According to PWBM, Biden’s infrastructure and R&D plans represent $1.6 trillion in new spending over the ten-year budget window. Those plans include new investments in Water infrastructure, High-speed rail, Municipal transit, Other green infrastructure projects, Clean energy R&D, “Breakthrough” technology R&D, e.g., 5G and artificial intelligence. Democrats will have to maintain their majority in the House of Representatives and to take back the Senate with a comfortable majority in order to pass the legislation supporting such large spending programmes.
“Getting to a 100% clean energy economy is not only an obligation, it’s an opportunity.” Biden’s plan for a Clean Energy Revolution and Environmental Justice aims to reach net-zero emissions no later than 2050, which would put US environmental ambitions on par with the latest Green Deal proposal put forward by the European Commission, through a legislative enforcement mechanism in 2021 that would achieve legally-binding emissions reductions.
More specifically, Biden’s Climate Plan is a watered down and more realistic version, even disappointing in a way, of the Green New Deal championed by Bernie Sanders and Alexandra Ocasio-Cortez (AOC) contains such provisions as investing $400 billion over ten years in clean energy R&D. supporting the deployment of more than 500,000 new public charging outlets by the end of 2030, alongside reducing the carbon footprint of the U.S. building stock 50% by 2035, requiring aggressive methane pollution limits for new and existing oil and gas operations; developing rigorous new fuel economy standards and ensuring that 100% of new light- and medium-duty vehicles will be zero emissions. The plan also states that a Biden Administration would enhance tax incentives for CCUS (Carbon Capture, Use and Storage).
The second pillar of this plan, Environmental Justice, would entail developing solutions for environmental injustices affecting communities of colour, low-income communities, and indigenous communities, as well as requiring fossil fuel companies and other polluters to bear the full cost of their climate pollution and pursuing anti-pollution case to the fullest extent permitted by law. However, Biden does not go as far as banning the fracking industry – one of the core tenets of the original Green New Deal – as he reasserted in August at a meeting in Pennsylvania, a state that has a sizeable shale oil & gas industry with tens of thousands of related jobs.
Biden’s climate plan builds largely on the environmental policy and legacy of the Obama-Biden Administration, which doubled fuel economy standards for cars and trucks and subsidized renewable, clean energy, while playing an influential role in the conclusion of the Paris Climate Accords. However, a large part of Biden’s climate related public investment of $1.7 trillion is channelled through its infrastructure plan making it difficult to disentangle the expenditures that are specifically related to the climate change. Chances are there is a significant double counting across the different plans.
As discussed by the IMF, in the second chapter of its upcoming October 2020 Fiscal Monitor, in addition to its direct effect on jobs, public investment has the potential to boost growth and increase employment through the usual macroeconomic interlinkages. Medium- to long-term multipliers for public investment have often been estimated to be larger than 1.0. However, the IMF warns that such results are not guaranteed, and that these fiscal multipliers are also sometimes estimated to be close to 0. The quality of investment matters and this is reflected in the macro estimates. Overall there is no clear cut evidence that public investment crowds in or crowds out private investment. But the push toward a Green economy by the public sector could have a signalling effect on the private sector by shifting incentives and serving as a catalyst for investments by the latter. In a workpaper published in 2019, Matteo Deleidi, Mariana Mazzucato. and Greogr Semieniuk, find that public investments not only have a positive but also consistently the largest effect on private investment flows relative to feed-in tariffs, taxes and renewable portfolio standards in general, and for wind and solar technologies separately.
On the international level, the Biden plan states that “as the U.S. takes steps to make domestic polluters bear the full cost of their carbon pollution, the Biden Administration will impose carbon adjustment fees or quotas on carbon-intensive goods from countries that are failing to meet their climate and environmental obligations.” This would mirror a similar carbon adjustment tax proposal that has been aired and is currently being ironed out by the European Commission. It would also strive to reward countries that set high climate change objectives through additional financing and debt forgiveness and form a coalition to “hold China accountable to high environmental standards in its Belt and Road Initiative infrastructure projects“. Hence, one thing is sure: whoever wins the presidential election, Trump or Biden, will continue to pursue a China containment policy. This is arguably one of the few issues over which there is a bipartisan consensus. We will tackle this important issue more in depth next week.