Marshall Geck, Senior Specialist, Stewardship (Climate Action 100+)
The US has elected Joe Biden as its next president, which all but guarantees big changes on many policy fronts. This is especially true on climate change, where President Trump spent most of his time in office rolling back rules and standards to reduce emissions and address environmental problems. However, the US Senate appears likely to remain in Republican control meaning Biden will be working with a divided government that could restrict his ambition to tackle the climate crisis.
But there is an important, yet often overlooked, approach to climate policy that Biden could emphasise to make progress on the issue: “just transition”.
US climate policy is long overdue
The motivations for US policymaker opposition to climate policy are manifold and complex, but one key source of their resistance stems from the fact that many US senators and members of congress represent states where fossil fuel production is an important part of the economy. Climate change might be scary, but to people who live in these states and regions, a future without any certainty about where their livelihoods will come from is just as scary.
At the same time, we are entering a “decisive decade” where both strong climate policies and US leadership are desperately needed. According to the IPCC, the world is running out of time to avoid the worst impacts of climate change, and as the largest economy on Earth, what the US does on climate policy has a ripple effect throughout the entire international community.
Strong climate policies also matter to investors for several reasons. Firstly, the physical risks from unchecked climate change – such as rising sea levels, extreme weather, and ocean acidification – could ravage investor portfolios. Secondly, early policy action reduces the need for more drastic actions to contain climate change in later years, thereby lowering transition risks and providing market certainty to investors.
Extensive polling shows that broad swaths of the American public support doing more to address climate change. But unless the US takes into account the people that stand to be adversely affected by the low-carbon transition, it will likely remain difficult to build enough political buy-in to pass meaningful climate policies in the country. This is where incorporating “just transition” approaches into Biden’s climate strategy could make a big difference.
Just transition can be Biden’s secret weapon
“Just transition” is an intuitive principle. Essentially, it means that the workers, communities, and countries that helped to power our societies with fossil fuels since the beginning of the industrial revolution should not be left behind as the world moves towards the clean energy revolution. Fossil fuel workers and communities, along with those who represent them politically, are less likely to resist climate policies if they know they won’t be hung out to dry by the transition.
Biden’s climate plan seems to recognise the importance of “just transition” in many respects. For example, it calls for establishing a task force to help US coal and power plant communities diversify their economies. It also calls for urging the US Congress to pass legislation that would protect the retirement benefits of miners, their widows, and their dependents. These are good first steps.
But Biden could go even further on “just transition”. For example, he could expand these programs to cover regions of the US that are dependent on oil and gas production, rather than just coal production. This reflects the fact that most climate transition scenarios show that unabated oil and gas consumption has to be phased out in order to meaningfully address climate change.
Biden could additionally explore incentives to increase clean energy jobs—which rose to 3.6 million in the US before the COVID-19 pandemic hit—in rural and fossil fuel-dependent regions of the country. Such measures would go a long way towards ensuring that people from these areas are able to reap the benefits of the new green economy. Similarly, Biden could expand job training and re-training programs to help former fossil fuel workers develop the skills needed for these jobs of the future.
Biden could furthermore take cues from a country like Germany, which has a similar legacy of coal dependence but passed a breakthrough coal exit law over the summer. This deal was years in the making as a special commission made up of voting members from industry, academia, environmental groups, and unions negotiated the terms. In addition to setting a timetable for closing Germany’s coal-fired power plants, the resulting agreement included €40 billion in aid to coal-dependent regions of the country. Establishing special stakeholder engagement commissions to inform transition policymaking, carefully forging consensus on phaseout plans, and providing crucial financial assistance to affected regions could serve as model elements of a Biden-led US shift away from fossil fuels.
Investors can mainstream just transition in the US
Investors can also help ensure that “just transition” approaches are incorporated into the US response to climate change. Some examples of ways they could do this include:
- Engaging US-based investee companies to ensure they are integrating just transition aspects into their emissions reduction strategies.
- Considering investments that help to diversify the economies of fossil fuel-dependent regions of the US.
- Incorporating just transition approaches into their investment practices, policies, and strategies. The PRI’s Just Transition Guide for Investors offers a good starting point for thinking about this.
- Signing the PRI’s Statement of Investor Commitment to Support a Just Transition on Climate Change, which has already been endorsed by 161 investors representing USD $10.2 trillion in AUM.
- Joining the PRI’s International Investor Working Group on Just Transition (sign into the PRI Collaboration Platform for access)
While a divided government may make Biden’s climate policy agenda more challenging to achieve, neither investors nor the world can afford another lost decade of US inaction. Putting “just transition” at the heart of Biden’s climate plans could help swing some of those US lawmakers on whose votes climate policy in the country may depend.
This blog is written by PRI staff members and guest contributors. Our goal is to contribute to the broader debate around topical issues and to help showcase some of our research and other work that we undertake in support of our signatories. Please note that although you can expect to find some posts here that broadly accord with the PRI’s official views, the blog authors write in their individual capacity and there is no “house view”. Nor do the views and opinions expressed on this blog constitute financial or other professional advice. If you have any questions, please contact us at firstname.lastname@example.org.