Today on April 30th, Biden will have been President for 100 days. The Biden-Harris administration has had an impressive first hundred days in office and the renewed leadership of the US on the world stage has been felt within the area of climate action.
The United States is the world’s largest economy and the second-largest emitter of CO2 behind China. Widely regarded as the global hegemon, the US bears a great deal of responsibility in leading the fight against climate change. Biden made many ambitious climate pledges during the campaign and certainly has a lot to live up to. He campaigned on a pledge to reach net-zero emissions before 2050, in line with the Paris Agreement, which he took executive action on to rejoin on the first day of his presidency. On Earth Day last week, the administration announced a new target of 50%-52% reduction in GHG emissions from 2005 levels by 2030.
The corporate sector can expect more stringent regulation, financing for sustainable growth, and possibly a carbon tax. As more companies are ramping up their climate ambitions, corporate climate advocacy will continue to be important to ensure collaboration between the public and private sectors. Right now, the best thing all businesses can do is get out ahead of upcoming regulation by ensuring a sustainable transformation per the Paris vision.
Status after 100 days: Executive action and international leadership
In the four years of abdication from American leadership, the world did not make very much progress at all in meeting the goals outlined in the Agreement. In addition to leaving the Paris Agreement, President Trump managed to roll back over 100 pieces of climate legislation and called climate change a “hoax”.
In his first two weeks in office, Biden signed a significantly higher amount of executive actions than his immediate predecessors to reverse the catastrophic decisions of President Trump. In addition to re-joining Paris, Biden revoked the permit for the Keystone XL pipeline, paused new oil and gas leasing on US lands and waters, and broadly elevated climate change as a national security and foreign policy priority. Biden also created a National Climate Task Force and appointed John Kerry as Climate Envoy to facilitate international climate cooperation.
On Earth Day last week, Joe Biden invited 40 world leaders to a virtual summit to discuss the climate crisis, in an attempt to regain America’s position as a global leader in the fight against climate change and pressure other countries to take action. The summit includes the heads of state of China and Russia, as they are part of the highest emitting group instrumental in achieving the goals set for 2030 and 2050. Overall, the summit’s participating countries accounted for 82% of the world’s total carbon emissions, and for once it seemed as though the US and China were on a friendly footing.
At the Leaders Summit, the United States announced its commitment to achieving a 50%-52% reduction in GHG pollution from 2005 levels by 2030. This ambitious target will pick up the pace on emissions reductions considerably, as they have also set a goal to reach 100% carbon pollution-free energy by 2035. These pledges are built on a 2 trillion US dollar proposal meant to catalyze the transition to clean energy.
Businesses operating in the US should expect stricter standards
John Kerry, the US’s Special Presidential Envoy for Climate, has said that the President will issue an executive order on climate disclosure requirements, aimed at shifting the allocation of capital to green investments.
With the administration’s economic plans expected be to align with Paris, businesses must at least get ahead of this regulation by committing to reaching net-zero emissions by 2050. Out of all the companies in the S&P 500 stock index, 215 have not set a single climate target, and only about a third of companies have set ambitious targets.
While voluntary standards are a great first step, they must be enforced by government legislation, standards, and reporting metrics to ensure accountability. If not, there is no way of ensuring companies will stick to their ambitious commitments for which they usually get media attention and praise.
The importance of corporate climate advocacy
To achieve a net-zero world, we need corporate climate advocacy. The We Mean Business Coalition works to catalyze business action and heighten policy ambition to accelerate the zero-carbon transition in the US. So far, 2,159 American companies have committed to bold action and 1,327 of them have committed to the targets of the Science Based Targets initiative.
The Coalition sent a letter to the Biden administration on behalf of over 300 American businesses and investors stating “a bold 2030 target is needed to catalyze a zero-emissions future, spur a robust economic recovery, create millions of well-paying jobs and allow the US to ‘build back better’ from the pandemic”.
A significant portion of the business sector would like their voluntary climate action to be government-mandated and accounted for. They view government mandates as a key component to accelerating the transition to a carbon-free economy.
Stronger regulation for the financial sector and a price on carbon?
Europe has been introduced to a new taxonomy aimed at regulating the business sector and the financial sector, and the US aims to do something similar. The new administration intends to impose extensive financial disclosure rules on climate risk that would force thousands of businesses, including banks, manufacturers, and energy producers, to disclose information to investors. This would be a significant step in the fight against corporate greenwashing and is long overdue in the US.
Another significant measure would be to put a price on carbon, which is something the US’s northern neighbour Canada did. According to Janet Yellen, President Biden’s nominee to run the Treasury Department, President Biden supports effective carbon pricing.
A carbon-reduction enforcement mechanism is likely coming, and therefore companies should get ahead of the curve by beginning to do everything they can to reduce their emissions. Companies should begin accounting for their GHG emissions to help identify which aspects of their value chain would be most affected by such a financial enforcement mechanism and work towards decreasing them by e.g. setting Science Based Targets.
Time for the Biden Administration to push the corporate sector ahead
It wasn’t too long ago that 2020 was seen as the ‘climate deadline’ we had to reach like 2050 now is, and therefore the Biden administration and the business sector must act accordingly. While the actions of every country matter, the EU is further along in its climate action agenda than North America. As the second-highest emitter in the world and a global leader, the Harris-Biden administration must catalyze a private sector sustainability transformation in order to catch up.