Biden Years Promise Energy Evolution, Not Revolution
NOV 9 2020
The Biden-Harris Administration shows every sign of getting off to a quick start, including on energy/climate policy. As in the election, they appear to be adopting a centrist position, most especially promoting policies that will add jobs in some areas but not hindering others. Policies to seal leading abandoned oil and gas wells, for example, will give laid-off workers in the industry new opportunities without necessarily burdening the industry with the costs. (‘Who pays?’ is always the operative question.)
On the big questions that affect the petroleum industry—fracking, pipeline construction, carbon taxes—the Administration seems unlikely to act to their detriment, at least initially. There will no doubt be pressure on Biden from the progressive/left wing of the Democratic Party, but all indications are that he won’t attempt radical programs, such as banning fracking or gas in buildings. More spending for mass transit and renewable energy are all but certain, and farmers can expect money for either planting trees or growing crops for biofuels, but it’s an open question how much the pandemic’s increase in government debt will allow major spending programs. An infrastructure bill with money for roads, bridges and mass transit should move quickly through Congress, but longer term, opposition from conservatives will constrain major new spending.
Probably the first contentious fight will be over auto-efficiency standards (now called SAFE, previously CAFÉ) which had been set to increase sharply by the Bush and Obama Administrations, but which the Trump Administration substantially weakened, requiring annual improvements of 1.5% instead of the ambitious goal of 5%. American automakers and unions will generally prefer the weaker goal, while electric vehicle manufacturers (i.e., Tesla) which benefit from selling emission certificates will lobby for the stricter standards. California’s efforts to require application of the stricter standards for sales there, which the Trump Administration opposed, are more likely to be allowed to go forward.
Which highlights some of the challenges the Biden Administration will face in attempting to design and implement energy policies: nearly every new policy will have some losers as well as winners, along with ideological factions lining up for and against them. Although the Republicans might control the Senate, it will be by a slim margin, and moderate Senators can be expected to accept some compromises, most especially on an infrastructure bill. Spending or subsidies for renewable energy and electric vehicles will certainly meet some resistance, but the widespread employment of workers in the renewable sector will mean support for those programs even among some conservatives.
Interestingly, the current debate over about the closeness of the election should indicate the direction of the Administration’s policies, as some Democrats argue the party should have been more progressive and others blame about more radical progressive proposals for Republican gains in the House. In my opinion, the latter view will prevail and translate into a more moderate, gradual policy approach. This should mean that 2024 will find the energy industry evolved by hardly transformed. Contrarians might consider a bet on petroleum company stocks as fears of their demise prove once again to be exaggerated.