|Date||December 11, 2020|
|Speaker||Randolph BELL (Director and Richard Morningstar Chair for Global Energy Security, Atlantic Council)|
|Commentator||TAKEDA Shinjiro (Director, Industrial Research Division, JETRO NY)|
|Commentator||KAWAGUCHI Yukihiro (Director Global Environment Affairs Office METI)|
|Moderator||WATANABE Tetsuya (Vice President, RIETI)|
President-elect Joe Biden declared that combating climate change will be one of his administration's top priorities. He also promised the US would come back to the Paris Agreement on Day One. However, Biden's most ambitious climate goals may be hampered by Republican control of the US Senate, which looks likely. What options does Biden have to enact climate policy through executive action and regulation? Are there bipartisan legislative opportunities that could be passed by the Senate? How will Biden's climate change policies transform US industries and what are the implications for Japan. Mr. Randolph Bell, Director of the Global Energy Center at Atlantic Council will deliver his views on the above issues.
In a closely divided Senate, moderate Democrats will likely resist the most ambitious climate policies. Joe Manchin has signaled that he would vote against policies like the Green New Deal. Democratic senators from other hydrocarbon-producing states like New Mexico, Ohio, Colorado and Pennsylvania are unlikely to vote for the most ambitious policies that might affect their respective state's industries. Therefore, any policy will be more moderate than the more aggressive policies that were discussed during the Democratic primaries by other candidates.
Joe Biden has said that he will rejoin the Paris climate agreement on day one. He can do that with executive authority and there's nothing that the Republicans can do to stop him. Biden will also embed climate policy in foreign relations and trade. The clearest signal that he will do this is naming John Kerry as the climate envoy. This signals to the world that the US cares about climate again and recognizes that it is more than just a domestic issue.
They also put John Kerry on the National Security Council, a cabinet level position. That suggests that they will treat climate change as a national security concern. I think it will also be a part of the trade agenda. One quote I've heard from a senior person going into the Biden administration is that there is unlikely to be a trade deal with Europe but there's likely to be a green trade deal with Europe.
The administration will also rebuild and empower various government agencies. The Trump Administration really tried to disempower a number of government agencies but their ability to do so varied greatly. The Department of Energy is still in pretty good shape while the EPA is pretty dispirited. He can rebuild these agencies.
Also, he can move on to rulemaking. The Congressional Review Act allows a new Congress to repeal or undo any regulation that the outgoing administration passed within roughly the previous six months. This allows the Democrats to undo some of the rulemaking that the Trump Administration has done over the past six months or so. There are a couple of key rules that would qualify, the most significant being the methane rule. Erasing this rule would bring back the Obama methane rule.
Crafting new rules is a very long process. It can take two years and a more conservative Federal Judiciary means that these regulations are more likely to be overturned in court. This means you're likely to see new rules get overturned or the Biden administration taking longer to write them in order to make them less likely to be overturned.
Possibility of bipartisan cooperation
Another question is whether McConnell will continue his obstructionism under Biden, particularly on climate issues. There is some hope for bipartisan legislation because the GOP is starting to consider climate action of its own. This is a change in the Republican Party: younger voters believe climate change is real, so the Republic Party made a calculation and changed to capture some of those votes. The Republican Party is still internally far from some of the Democrats, but there has been some action recently. First, the One Trillion Trees Initiative, an effort to plant a trillion trees worldwide, was endorsed by Trump and the Congressional Republicans. Republicans have been very forward thinking on carbon capture technologies and tech innovation. The 45Q tax incentive, which incentivizes carbon capture and sequestration, may be one of the most important pieces of climate legislation passed within the past few years. The Trump Administration tried to cut the DOE's budget for research by the National Labs every year and Congress, with Republican support, always reinstated it.
There are a few bipartisan avenues for climate policy. One is carbon capture. Also, bipartisan nuclear power legislation was passed under the Trump Administration with Democrat support. A bipartisan group of 20 senators wrote a letter encouraging the inclusion of the Nuclear Energy Leadership Act in the NDAA, the National Defense Authorization Act. There is bipartisan support for nuclear power and for innovation.
I think there will be an opportunity for some sector-specific policy coming from Congress. There won't be a comprehensive bill but there may be some very sector-specific legislation: clean transportation and infrastructure, grid modernization, energy-efficiency and community investment. Community investment in clean energy would be seen as environmental justice. The other piece that makes this likely is that there is at least talk of bringing back earmarks. They were a way for legislators to give specific grants to very specific projects in very specific communities; essentially a way of "bringing home the bacon" to their home districts. They were controversial because some representatives were misusing them. There's been a desire to bring them back and there's been significant discussion about that over the past few weeks. With earmarks you can see real investment in communities. They also encourage bipartisan bills and may discourage polarization. It allows people to make deals much more easily.
