9 February 2021 (Wall Street International)*  — One of the first things Joe Biden will do as President of the United States will be to revive U.S. participation in the Paris climate accord. Most other nations will be happy that “America is back”.

After all, the United States is second only to China in the amount of carbon dioxide (CO2) it dumps into the atmosphere.

But the good news is tempered because the rest of the world has reason to worry whether the U.S. can keep its commitments. The destructive interlude of the Trump presidency demonstrated an inherent weakness in America’s biggest asset, its representative democracy. It puts temporary leaders in charge of long-term problems. Unfortunately, in the case of climate change, new leaders with different priorities and philosophies of governance feel no obligation to honor the commitments of their predecessors. There has been no more dramatic an example than Donald Trump.

Biden’s long-term goal is clear. His plans to confront global climate change are ambitious – not as bold as America’s progressives would like, but ambitious nonetheless. He has laid them out in detail with scores of ideas aimed at one clear goal: a net-zero carbon U.S. economy within 30 years. But at best, he will be president for only eight of them.

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Energy and environmental policies can be codified in presidential directives and new laws | Image from Wall Street International.

America’s structural fickleness goes even deeper. The federal government’s authority is shared by three branches: the presidency, Congress and the courts. Even if every president were deeply committed to confronting climate change, his or her power would be limited by the Constitution and the other two branches.

The courts are at least nominally obligated to honor precedent, but Congress consists of 535 voting members with their own priorities. Members of the House of Representatives stand for reelection every two years, so frequently that they are tempted to spend more time campaigning for reelection than doing the public’s business.

Congress’s rules allow any single member to prevent votes on legislation and even to shut down the government entirely. Worse, the U.S. Supreme Court, America’s ultimate legal authority, has ruled dubiously that money contributed to political campaigns is a form of free speech. As a result, corporations are allowed to give unlimited and anonymous money to influence, if not purchase, the votes of Congress’s members.

The predictable result is that elections in the United States are spending contests rather than idea contests. The cost of political campaigns has escalated, giving rich special interests undemocratic influence. In the 2019-2020 election cycle, one candidate for the House felt obliged to raise nearly $34 million for his election while a candidate for the Senate raised more than $100 million.

The oil and gas industry contributed nearly $33.5 million to congressional candidates, with 77% supporting Republicans. Its contributions to U.S. Senate candidates went as high as $900,000; contributions to candidates for the House of Representatives were as high as $534,000.

In the 2020 presidential campaign, Trump received nearly $2.8 million from oil and gas companies, more than twice their contributions to Biden. One suspects that the industry’s generosity has something to do with oil and gas production becoming the centerpiece of Trump’s energy policy and the fact that Congress has not taken significant action on climate change since 1992.

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The economic foundation of the coal, oil and gas industries is disappearing | Image from Wall Street International.

Pencils and erasers

We might think that energy and environmental policies can be codified in presidential directives and new laws. However, presidential orders are written in pencil, figuratively speaking. Future presidents can simply erase them. Congress writes its laws in ink, but they too can be erased or even ignored by future congresses.

When Congress passed America’s foundational environmental law (the National Environmental Policy Act of 1970), it declared that the “ongoing policy” of the federal government was “to create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans.” That is not what Congress has done about the greatest threat being imposed on future generations.

The bottom line is a perverse relationship between Congress and monied special interests. The fossil energy sector has used its influence to win and sustain taxpayer subsidies for more than a century. The federal tax system gives the industry production subsidies amounting to billions of dollars every year. But the largest subsidies are the industry’s damages to society and the environment.

Combined with tax benefits, these indirect public subsidies amounted to nearly $650 billion in 2017, according to the International Monetary Fund. In effect, every American taxpayer is helping some of the richest companies in history get richer by polluting air and water, harming public health, and producing a more violent planet.

