The announcements that came out of President Biden’s international climate summit last month left most of us wondering, What’s next? U.S. policymakers are engaging the public’s increasing interest in climate solutions with an interesting mix of bravado, boldness, and pragmatism.
And the federal approach leaves room for oil and gas companies to participate.
Let’s not miss the window of opportunity.
Both of these things are true:
- President Biden has made bold, unprecedented commitments to address carbon emissions.
- U.S. leaders have embraced the complexity of changing our energy system; this gives oil and gas leaders an opportunity for leadership.
Here are the key announcements that came out of, adjacent to, or rippling from the climate summit:
- New emissions targets. President Biden announced that the U.S. would seek to cut greenhouse gas emissions by 50-52% by 2030 relative to 2005 levels, roughly twice as ambitious as the previous target of a 26-28% cut by 2025 set during the Obama administration. These announcements have been met with equal parts skepticism, critiques that they do not go far enough, and appraisals that they are impractical.
- International climate financing. The White House released a plan to boost international climate financing to help developing economies reduce emissions and adapt to a changing climate. Relevant to the debate on who should get the remaining carbon budget which I covered in my podcast with Rose Mutiso, the White House plan directs U.S. agencies to ” seek to end international investments in and support for carbon intensive fossil fuel-based energy projects.” However, it says that in “limited circumstances,” there may be “compelling development or national security” reasons to continue support for fossil projects. It also encourages the Treasury Department to work with OECD partners (developed economies) to have their export credit agencies “reorient financing away from carbon-intensive activities.”
- Big banks weigh in. Glasgow Financial Alliance for Net Zero (GFANZ) — an industry-led and United Nations-convened group of more than 160 banks, asset managers, investors, and insurers collectively managing $70 trillion in assets — launched its own initiative to accelerate the transition to net-zero by 2050. GFANZ aims to boost private funding for clean tech as well as press the emissions-intensive companies that its members work with to cut emissions. The banks involved agree to ensure that emissions from their lending and investment portfolios are on a pathway to net zero by 2050, with interim targets beginning no later than 2030. Critics of the announcement want to see banks defund these activities. Not all large U.S. banks are onboard, even though most have made net-zero pledges.
- Congress gets busy. Two energy tax bills (Wyden and Crapo & Whitehouse) could reshape how we invest in energy technology. Infrastructure bill negotiations are underway. And, the Senate notably voted to restore methane regulations on the oil and gas industry with Republican and vocal industry support. (The House still must vote on this measure before the President can sign it.)
Seize the day
The new energy paradigm has arrived. President Biden’s recent international climate summit merely marked the occasion. If any oil and gas leader had doubts about the shifting paradigm of the energy future, the flurry of investor, policy, and public opinion activity has left no room for doubt.
What are game-changing oil and gas leaders doing in response? They are:
- Positioning themselves at the front of the parade;
- Supporting innovative and bar-raising legislation;
- Investing in the innovations of the energy future; and
- Articulating efforts to reduce emissions today.
As I recommended in my Both True about Bill Gates’s new book, we need to show up again and again for meaningful conversations with policymakers on the future energy system. Adamantine’s policy expertise now includes Kayla Dolan, a former adviser to Senator Bill Cassidy.
The public’s expectations are driving disruptive change in the investment and policy environment shaping the energy system right now. Call us to schedule a strategy session to map your company’s risks and opportunities.
Wishing you an effortless and almost-boring day,