The Strategist

Ambitious action or a complete reversal? The US election's impact on our climate

In a week, the citizens of the USA will once again decide who will lead the country for the next four years. After President Joe Biden announced his withdrawal as the Democratic candidate in July, Kamala Harris brought new momentum to the race for the White House. With her, a woman could hold the highest office in the US for the first time. But what does the election on November 5th mean for the country's climate policy? What do the two candidates stand for, and what impact could their respective presidencies have on global efforts to achieve climate goals? This election could be pivotal in the fight against climate change.

Data
Autore
Cedric Baur, Equity Analyst, LGT Private Banking
Tempo di lettura
10 minuto

Trump Harris Climate
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"Drill, baby, drill" 

The Republican presidential candidate Donald Trump, who regularly dismisses climate change as a "hoax" and initiated the withdrawal from the Paris Climate Agreement during his first term in 2017 (though the US ultimately did not leave), generally shows little interest in climate protection. His current agenda contains no measures to reduce emissions at all. In the current campaign, he repeatedly communicates plans to reverse existing regulations and laws, such as the Inflation Reduction Act (IRA). Trump emphasises that under his leadership, no new funds will be spent on "new green fraud ideas." He wants to exit the Paris Climate Agreement and boost fossil fuel production to keep energy prices low, following the motto "drill, baby, drill," as stated in the Republican platform. Trump also wants to end subsidies for electric cars from the first day of his term. Import tariffs on electric cars produced in China are to remain at least 100%, but could be expanded to include those made in Mexico. The Environmental Protection Agency (EPA) would likely be restricted in its activities and receive a significantly lower budget, limiting its work on environmental standards and regulations. Reporting by publicly traded companies on climate factors could also be rolled back, affecting the work of the Securities and Exchange Commission (SEC). If companies do not continue voluntary reporting, comprehensive sustainability analysis by investors would be difficult to implement.

If Trump is re-elected, fossil fuel companies are likely to benefit from a weakening of climate policy, with more generous issuance of drilling permits for oil and gas projects and a relaxation of environmental regulations expected. US automakers might also fare better, facing fewer restrictions on emission limits and continuing to produce combustion engines. Companies in the renewable energy sector, especially those reliant on Chinese suppliers, might face tougher times. However, a repeal of the IRA is unlikely, as Trump would need a majority in both the Senate and the House of Representatives, which current polls suggest is improbable. Additionally, a significant portion of IRA funds currently flows to Republican-governed states, which would likely want to avoid losing federal funding and jobs. An exit from the Paris Agreement would hinder international cooperation for more climate protection, as a key partner in the fight for global emission reductions would be absent for at least four years. China and other BRICS countries might try to fill this gap and promote greater energy independence, including from fossil fuels. However, some US states would continue to pursue their own climate agendas. States like California and New York, in particular, should not be underestimated; they are likely to continue their climate policies even if Trump is re-elected, as they did during his first term, meaning renewable energies would continue to advance there. If the IRA largely remains, this could also apply nationwide. According to the think tank "Carbon Brief," US emissions could slightly decrease by 2050, but overall climate goals would be significantly missed with a new energy policy. Globally, the Paris Climate Goal (+2.0°C above pre-industrial levels, ideally +1.5°C) would be unattainable under another Trump presidency. In times of increasing environmental disasters, this would be a disastrous signal.

The clock is not ticking, it's striking

In contrast to her opponent, Kamala Harris is not a climate skeptic and takes the dangers of climate change and the necessary changes very seriously. Not least, she was the decisive vote in the Senate for the passage of the IRA in 2022. Biden's previous climate policy is likely to continue largely under Kamala Harris as president, as she was also an advocate of his climate policy as vice president. The Democrats see climate change as a real threat and not a possible hoax. Therefore, the US climate goals are likely to be confirmed or even increased, which would be seen as a clearly positive signal internationally. Last year, Harris advocated for ambitious climate protection at the climate conference in Dubai, recognising that time is running out to curb global warming. CO2 emissions could therefore decrease by 50-52% by 2030 (based on 2005 levels) and reach net zero by 2050 as planned. The IRA is likely to remain an important instrument of Harris's policy, with tax credits available until the end of 2032. Most of the funds for companies can still be accessed. However, the IRA alone will not be enough to fully achieve the Paris climate goals. Further efforts at the national and state levels will be necessary. Programmes like the IRA could be extended, expanded, or supplemented. For this, Harris would need a majority in both chambers, the House of Representatives and the Senate, which is currently uncertain. Whether there will be bipartisan support for new programmes is also unclear. However, Harris could still cement the energy transformation by 2029 with her agenda, as the IRA would not be reversed or significantly adjusted. After that, a reversal would be very difficult. Additional measures are likely to aim at strengthening the EPA, such as stricter regulations on clean air, standards for greater energy efficiency, and methane emissions. Subsidies for electric vehicles and a ban on combustion engine vehicles are also likely to be further promoted. Modernising the power grid and accelerating approval processes to expand renewable energies and distribute them across the country with modern infrastructure would also be priorities. Through increased electrification, accelerated expansion of renewable energies, and grid infrastructure, the power grid under Harris could be CO2-neutral by 2030, whereas Biden had aimed for 2035. However, Harris would not be a pure climate president; for example, she has spoken in favor of fracking gas as a cheap energy source, which could gain her votes from swing voters.

With Kamala Harris as president, the USA would likely remain a reliable partner in international climate policy. They would continue to play a significant role in climate conferences and encourage both China and developing countries to increase climate protection to keep the temperature rise as low as possible. The +1.5°C goal is probably no longer achievable, but all efforts should be made to limit global warming as much as possible. This requires appropriate international cooperation and ambitious, implementable plans. With Harris, companies in the renewable energy sector and the necessary infrastructure would continue to benefit and accompany the grid expansion over the next few years. The tax credits from the IRA will support this. Automakers are likely to continue advancing their plans for electric cars and likely say goodbye to the combustion engine for good. With appropriate tariffs, which President Biden has already introduced, manufacturers would be protected from Chinese competition. For companies in the energy sector, it would be important to approach their own transformation much more ambitiously. However, natural gas would remain an important energy source for Harris as a complement to renewable energies. New drilling permits and land allocations could be issued more cautiously. If Harris is re-elected after four years, she would have a total of eight years to decisively shape the sustainable development of the USA and compete against international competition. The first four years of this mammoth task could begin soon.

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