with allies and partners that are committed to fighting climate change. As appropriate, and consistent with domestic approaches to reduce United States greenhouse gas emissions, this includes consideration of carbon border adjustments in relation to carbon-intensive goods.”
Border carbon adjustments were included as part of the Biden campaign platform, but recently Special Presidential Envoy for Climate John Kerry suggested that the European Union might need to slow down its own CBAM efforts, raising questions about whether the United States was still considering the controversial tool. It now appears it still is.
In theory, a CBAM incentivizes decarbonization across trade value chains, while also preventing low-emitting industries from being disadvantaged by increased domestic climate commitments at home. In practice, there still is a fair amount of important work to be done in this space. Depending on how a CBAM is developed and implemented, it it unknown where this would fall within current World Trade Organization (WTO) rules. There are also trade-offs to the unilateral or multilateral construction of a CBAM, as well as consideration of how developing countries might be affected.
For the United States, these trade-offs are especially complicated. The easiest way to ensure a WTO-compliant CBAM is to pair it with a domestic price on embodied carbon. A price on carbon is part of Biden’s plan, but still faces hurdles in Congress. Some argue that US regulations can be quantified as “an implicit tax,” but the mechanics of that are so complicated and likely open to so much litigation to make it all but impossible to implement. A good political strategy, however, would be to package a border carbon adjustment with a domestic carbon price, which might assuage those concerned about a carbon price negatively impacting the competitiveness of US industry.
Nonetheless, emissions from trade will have to be reduced in order meet climate goals and not create an unfair playing field, making the attention to CBAM during the summit an important step and a trend to watch moving forward.
Climate risk disclosure a growing priority for countries and companies alike
A significant theme throughout the summit were the financial tools available to unlock the next big round of private capital into clean energy investment—a necessary compliment to the increased ambition the Biden-Harris administration called for this week and hopes to see in the lead up to COP26. By pure volume of mention, it appears the tool of consensus from many of the leaders assembled would be mechanisms requiring companies to disclose their financial exposure to climate change. A ‘climate risk disclosure’ tool could incentivize additional flows of investment towards clean energy or climate-action enabling businesses, while also adding support to the growing prevalence of environmental, social, and governance-investing, which at the end of 2020 accounted for 33 percent of total assets under management in the United States.
Reed Blakemore is the Deputy Director of the Atlantic Council Global Energy Center.
Industrialized nations will need to up the ante to support global mitigation and adaptation
As world leaders convened for President Biden’s Climate Summit this week, it became clear that the notion of common but differentiated contributions, an approach born from the Rio Summit and enshrined in the Kyoto Protocol, remains a strong fixture in international climate engagement today. One after the other, developing nations, and even states with large and rapidly growing economies like India, asserted that high-income, industrialized nations should take ownership of their historically disproportionate share of global emissions in both bearing the brunt of responsibility and in providing mitigation and adaptation financing to less developed states with marginal carbon footprints. And while these lower-income states have made strong commitments of their own, they expect OECD countries to do far more. Small island states, Sahel nations, and other vulnerable sealine countries like Bangladesh will require international support—from the largest economies and global emitters in particular—to adapt as oceans rise, crops are destroyed, and people are displaced. Those now dependent on coal and other fossil fuels looking to make the shift to a cleaner energy system will require access to technology, financing, and human capital necessary to realize their transitions. And as expected, formerly underdeveloped but now rapidly growing economies, such as China and Brazil, may continue to assert that their former status as developing nations absolves them of the full weight of climate commitment. The greatest game of chess for the world will be to push them to parity, but that will only happen should they see such action as comparatively economically advantageous. As the whole world opens its eyes to the employment and growth opportunities for green development, the needle may be moving in that direction.
Zachary Strauss is an Assistant Director at the Atlantic Council Global Energy Center.
Major emitters, including China, are going bigger on their climate commitments
The Leaders Summit on Climate was an essential milestone in the leadup to COP26 in Glasgow, most notably with the announcements from countries like the United States, Canada, and Japan that aim to nearly halve greenhouse gas emissions from their respective baselines, and additionally, with major announcements on coal development and finance. Japan’s revised 2030 target to reduce emissions by 46 percent will require a shift away from coal development and a larger emphasis on renewables, advanced technologies like carbon capture, and hydrogen. The Republic of Korea announced it would end all new financing for overseas coal projects, which aligns with the goals of the proposed Green New Deal of the Moon administration. Chinese President Xi, who announced his participation at the last minute, specifically singled out coal for the first time and stated that China would peak coal consumption by 2025 and phase down coal use through 2030. Xi’s announcement is significant because China is still approving new coal projects, which threatens its ability to reach its 2060 carbon neutrality target. Ending support for coal has been one of the Biden-Harris administration’s key priorities in US engagement with East Asia, not only because of the domestic reliance on coal in the region but also because of their principal influence in coal development abroad. The shift away from coal finance is critical to achieving climate goals but underscores another important message of this summit: developing nations will need more financial and technical support from developed countries for renewable and advanced energy solutions at the rate necessary to meet rising energy demand. The summit was a moment to continue the international climate conversation and outline the next steps to making meaningful progress before COP26 in November. If nothing else, it confirmed the United States is, once again, prepared to play a leading, collaborative role.
Margaret Jackson is the Deputy Director for Climate and Advanced Energy at the Atlantic Council Global Energy Center.
