As the Biden administration settles into its first weeks, a clear emphasis on climate change governance has already unfolded, creating significant momentum for mandatory climate change regulation to roll throughout the U.S. economy.
In the White House list of priorities for the new administration, COVID-19 took the top spot. Climate change came in second place ahead of perennial issues of importance such as racial equity, the economy, health care, and immigration. In placing such a high priority on climate change, the White House promised swift action. That velocity was felt in a broadly scoped executive order issued within one week of the new administration’s inauguration that has begun to direct agencies toward increasing oversight and regulation under the umbrella of addressing global climate change. In the weeks, months, and years to come, a teaming of the federal and state executive branches, financial systems, and the corporate world will be oriented toward lessening the effect of climate change. As this prioritized effort is emphatically engaged and momentum builds, industry and organizations across the nation prepare for the impact of climate change regulation.
The Push Begins (Again) at Paris
On February 19, 2021, the Biden Administration officially re-committed the United States to the Paris Agreement under the United Nations Framework Convention on Climate Change. This Agreement is firmly within the common lexicon these days, but there are still many who are unaware of its elements. Signees to the Agreement must define, disclose, measure, and comply with nationally determined contributions (NDCs) of carbon emissions the international goal of which is to limit the rise of average global temperatures to less than 2 degrees Celsius compared to pre-industrial levels. While the Biden administration has yet to announce the U.S. NDCs, policies offered in the climate change executive order lay out targets the U.S. will be rolling toward, among them are these three:
- Double offshore wind production by 2030
- Eliminate carbon-dioxide emissions from the power sector by 2035
- Reach a carbon-neutral U.S. economy by 2050
The stated policy targets would mean great benefit to industries that generate carbon credits or produce renewable energy fuels (e.g., biogas, agricultural byproducts), and would imply the need for substantial innovation for carbon-intensive industries (e.g., steel, aviation) to develop greener alternative approaches. The policies seen in the executive order will require more than voluntary adoption by several ambitious sectors if they are to materialize. Such targets will need broad integration and enforcement in every carbon-using or -emitting corner of the nation, with oversight by a force of regulators in every sphere of influence in the federal executive branch. That force is exactly what the Biden administration is determined to apply.
A Government-wide Force is Applied
In the climate change executive order, the Biden administration, understanding the need for a comprehensive regulatory framework to achieve the pending NDCs, created two significant layers of domestic governance in the U.S. A National Climate Task Force was created made up of the heads of essentially every executive branch office and department including the Departments of Interior, Energy, Agriculture, Labor, Homeland Security, Defense, and the Environmental Protection Agency (see the whole list here). In addition to the Task Force, a new White House Office of Domestic Climate Policy was established, headed by a National Climate Advisor (currently Gina McCarthy, former head of the Obama-era EPA). As a stated national priority with clear directive from the White House, the amount of regulatory potential energy available within the new Task Force and Climate Policy office seems enough to address every sector of the economy and every industry therein.
The federal executive branch will not be pushing alone, however. Half of the nation’s governors have already committed their executive powers to aligning their individual states economies to the Paris Agreement through the U.S. Climate Alliance. In those 25 states already moving with Paris’ push, the federal force will generate the short-term flywheel synergy to take significant steps into a carbon-mitigated and -regulated future.
The Corporate World Adds Its Weight
The force of the entire executive branch and half the nation’s state agencies is substantial, but more weight will be added to their efforts to build momentum toward regulated carbon neutrality across the country. The financial sector, investors, banks, asset managers, and many large corporations have already committed their organizations to the vision of a carbon neutral future. BlackRock, managing of $7 trillion dollars in assets, has pledged to emphasize climate change and sustainability in its investments and conducted a survey of its clients in which a majority stated that sustainable investing is fundamental to their processes. BP, one of the largest oil and gas companies on the planet, has committed to being carbon neutral by 2050.
In addition, many corporate and municipal organizations are already integrating reporting and compliance frameworks such as the CDP (formerly the Carbon Disclosure Project), the recommendations of the Task Force for Climate-related Disclosures (TCFD), and the UN Sustainable Development Goals (UN SDGs). As momentum builds toward climate change regulation, there will be little if any counter-push from financial managers, large global conglomerates, and the myriad organizations who are already moving toward a carbon-neutral paradigm.
Inertia’s Implications
While some sectors will have greater scrutiny initially under the government-wide climate change policies already revealed (e.g., power, aviation), every sector of the U.S. economy will eventually be impacted by the nearly self-sustaining momentum of climate change regulation being generated in these early days of 2021. In large measure, organizations in the U.S. are already accepting climate change commitments and carbon reporting voluntarily and will be well prepared if such programs are mandated through federal and state policies. These organizations have begun the investment into defining their own goals and deploying solutions to reach them. For organizations that have yet to significantly address carbon and climate change voluntarily, early investment toward understanding their exposure to climate change impacts and regulatory risk and/or opportunity would be prudent. Three steps would start the process for those organizations looking to prepare:
- Evaluate how carbon usage, emissions, and offsets would best be assessed across multiple scopes of your operations and value chain.
- Determine how best to frame your goals within UN SDGs and integrate climate change frameworks into your existing sustainability and risk reporting programs.
- Evaluate your risk to climate change impacts and identify opportunities to determine where adaptation planning, disclosure, and mitigation would be appropriate.
Our climate change, sustainability, and resilience team is comprised of experts across the nation who advise on adaptation planning, sustainability reporting, climate risk and opportunities, and strategic approaches to help you prepare for a changing climate – and get ready for climate change regulation.
