After a period of promises, now has come the time for concrete commitments. At the Leaders Summit on Climate, held on April 22nd and organized by Joe Biden, the president has the opportunity to move past rhetoric and take action.

An airliner departs for Paris-Charles de Gaulle Airport (CDG) in Berlin on November 8, 2020 (Photo by Odd ANDERSEN / AFP)
An airliner departs for Paris-Charles de Gaulle Airport (CDG) in Berlin on November 8, 2020 (Photo by Odd ANDERSEN / AFP)

In a flurry of initial presidential decrees, Joe Biden included one that brought the United States back into the Paris Agreement. With John Kerry (the former Secretary of State to Barack Obama) heading climate diplomacy for the country, The United States has put together an experienced team. Its first full-scale test arrives with the Leaders Summit on Climate hosted by the White House on April 22nd and 23rd, eight months from the upcoming COP in Glasgow.

Biden’s credibility amongst his peers is at stake, undermined by the various flip-flops on climate negotiations that the United States has committed over the years: adopting the Kyoto Protocol under Clinton in 1997 and then abandoning it during the Bush administration in 2001; Obama’s commitments in Copenhagen in 2009 that congress rejected the following year; the ratification of the Paris Agreement in 2016 that was later denounced by Donald Trump when he took office.

 

First condition for credibility: put climate priorities in order

We can count on the Biden/Kerry ticket to reaffirm the aim of achieving climate neutrality by 2050. It has now become a mandatory component of climate diplomacy. The crucial question, however, concerns the 2030 mid-term goal of achieving it.

The contribution offered by the Obama White House in 2015 as part of the Paris Agreement dealt with a 26-28% decrease in emissions between 2005 and 2025. If the Biden administration confined itself to this objective, it would demonstrate a complete lack of ambition. The administration has already set the tone by stating before the summit that it will reassess its international commitments. But how high should the new steps towards the goal be set?

Adopting the proposals made by the economist Keohane, who served as special assistant for energy and environment to Barack Obama, a coalition of 300 company executives has recommended dropping emissions by 50% between 2005 and 2030. This would represent an effort extending to 2030 comparable in scope to the 55% drop in relation to 1990, now the goal of the EU (see graph below).

 

All greenhouse gases, excluding changes to land use (estimated 2019).

 

The United States has set its emissions reduction objectives with regard to 2005, and the EU with regard to 1990. The European Union’s 55% reduction objective with regard to 1990 represents an effort amounting to -51% with regard to 2005, which is a level close to the goal proposed by Nathaniel Keohane for the United States.

The first test for Joe Biden’s credibility will involve this figure. It will be a bad sign if the United States remains below it. If the US sets a higher bar, that would be a new warning for Europe, added to the one embodied by America’s stimulus package, which shows Europe to be more timid when compared to the Biden administration’s effort to inject billions of dollars into the American economy.

 

The test of passing it through Congress

The second credibility test will be the most decisive one. This will play out in Congress where Joe Biden needs to pass theAmerican Jobs Plan, which seeks to inject more than two trillion dollars worth of investments into the economy. Of these amounts, half of them (about 0.6 % of the GDP) are directly earmarked for the transition to a low-carbon economy with two primary objectives: completely de-carbonize electricity production by 2035 and shift the automotive industry towards producing electric vehicles only.

While this may be a step backward from the president’s campaign promises, this plan would supply a great deal more to low-carbon transition initiatives than had ever been considered by previous democratic administrations. But the plan’s path will become a difficult one in the senate where the democrats only have a single-vote majority. Negotiations will take place in the senate chamber and could undercut initial ambitions.

Even if the plan comes away from a senate vote intact, it may still not be enough to achieve the set objectives. It offers an impressive collection of incentives to invest in low-carbon actions, but it is not as forceful when it comes to the most complicated aspect of the transition for major energy producers: fossil fuel divestment.

 

CO2 taxation, a major weak spot in Biden’s proposals

As the economist Robert Stavins has analyzed, it is easier for Congress to reach a compromise on recovery measures involving tax write-offs and subsidies than on the key instrument in ramping up the fossil fuel phase-out: a carbon tax. Pulling out of this measure, however central (yet vague) it was in the campaign, is a major weakness in the current proposals.

This type of tax would first make it possible to secure additional expenses for the federal budget, a major symbol of credibility in itself. The current facilities for monetary financing and resulting low interest rates are difficult to project forward to 2030.

Above all, an ambitious CO2 price point would accelerate the phasing out of fossil fuels due to their increased cost. This step back from fossil fuel addiction poses a major restructuring problem for various industries in an economy where large parts of it rely on the availability of cheap, locally extracted fossil fuels.

 

 

During his presidency, Obama began phasing out the use of coal in the electricity sector, which the Trump administration was unable to reverse. Despite the introduction of standards on automotive vehicle emissions and blocking the expansion of the Keystone Pipeline, his administration did not launch any equivalent initiatives on oil or fossil fuel gas.

Biden’s real credibility will become clear if he manages to speed up the break with fossil fuels by widening the phase-out’s scope to include oil and fossil fuel gas. This is the mother of all battles. Without an ambitious carbon tax, this battle will involve an increasing number of regulations that will quickly become more unpopular than a correctly established and redistributed carbon tax.

 

Possible ripple effects: low-carbon transition and access to development

Externally, the potential ripple effects of Biden’s summit chiefly concern China and the EU. The EU’s position is already known. The question is to know if the Leaders Summit on Climate will help clarify China’s position.

As the source of more than a quarter of the world’s emissions, China’s voice has a far-reaching impact, but it has gone completely silent. During the United Nations General Assembly in September 2020, president Xi Jinping showed his support for climate neutrality by 2060. This was a step in the right direction. At the same time, China’s domestic regulations that froze investments in coal were relaxed. In 2020, for the first time since 2015, investments in new means of thermal electricity generation increased. This was a step backward that could call into question the sharp rise of Chinese emissions over the last decade.

Clarifying China’s position would be a significant result of the summit. Its most important ripple effects however concern the “rest of the world,” which has come out ahead of China, becoming the biggest contributor to the rise in global emissions (see graph below).

 

Data source: J. G. J. Olivier et J. A. H. W. Peters, “Trends in Global CO2 and total Greenhouse Gas Emissions: 2019 Report “, report no.  4068, PBL Netherlands Environmental Assessment Agency, La Haye, 2020.

 

In 2018, the top three greenhouse gas producers (China, the United States and the European Union) represented 47% percent of the global greenhouse gas emissions. The “rest of the world” represented 53%. It’s this group that has contributed the most to the increase in global emissions over the last decade.

 

Reintegrating countries that produce and export fossil fuels

In this group, the countries producing and exporting fossil fuels are those that have increased their emissions the most. Since COP-1 in Berlin in 1995, they have procrastinated on addressing the issue by slowing down or blocking negotiations. They need to rejoin the process as it will be impossible to aim for a global warming target lower than 2 °C without drastically reorganizing their economies. In political terms, this involves an objective as complicated as including Wyoming or North Dakota in the American effort to advance in the low-carbon transition…

Developing countries still do not weigh much in global emissions due to their low per-inhabitant emissions production. If they follow the same historic growth models of the past that rely on fossil fuels, they will become the largest global emitters. To avoid this scenario, these countries must immediately launch their low-carbon transition efforts through a massive investment in order to expand access to energy, which a large part of their population is deprived of.

If the White House summit starts off in this direction, it could become a major inflexion point in international climate action.

 

 

The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.

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