How the US commitment to lower emissions will affect the fight against climate change

US President Joe Biden has made tackling climate change a top priority. One of his first orders in 2021 was to appoint John Kerry as the first US Special Presidential Envoy for Climate. The Biden-Harris Administration have, since then, pursued an environmental agenda, backed by a push for clear regulations to move the American economy to a low-carbon path.

On 15 February the White House announced a string of environmental actions, including addressing emissions from harder-to-abate sectors like heavy industry and heavy-duty transport. These industries, which includes concrete, aluminum, steel, chemicals, and transport, are responsible for up to 30% of greenhouse gas emissions. If they’re not decarbonized, as advocated for by initiatives like the Mission Possible Partnership, staying within the 1.5 °C target will be very difficult.

This transformation will require a significant push for research and development (R&D), with innovations bent on driving down the ‘green premium’ – the current additional cost of choosing clean technologies over ones that emit greater amounts of greenhouse gases (GHG). The announcement, too, includes at least $9.5 billion for developing and adopting clean hydrogen technologies as well as new guidance on carbon capture and sequestration.

The Biden-Harris Administration is committing itself to a green public procurement strategy, which aims to give preference to private sector providers who use low-carbon products. Kerry, who launched the First Movers Coalition at COP26 in 2021, sees an empowered private sector as a central player in the low-carbon transformation.

World Economic Forum president, Børge Brende, has emphasized that “The transition to green procurement practices isn’t a cost burden for industries and the public sector, but something that creates long-term sustainable economic growth.”

Here's what the White House's recent announcement and such changes will mean for not only the green economic transformation but the battle against climate change.

Lukas Bester: What does the Biden-Harris administration’s plans to reduce emissions mean for the American economy?

Nathan Cooper: Governments are massive procurers of concrete, steel, aluminum, chemicals, and other products that have driven-up GHG emissions. The US federal government is the single largest consumer globally, spending over $650 billion on products and services annually.

The announced Buy Clean Task Force would work with federal agencies, and the Departments of Energy, Defense, and Transportation, to source low-carbon construction materials from American factories. The public purse’s spending power and influence will go a long way in incentivizing industrial players to produce products using low-carbon materials.

Mainstreaming a low-carbon transformation in heavy-polluting industries requires a mix of carbon-sensitive trade policies, strong public investment in research, development, and diffusion, and bold commitments from procurers that they will only by green. This will nudge private sector players to not just compete for government and company contracts but to innovate - driving down the costs of green technologies.

The role of government to drive and incentivise clean hydrogen and carbon capture technologies and further push for wind- and solar energy adoption, is crucial to this transformation. The Department of Energy hopes to reduce the cost of clean hydrogen by 80% to $1 per kilogram before 2030. To accomplish this, they’re pushing $28 million into R&D.

How does this move fit into the larger global effort to reduce emissions?

Cooper: The energy industry in developed economies have, to a certain extent, successfully addressed the ‘green premium’. Prices of solar power has been driven down by 80% since 2010 – it is now cheaper to produce than nuclear or coal. So too, the same period saw onshore wind production fall by 56%, while offshore wind fell by 48%. Half of all renewables, now, undercut fossil fuels. These gains are thanks to fervent R&D efforts to create better technologies, creative market-based interventions such as the UK’s contracts for difference, and market demand, which drove production of scale.

The COVID-19 vaccine development efforts are another excellent example of what can be done when public and private ambitions meet. The US used public-private partnership (PPP) policy to accelerate R&D and private firms produced COVID-19 vaccines at unprecedented speed. Here, we saw how the public sector provides attractive conditions to support private sector innovation.

PPPs can leverage the strengths of the public- and private sectors, simultaneously accelerating the creation of economies of scale. Applying the same logic to the green premium in the manufacturing industry is feasible and we should embrace the role of a proactive government therein.

This push by developed nations shouldn't create a two-tier system, however, where nations who have fewer resources get left behind. The G7 will meet later this year in Berlin, Germany, where much of the discussion will centre on enhanced collaboration to drive a low-carbon future. The G7’s Industrial Decarbonisation Agenda will create conditions among these nations to stimulate investment in green industries.

The fear, however, is that emerging nations may get left behind – a hot topic for the G20 sumit in Bali, Indonesia, in October 2022. Indonesia, like others, is experiencing rapid economic development but, while overtly vulnerable to the effects of climate change, is slow to phase out fossil fuels and heavy-polluting industries. If wealthy nations shift global trade standards to require low carbon targets, economies like Indonesia’s may suffer as a consequence.

Nevertheless, the US’s turnaround may serve as a valuable reminder of what ambitious leadership can accomplish. Less than 18 months ago, the US wasn’t even a signatory to the Paris Agreement. Now, it’s firmly taking up the mantle of being a green economy leader.

What more needs to be done?

Cooper: Half of the emissions reductions needed to reach the 2050 net-zero target relies on technologies that are still only prototypes or in early stages of development. IKEA’s CEO, Jesper Brodin, called the 2020s the most important decade in the history of humankind, emphasizing the need for upscaling of R&D.

McKinsey calculates that, to reach net-zero by 2050, we need an additional $3,5 trillion a year in capital spending to transform energy and industry systems. Bill Gates has pledged $1 billion for developing such technologies, emphasizing that the price of low-carbon solutions must be the same – or cheaper – than high-pollutant methods. For price parities in heavy-emitter industries to be global, we must address both the ‘ambition gap’ (promises made) and the ‘implementation gap’ (actions taken). Rich nations must work alongside developing ones to redirect capital away from fossil fuels and transition to low carbon economies.

What is the First Movers Coalition, and how is it part of this work?

Cooper: The First Movers Coalition has brought together major global companies, including Amazon, Apple, Bank of America, and Volvo, to drastically scale-up R&D and innovation in green technologies. The coalition represents eight major sectors comprising 30% of all emissions.

Major companies who have signed up within the harder-to-abate industries (like shipping, aviation, trucking, and steel) include Airbus, A.P. Møller-Mærsk, Boeing, Cemex, Dalmia Cement, LafargeHolcim, Mahindra Group, SSAB Swedish Steel, and Yara.

Amazon has pledged to be net-zero by 2040, aiming to decarbonise its transportation network by investing in the development of sustainable technologies. Lafarge, in turn, has committed to lowering C02 intensity in cement to 475kg net C02 per ton of material. Mahindra Group, meanwhile, is showcasing that manufacturers can make bold climate actions, aiming to reduce its Scope 1 and Scope 2 GHG emissions by 47% per product produced by 2033.