Climate Watch 2021: Key Issues for Companies in a Changing Landscape
Companies must be prepared to address climate change in 2021 and beyond, as this issue is now top-of-mind for regulators, investors and consumers, creating momentum for both proactive corporate efforts and new policy initiatives at global, federal and state levels. Companies and activists have a chance to assess opportunities and risks and map out plans to engage and communicate in this evolving policy landscape. Here are four areas to watch in the United States in 2021:
#1: Biden’s bold climate agenda will face opposition in the Republican-controlled Congress.
Climate is one of four issues being prioritized by the Biden transition team for early action in 2021. The president-elect has proposed an ambitious $2 trillion climate action plan to escalate the U.S. transition to clean energy and reduce carbon emissions. The plan is not designed to be considered by Congress through an omnibus climate bill, but rather through an array of measures tucked into other legislation.
If Republicans hold the Senate, Biden will have difficulty enacting his bold climate agenda as envisioned. In some areas, he can act without Congress through regulatory action and executive orders, but as Trump discovered these actions can invite judicial challenges. Complicating the climate agenda is the need for Biden to prioritize the pandemic response and economic recovery — both of which will require compromises with Republicans and may drain political capital needed to pass climate measures.
#2: Tax policy will continue to shape climate policy.
Tax incentives are an important component of U.S. federal policy to incentivize corporate and individual climate action. Renewable energy credits have helped make wind and solar production commercially viable, while tax credits have helped consumers shift to electric vehicles. Biden proposes to expand or extend renewable energy, residential energy and electric vehicle tax credits. He proposes to end subsidies to fossil fuel companies and U.S. financial support for foreign coal-fired power plants.
#3: Beyond federal action, states, localities, utilities and the private sector will continue climate and energy activity.
Biden has proposed a mix of federal spending and regulatory action on energy and climate designed to escalate a U.S. transition to clean energy in the transport, electricity and building sectors, create new jobs, invest in next-gen technologies, strengthen infrastructure and mitigate the climate impact on disadvantaged communities. If Biden’s climate agenda stalls in Congress, state announcements such as California’s decision to phase out gasoline-powered vehicles may become more common.
Several large companies have made carbon-neutrality commitments. Companies are under greater pressure from investors to report on climate business risks and from their employees and customers to make good on their sustainability commitments. Earlier this year, BlackRock, the world’s largest asset manager, said it would avoid investing in companies that pose serious climate risks.
#4: The global policy landscape is shifting, and this is a critical moment for U.S. leadership.
Biden has pledged to bring the United States back into the Paris climate agreement and advance domestic achievements that he can take to multilateral summits in 2021 to demonstrate U.S. leadership, including next year’s COP-26, G20 and G7 summits. In addition, Biden would seek to include strong climate provisions in any future U.S. trade agreements, but he’s unlikely to pursue these in the near term.
Other countries are stepping up action on climate. The European Union is advancing a green action plan for the bloc to be climate neutral by 2050. China, South Korea and Japan have announced commitments toward carbon neutrality. The World Bank and IMF are urging countries to build climate action into their pandemic and economic recoveries.
Article edited by Jillian Nystedt and Nicole Sheehan.
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