A major avenue for bipartisan policy will be the COVID stimulus. Under the Biden administration, the COVID stimulus will have more green requirements. The other avenue will be infrastructure spending. This of course follows the COVID stimulus. Biden, the labor unions and the white working class that supports Donald Trump all want it.
Implications for Japan
What does all this mean for Japan? A lot of the small-bore stuff doesn't have direct implications. John Kerry's credibility as the flag-bearer for US climate action will depend on what the US is able to do at home. Biden will likely prioritize climate action in his foreign policy and that could reshape the US-Japan energy relationship to some extent. Natural gas is going to be less emphasized, but much of that infrastructure can be utilized for a hydrogen economy in which Japan is frankly a global leader. I think that's a key message that Japan is well-positioned to send. There is room for collaboration on advanced nuclear technology and also on offshore wind, energy storage, hydrogen, battery innovation, battery supply chains and clean vehicles. This could happen through the Department of Energy and others and also through collaborative programs like Asia EDGE, USAID and the Development Finance Corporation. Climate will be emphasized in Biden's developmental assistance and development finance. The US will probably involve Japan in these efforts.
This shift will extend to trade relationships. We've been thinking about carbon border adjustment internally and with our Japanese partners. The Biden administration has said that they want carbon border adjustment. They recognize that it will be a challenge and difficult to design, but the Europeans are already signaling that they are open to working with the US on this, so there is a real possibility for Japan to serve as a partner for the US in establishing transparent clean energy and clean manufacturing markets.
I have two questions. First, what will John Kerry do in his new role? The proposed structure of his climate change policy is unprecedented and unique. What kind of a division of labor do you expect? Second, what kinds of technologies do you recommend that the US and Japan collaborate on, especially in the Asia-Pacific?
On John Kerry, nobody knows and there is some concern in the press about how this structure will work. Some are worried that John Kerry will step on Tony Blinken's toes and that there could be disagreements between them.
John Kerry used to be Tony Blinken's boss and now Blinken will be above John Kerry. There are obviously questions about that. It is important to define what John Kerry will do. We have heard that he won't be focused on domestic issues because there will be a domestic climate coordinator as well. The other clear line is that ultimately John Kerry knows his role and is a responsible patriot who wants to advance this issue and he will have a lot to do. I suspect he ultimately won't have time to step on Tony Blinken's toes. Another question is who takes Todd Stern's job as climate negotiator or is that now also John Kerry's role. Yet another question is whether this reduces the importance of the ENR and the State Department. I am not particularly concerned that there will be real issues. John Kerry and Tony Blinken are friends and professionals who have worked well together and I think they are going to be able to find clear lines. The first thing John Kerry needs to do is find a way of bringing the US back to the global stage, so they will rejoin the Paris Agreement and then he will work to make the US' engagement in COP26 in Glasgow as successful as possible.
What technologies should we collaborate on? I think battery storage and supply chains would be a great technology to work on. The US and Japan are both leaders in lithium-ion battery technology, although China is producing more batteries and really has a dominant position in the supply chain, which does create energy security risks. That issue brings together a diverse group of stakeholders in the United States to support an effort to work on batteries and supply chains to make sure that the battery supply chains are secure and environmentally friendly and to ensure that human rights are protected. I think that provides a really great opportunity for collaboration. Even under Donald Trump they started working on minerals and metals supply chains, so I think it's politically durable.
I also think that hydrogen presents a great opportunity. The US recognizes that it is behind on hydrogen, and again there is bipartisan support for it. The Rocky Mountain Institute has been very clear that we can't decarbonize the industrial sector and parts of the transportation sector without hydrogen. At the same time, hydrogen leverages the expertise of the fossil fuel industry, so there is great support for hydrogen and hydrogen development from major oil and gas companies. As I mentioned earlier, support for carbon capture is growing and I think most of the forecasts suggest that if we're going to have a hydrogen economy, it's going to need to be so-called blue hydrogen produced with carbon capture. That engages a robust group of stakeholders in the United States so, again, it's politically durable. Japan has been a leader on this and so I think the US is going to look to Japan to help advance the technology.
I have two questions. First, what do you think about a new nationally determined contribution (NDC) under the Biden administration? My second question is about the implications for countries other than Japan. We also want to know how US will approach China and the EU. What will the direction be?