Although many states, cities, and corporations are attempting to fill the federal leadership void with their own clean energy goals, the reality is that America’s carbon pollution can’t be cut enough or rapidly enough without the involvement of the national government. Without nationwide limits, the carbon pollution from any state can make the clean-energy work of other states meaningless.

When it comes to permanent commitments, the best way to codify a principle or policy in the United States is to amend the Constitution. Even its requirements can be bent and broken, however. For example, one amendment guarantees that all Americans will have an equal right to vote, but that hasn’t stopped many states from creating election rules to disenfranchise some citizens – usually minority groups and the poor. In some cases, the Supreme Court has permitted and even sanctioned voter discrimination.

Mandates and markets

So, is there no way the international community can be confident that the United States – or any other democracy for that matter – can fulfill its carbon-cutting commitments? Reforms of congressional rules and campaign finance would be important improvements in the U.S. At least two other changes are necessary: the mobilization of market forces and of a public mandate so strong and enduring that it is politically more powerful than the carbon cartel.

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Some oil and gas companies are adapting by easing into the renewable energy sector | Image from Wall Street International.

Markets

The necessary changes in energy markets appear to be underway. The economic foundation of the coal, oil and gas industries is disappearing, and investors know it. An international study published in the journal Nature Climate Change concluded two years ago that the nearly 1,500 oil and gas companies on the stock exchange were worth about $4.7 trillion, much of it based on the perceived value of their proved underground reserves.

But because of cost-effective carbon-free energy technologies, energy efficiency, and policies designed to prevent further climate change, global demand for the fuels will largely disappear by 2035, rendering the reserves nearly worthless. This bursting “carbon bubble” would be 16 times larger than the bubble that caused the 2008 financial crisis, and would cost the world economy as much as $4 trillion, the study’s authors concluded.

Some oil and gas companies are adapting to this reality by easing into the renewable energy sector. Total, Valero Energy, and Clean Energy Fuels are examples. Total bought a majority stake in SunPower and acquired a battery-storage company. Valero, one of the world’s largest oil refiners, has invested in North America’s largest green diesel plant. It turns rendered animal fats and cooking oil into a transportation fuel compatible with conventional engines.

Clean Energy Fuels produces low-carbon renewable natural gas from biomethane extracted from landfills and dairy farms. It plans to make zero-carbon gas by 2025.

Investors are increasingly aware that energy markets must turn to clean renewable energy. An analysis of stock market data, released earlier this year, found that investments in renewable energy brought returns of 178% over five years in Germany and France, compared to a loss of nearly 22% for fossil fuels. In the U.S., renewable energy returns grew 200%, more than twice those from fossil fuels.

Nevertheless, government policies in many countries are working against market forces with fossil energy subsidies and prices that do not account for the costs that oil, gas and coal impose on society and the environment.

The-United-States-is-second-only-to-China-in-the-amount-of-carbon-dioxide-it-dumps-into-the

The United States is second only to China in the amount of carbon dioxide it dumps into the atmosphere | Image from Wall Street International.

The global public mandate

The global electorate’s mandate for clean energy must become far more powerful than the political influence of the fossil energy sector and those in society with large carbon footprints. The United Nations warns that the world’s richest one percent need to cut their carbon footprints by nearly a third; moreover, they should be required to help stabilize the climate, assist populations in adapting to its impacts, and ease disruptions for workers, communities and countries whose livelihoods depend on carbon fuels.

To raise and inform public awareness, every Earth Day during the remainder of this decade should be dedicated to a global teach-in on climate change, including addresses in which each nation’s leader gives his or her people a frank appraisal of the state of their environment, including greenhouse gas emissions. Environmental crises in the United States inspired the first Earth Day in 1970; some 20 million people turned out across the country. The political tour de force resulted in a rapid series of landmark environmental-protection laws in the U.S.

Earth Day now is celebrated in 193 nations. It should remind elected leaders every year that their best chance to keep their jobs is not to cater to oil, gas and coal, but rather to facilitate and empower the world’s rapid transition to zero-carbon energy.