Biden’s green deal is really a loaded weapon for trade war against China
Mr Biden’s original ‘build back better’ manifesto was $1.7 trillion over ten years. It is now $2 trillion over four years. The sedate waltz is skipping into a fast tarantella.
All talk of a fracking ban has been dropped in the final text, wisely if the Democrats wish to win the battleground states of Ohio and Pennsylvania, where the Utica-Marcellus shale basin has fired a rust-bowl revival. Mr Biden’s core advisers are Obama veterans who oversaw America’s transformation from the world’s biggest energy importer into an oil and gas hyper-power. They are proud of it.
There will be tougher methane rules and no new permits on federal land – a bone thrown to the Sanders-Warren camp – but otherwise natural gas will be cosseted as a post-coal ‘bridge fuel’. Helima Croft from RBC says support for gas will be carried out quietly “under-the-radar ”. Exports of US liquefied natural gas (LNG) will remain a foreign policy tool, chiefly to break Gazprom’s pricing power in Europe.
Mr Biden has thrown in a pledge for carbon capture and storage, the fossil lifeline. Gas companies have discovered to their delight that they might do nicely under a President Biden after all. “The plan is a masterpiece,” says LNG pioneer Charif Souki.
Oil will fare less well. The Democrats will not attack it. They let it wither on the vine. America will be electrified instead with up to 200,000 miles of high-voltage transmission lines along existing rail and highway routes, with 500,000 charging stations for electric cars by 2030.
A proto-Manhattan Project will seek to drive down the cost of grid-scale energy storage tenfold. There will be a push for fuel cells in trucking and freight, and synthetic green fuel for aviation.
Mr Biden’s new age Gosplan is not to my taste. Should the Democrats be pledging to install 500 million solar panels and 60,000 wind turbines over the next four years? Is such dirigiste planning the American way?
The laissez faire way is to set a carbon price that ratchets up predictably, letting business respond to the price signal, and letting Schumpeterian competition find its own answers. All former chairmen of the Federal Reserve and a cast of economists of all ideological stripes have backed HR 763, a bipartisan House bill for a carbon tax and dividend.
It starts at $15 a tonne and ratchets up $10 every year until CO2 emissions are almost eliminated. The money raised is rotated back into people’s pockets. The higher the carbon price, the bigger the cheque, and the poor do best.
Needless to say, Ursula von der Leyen’s variant in Europe aims to siphon off its carbon tax to fund the Commission’s apparatus. The EU seems to have learned little from the gilets jaunes and the sociology of revolt.
America’s Republicans have only themselves to blame for abandoning the field over the last four years. What could have been set in motion along free market principles will instead be structured with greater clumsiness by the central planners if Biden wins.
What is clear is that global energy order may soon be unrecognisable. Climate denialism in the White House has given political cover to coal burners and tree slashers everywhere, whether Xi’s China or Brazil’s Jair Bolsonaro. “Trump has been holding back the damn. If the US switches sides, it changes everything,” said Kingsmill Bond from Carbon Tracker.
The cost of abusing the global commons will become punitive for a lot of countries but Mr Biden’s howitzer is aimed at Xi Jinping. China released more CO2 and methane last year than the US, the EU, and Japan combined, and is adding an extra coal plant every two weeks in breach of promises.
Greenpeace says Beijing has let rip even since the warnings from UN scientists that CO2 danger thresholds are lower than originally thought and that we have just a decade to head off runaway global warming. China currently has 94 gigawatts of coal power in development, on top of 30 gigawatts added last year. It has also reverted to the worst form of industrial stimulus to counter the pandemic.