Let me take the second question on US relations with other countries first. I'll focus on the EU and China. The EU has signaled very robustly that they want to bring back the strong transatlantic relationship that really was estranged during the Trump Administration. A major part of that is climate and I think a good signal that they are serious is their changed position on methane. There was some real concern about a month ago when the EU was working on its methane strategy that it would take a country-level approach to LNG imports and methane intensity. The US would do fairly poorly if that were the case and US producers and LNG exporters were up in arms because they would be punished for a bunch of bad actors who got a free pass from the Trump administration. That has changed and the EU has been very clear that they want to work with the US and with companies and find ways to incentivize good behavior. I think they are really ready to encourage the US to be stronger on climate. That's a great sign. As I said earlier, a new trade deal with the EU seems unlikely, but there could be a green trade deal with Europe.
Relations with China are much more complicated. I don't think that there's going to be a tremendous change in attitude towards China between the Trump Administration and the Biden administration, although the ways in which they operate and approach problems will be different. I think they recognize that the problems are roughly the same. There won't be trade wars, that's not the way in which frankly most of the establishment wants to work, but they recognize the problem of intellectual property theft, for instance, with China. The US will have conflict with China in a number of areas, though it may not be as bombastic or aggressive as under the previous administration. I believe Kerry said when he was Secretary of State that there is a history of countries who are at odds on any number of issues coming together and finding ways of cooperating in areas of mutual self-interest. I think climate change is one of those areas. China has made a bunch of big commitments and on the one hand is a leader in clean energy, battery technology and photovoltaic production. On the other hand, they continue to support coal power plants in the developing world and continue to build coal fired power plants in China, and there's a pretty strong indication that more coal power plants are being constructed than the official numbers indicate.
Getting back to your first question about NDCs: I think the US is going to want a more ambitious NDC. The question is how credible that will be if it's not on track to meet its current NDC, so I would suspect that they will first try to clean things up at home and really show that they are acting seriously within the parameters that they have before they set a more ambitious NDC. The problem is the timeline.
SABURI Masataka (RIETI):
I have a question about how the split between the two parties can be overcome. The conflict between them is very severe. That is my first question. My second question is how we can support internal efforts from outside, how other countries can provide support.
The conflict between the Democratic Party and Republican Party keeps getting worse. I think one good thing is earmarks coming back, which allows for more deal making and ultimately brings people together. A lot of this conflict is caused by large-scale societal shifts in the US: changing demographics and changes in the economy and globalization that have disadvantaged people without college educations and people who don't live in the big cities, causing a realignment towards the Republican Party. On climate, there is some opportunity to overcome that because, as I mentioned, there is newly a real interest in climate issues in the Republican Party, but the suburban vote has moved more towards climate action as the weather impacts become more real. I believe that climate could become more of a bipartisan conversation.
Now, on your second question, whether the international community can do anything to help keep the US in the Paris Agreement, I think that helping promote jobs in clean energy in the US and also building support for renewable energy at the grassroots level in the US would be useful. Japan has a great opportunity to do this with its large corporate presence in the US. It's important that it not be good politics for the next Republican president to leave the Paris Agreement. Donald Trump was advised by many Republicans not to leave but he recognized it was good politics to leave. It's really about employment and changing opinions at the grassroots level.
YANO Makoto (RIETI Chairman):
I have a question about fracking. Fracking was a very important issue for Mr. Biden in the second debate. I don't know if he made a mistake by saying that for the American economy, in the long run you want to get rid of it but in the short run he didn't commit to a position. That statement caused a major change in votes after the debate. Do you think that he can keep the votes of people who support that industry in 2022 and 2024? I wonder what his policy will be and I would like to know what you think.
You're absolutely right that in that second debate he misspoke about fracking when he had done a remarkable job throughout the campaign of managing both sides of that question. He talked about being aggressive about climate on one hand and on the other saying that he was not going to ban fracking. As a pragmatist, I don't see those positions to be in conflict but US politics frames them that way. It came across as a statement that he would ultimately ban fracking. He can't ban fracking. That is not something that can happen at the executive level. It would require the Senate and the House and it would require a supermajority. It was a political statement that had no bearing on reality. What he can do is prevent new oil and gas leases on federal land. That would have a minimal impact on the oil and gas industry but it would make the environmental community happy, and I think that will be the policy.
How does he manage these politics going forward? He stays the course and tries not to slip up. You're right that he lost some votes. The polling suggested that fracking isn't very popular in Pennsylvania, but in Texas it's a different story. He did very poorly with the Latino community in Texas and that is attributed to the perception that he would undermine their employment in the oil and gas industry.
So you think his actual policies will be positive for the Latino community and others related to that industry.
It was interesting to see how the Latino community voted across different states, but yes, I think that a couple of things impacted the Latino vote. There was anti-oil and gas framing that lost a lot of Latinos in Texas. I think it's possible to win them back with a concerted outreach to the Latino community as a whole that is specifically focused on jobs. In Arizona, the Latino community was one of the constituencies that pushed Biden ahead.
*This summary was compiled by RIETI Editorial staff.