From climate leadership to oil drilling: Biden’s green pragmatism one year before the election

The return of the United States to the Paris Agreement and the appointment of a climate czar, the special envoy John Kerry, were the first signs that under the presidency of Joe Biden one of the two countries with the highest greenhouse gas emissions in the world — the other one is China — was starting to get serious about fighting the climate crisis, following the disdainful attitude of his predecessor, Donald Trump. Since then, the Democrat’s policies to tackle global warming have had both lights and shadows, to the point that he has built up a climate house of cards whose stability depends on the political ups and downs of this country, which is holding a presidential election next year.

The main piece in this balancing act is a law approved in August 2022 with a somewhat misleading name (Inflation Reduction Act or IRA), which in fact is an ambitious project to promote the transition towards a low-emission economy through tax breaks and subsidies, with $369 billion earmarked for green investments over the next decade. This is the most successful part of America’s return to the path of fighting the climate emergency. But there are also shadows, such as the things the president has been forced to yield on to stop the rise in gasoline prices: more oil drilling licenses, even in natural spaces like Alaska. Or, most recently, his decision not to attend the COP28 climate summit in Dubai, although Kerry and Vice President Kamala Harris will be there.

The colossal initiative that is the Inflation Reduction Act was well received by the scientific community, but not so much by some of Washington’s allies. In theory, the measures can reduce greenhouse gas emissions by 30-40% by 2030 compared to 2005 levels, bringing the country closer to meeting Biden’s 50% reduction promise made last year. Furthermore, according to scientists, the initiative shows other countries the way: the Paris mechanism is based on reciprocity, and large emitters are decisive in setting the standards. But it is also a gigantic business opportunity that places its bets on industry and could deliver clear economic (and political) profits. One example is Biden’s determined push for manufacturing electric vehicles, a sector that generates tax revenue and jobs, especially in the swing states that decide elections.

The bulk of the IRA budget will go toward clean energy, with $128 billion in tax credits over the next decade for companies that adopt greener sources, such as solar. A huge financial market is also being created around the processing of loans and aid, which could soon be handling up to $80 billion a year in transactions that promote a green transition, according to experts.

Biden’s environmental credentials have been well known since the 2020 election campaign, but to put them into practice he has needed not only the Republicans’ votes, but also those of fellow Democrats who disagree with his policies, such as Senator Joe Manchin, who has ties to the coal industry. Hence, the initial purpose of the ambitious Bipartisan Infrastructure Law was undermined by the obstacles of the rebel Manchin. The infrastructure legislation, the first legislative achievement of the Democratic presidency, in 2021, included investments aimed at improving the most polluting activities and allocated $55 billion to contribute to the “climate resilience” of regions especially exposed to natural disasters.

“The IRA is probably the best deal we could get in the United States with pro-coal Senator Joe Manchin as the gatekeeper of what could pass in the Senate,” explains Michael Mann, distinguished professor in the Department of Earth and Sciences at the University of Pennsylvania. “The IRA will likely reduce carbon emissions by 40% by 2030 if fully implemented. But since the world average has to be 50% and traditional industrialized countries, like the United States, have to make bigger cuts, for example 60%, it is not really enough. It’s a good start and something we can build on if Americans vote for climate-minded politicians in the next election. It is a signal to the rest of the world that the current administration is serious about the U.S. doing its part. This is essential to convince developing countries like India to do more, which remains one of the sticking points ahead of COP28,” adds Mann.

In addition to the necessary political balancing act, even more complicated since the midterm elections a year ago, which gave control of the House to the Republicans, inflation has slowed down part of Biden’s green goals. To contain the rise in the price of gasoline — at maximum levels for much of 2022 — last year Biden greenlighted oil drilling as part of the controversial Willow Project, in the National Petroleum Reserve in Alaska, despite protests from green groups and criticism by the United Nations. He also revoked a moratorium, imposed a year earlier, that suspended oil and gas exploitation licenses on federal land to combat the climate crisis. In addition, the war in Ukraine made the United States go from being an importer to an exporter of liquefied natural gas (LNG) thanks to fracking, a technique that environmentalists reject due to its impact. The European Union, also critical of the practice, has been the recipient of 70% of exports.

While oil extraction will reach a record figure of 12.9 million barrels this year, more than double what the country produced a decade ago, a mega LNG export plant is being built in Louisiana with an investment of $20 billion. Once operational, it will have a capacity of 20 million metric tons per year. “We must face the fact that, due to the marginalization of Russia, the U.S. is now the largest exporter of LNG in the world. And we are going to maintain that status for years and years. That gas has played an absolutely critical role over the past year in helping European energy security, in filling the hole created by Putin’s militarization of its energy resources,” said Geoffrey R. Pyatt, Assistant Secretary of State for Energy Resources, in a recent call with reporters. “So I don’t see a contradiction in the fact that the U.S. continues to have a powerful energy sector, because we are working as much as we can to decarbonize that sector, manage emissions and develop new opportunities for technologies such as the production of clean hydrogen.”

An initiative that consecrates U.S. hegemony

The environmental initiatives of the Biden administration are part of a framework of protectionism — and even a certain degree of autarky — that runs through the president’s economic program. The CHIPS Act was aimed at incentivizing local production to overcome dependence on China, and the Build America, Buy America Act invites citizens to consume products made in the United States.

The IRA received a lukewarm response last year at COP27 in Egypt, even provoking quarrels with partners and allies close to the United States. It is worth remembering the reproach that French President Emmanuel Macron directed at Senator Manchin: “You are harming my country,” he said, hinting that the IRA is expected to redirect billions in clean energy investments away from Europe and toward the United States as multinationals pursue the legislation’s generous benefits. The IRA, in short, underpins the industrial hegemony of the United States in a context of maximum rivalry with China, the other major global emitter. At the recent APEC summit in San Francisco, Washington and Beijing agreed to resume their cooperation to accelerate the transition from fossil fuels to renewable energy sources.

“The IRA is the most important environmental legislation in the United States since the Clean Air Act of 1970, and the most important climate policy in history,” says Dallas Burtraw, a senior researcher at the non-profit organization Resources for the Future. “There is great uncertainty about what will be achieved between now and 2030, as the U.S. faces similar challenges to the E.U. in authorizing and siting transmission and new renewable resources. In the long term, the repercussions will be considerable. We estimate that in the electricity sector, which is the most important one in this decade, the IRA will take the U.S. approximately halfway to meeting its pledge by 2030. In addition, it puts in place an infrastructure that can be leveraged by other policies and by the states.”

The question some experts are asking about the IRA is, why address the climate threat with subsidies rather than, say, a tax on greenhouse gas emissions. The answer is, because taxes were not going to get approved by Congress, while the IRA did, if by a very narrow margin. And the role of industries likely to receive subsidies was an incentive, not a drawback; in fact, it was the only thing that made the measure possible. But the current precarious political balance could be blown up if a Republican wins the White House in November 2024. Trump or DeSantis do not differ in their environmental policies, which collide head on with Biden’s initiatives. While in office, Trump withdrew the United States from the Paris Agreement in 2017. However, Burtraw emphasizes, “it is important to highlight that, for the most part, the IRA establishes incentives that will be long-lasting and that will be hard to get revoked by a future administration.”

“Support for clean energy infrastructure and incentives for businesses and consumers are crucial elements of any global policy strategy, but they cannot do all the work alone,” adds the expert. “They must be complemented with regulations or prices. This should be the next step in the United States.”

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