Time is ripe for a US-EU sustainable finance coalition
In just three months, the United States made a giant pivot from leaving the Paris Agreement, to hosting an unprecedented Leaders Summit on Climate in the lead-up to COP26 in Glasgow this November. The US and EU climate ambitions are once again aligned; coordinated implementation is the next crucial step. Transatlantic cooperation on sustainable finance serves as an impactful way to act on these targets.
The Biden-Harris administration has doubled its commitments, compared to 2013—2016 levels, to help developing countries reduce and/or avoid greenhouse gas emissions under its recently released International Climate Finance Plan. The United States and the European Union (EU) have a real opportunity to be strategic and coordinated on clean energy development financing in order to collaboratively target areas of greatest need, while eliminating redundancy in international aid. This can be accomplished through coordination between EU’s financial institutions and the Export-Import Bank of the United States (EXIM), The US International Development Finance Corporation (DFC), and the US Trade and Development Agency.
US-EU cooperation can also accelerate the private sector’s shift towards clean energy investment. The launch of the Glasgow Financial Alliance for Net Zero and the Net-Zero Banking Alliance are unprecedented efforts to align $70 trillion in assets with net-zero targets; nevertheless, clear policy signals and standardized disclosure mechanisms are needed to guide investors toward projects with optimal climate impacts. The EU is leading these efforts by establishing the criteria in its sustainable finance taxonomy. The United States should roll out its own comprehensive regulatory guidelines for sustainable investments, so as to align with the EU’s proposed taxonomy in areas of mutual interest. But, unlike the EU’s guidelines, the US taxonomy should clearly define nuclear technologies and low-carbon natural gas as sustainable investments.
Restoring US leadership on climate action will involve rebuilding trust with European allies, who stepped up to lead on when the United States withdrew. A US-EU strategy on sustainable finance could bring continuity to US climate leadership and accelerate US-EU efforts to reach net-zero emissions by midcentury.
Olga Khakova is the Associate Director for European Energy Security at the Atlantic Council Global Energy Center.
Climate summit reframes global challenge, highlights carbon capture technology
The US Leaders Summit on Climate has inaugurated a new era of US leadership on climate action. The summit inspired many countries to commit to stronger climate goals by 2030. The Intergovernmental Panel on Climate Change has shown that the sooner the world can reduce emissions, the better the chance at fending off the worst effects of climate change. Yet, while pledges are an important signal of political will, global leaders must not underestimate the challenge of implementation. The Biden-Harris administration has aptly reframed the debate away from one of economic tradeoffs. Good climate policy is economic policy. As an imperative for decarbonization, fearless innovation will future-proof industries, reduce emissions at home and abroad, and create economic opportunity. Along these lines, Canada and Australia announced new investments in carbon capture and removal technologies this week. President Biden’s proposal on carbon management in the American Jobs Plan is the largest investment proposal to commercialize carbon management technologies ever put forward by a single government. The plan could grow US carbon management capacity by more than thirteen times by 2035 while safeguarding and creating tens of thousands of US jobs.
Lee Beck is International Director, Carbon Capture at the Clean Air Task Force and a Nonresident Senior Fellow at the Atlantic Council Global Energy Center.
Nuclear energy technologies—both current and advanced—are necessary to hit climate targets
At this week’s Climate Leaders Summit, a number of world leaders announced a range of new climate commitments, from the highly specific to the general. With the United States reclaiming its role as the global leader on climate, the White House announced a new greenhouse gas reduction target for 2030, along with promises to create jobs and lead the world in clean energy technologies. The White House press release mentioned the existing fleet of nuclear reactors—which constitute a low-carbon energy source that can play an indispensable role in decarbonizing the power sector—and it also noted the role of nuclear energy, along with renewables and waste-to-energy, in producing hydrogen for industrial processes. Of course, a global summit is unlikely to offer much in the way of specific policy details on specific energy sources, and much will be left up to US federal and state policy. However, political recognition of the potential for nuclear energy to decarbonize hard-to-abate sectors—in addition to the power sector—is a crucial first step to meeting climate targets.
Jennifer Gordon is Managing Editor and a Senior Fellow at the Atlantic Council Global Energy Center.
Energy efficiency is a key opportunity to Build Back Better
The United States needs to be smart and strategic in pursuing President Biden’s ambitious climate pledge and demonstrate to the world the seriousness of his administration’s commitment. Even as the United States works to accelerate the transformation to cleaner generation and fuels, a high priority should be placed on energy efficiency to increase the productivity of the energy system and lower the energy intensity of the economy. Such an emphasis has many political, economic, technological, environmental, and social benefits and is recognized as a critical element in a least-cost energy policy. Investment in energy efficiency fits well with President Biden’s jobs focus in “building back better,” especially since many jobs were lost in this sector due to the pandemic. Energy efficiency can also further social justice goals through programs that support the weatherization of low-income housing and lower utility bills, particularly for those already laden with a high energy burden. Energy efficiency can also complement efforts to electrify the key sectors of transportation and buildings and further progress on digitalization. A combination of policy and market reform, improved standards and codes, and tax and investment incentives will be essential in realizing these benefits at both the national and local levels. The potential for a bipartisan win-win approach on such a strategy appears possible with a concerted and thoughtful administration and congressional effort.
Robert F. Ichord, Jr. is a Nonresident Senior Fellow at the Atlantic Council Global Energy Center.