Biden Administration's ambitious climate agenda starts now

US Capitol

Sustainability and Environmental, Social and Governance Alert

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Since well before his election, President Joe Biden has promised an immediate about-face from the Trump Administration’s skepticism and inaction on climate change. To that end, the Biden Administration is expected to reengage in international climate negotiations, impose mandatory corporate climate disclosures, and generally adopt a whole-of-government approach to tackling the climate crisis. And companies, which have emerged as climate leaders to fill the void left by federal inaction, may now have to reevaluate their efforts in light of the new Administration’s ambitious regulatory agenda.

On the campaign trail, Biden pledged to rejoin the Paris Climate Accord on his first day in office. On January 20, one of President Biden’s first acts was to sign an Executive Order rejoining the Paris Agreement. The United States will officially become a Party in 30 days. His campaign also promised to convene a climate summit to persuade the world’s largest carbon-emitting nations to join the US and pledge to reduce fossil fuel dependence. President Biden’s first order of business will be to reestablish the US as a global leader on climate change. The Biden Administration also plans to engage global leaders to secure an international commitment on eliminating fossil fuel subsidies by the end of his first term and may seek a binding decision on this issue at the next COP in Glasgow. To communicate his resolve to the world, Biden has named John Kerry the Special Presidential Envoy for Climate. As US Secretary of State in the Obama Administration, Kerry’s efforts were pivotal in negotiating the Paris Agreement.

On the domestic front, President Biden kicked off his whole-of-government approach by filling positions across the federal government with officials who will govern with climate change in mind. Rather than simply leaving climate policy to the EPA, President Biden plans to employ a combination of executive authority and market-based incentives to combat global warming. Biden tapped former EPA administrator Gina McCarthy to lead that charge as national climate adviser. Her role will be to help coordinate efforts across federal agencies on climate change. Biden has also named Brian Deese, the Head of Sustainable Investing at BlackRock, as director of the National Economic Council (NEC), making Deese the White House’s top economic adviser. In his announcement, Biden touted Deese as the first director of the NEC “who is a true expert on climate policy.” And to ensure that all federal agencies consider climate change when making decisions, Biden is expected to revive the Obama-era mandate that every federal agency incorporate climate change in its policymaking.

President Biden is also expected to answer the growing calls of investors and other stakeholders who have been demanding greater transparency on climate change from Wall Street. During the campaign, Biden pledged to issue an executive order requiring public companies to disclose their GHG emissions and their financial risks associated with global warming. Under Biden, the SEC is expected to initiate rulemaking or issue guidance related to reporting on environmental, social, and governance (ESG) issues. An SEC rule requiring ESG disclosures would not only redefine how financial institutions and public companies disclose risks but also shape investor behavior for years to come. In another move in keeping with the whole-of-government approach, the Labor Department is also expected to reverse a recent Trump Administration effort to bar ERISA plans from considering ESG in investment determinations and instead require ERISA plans to address ESG risks. The Office of Management and Budget will also require an ESG assessment in every proposed rulemaking.

The Biden team also sees a role for federal authority in limiting or halting carbon-intensive projects that depend on federal permits. During the campaign, Biden committed to requiring “any federal permitting decision to consider the effects of greenhouse gas emissions and climate change.” Part of that commitment was Biden’s declared intent to revoke federal permits for the controversial Keystone XL pipeline. Reports leading up to the inauguration suggest he might do so almost immediately. The Executive Branch plays a key role in greenlighting such projects, so Biden may see scaling back or terminating federally approved projects seen as contributing to climate change as a way to secure early wins for his climate agenda.

With Democrats gaining control of both the House and Senate, the Biden Administration will likely also seek to pass sweeping reforms that would change the US approach to climate change. But Democrats enjoy the narrowest of majorities in the Senate, so building consensus around climate legislation will require winning over moderate senators in both parties. In keeping with its campaign promises, the Biden Administration’s ambitious climate agenda will present a sharp contrast to the Trump Administration’s international isolationism and environmental deregulation. To fulfill his campaign pledge of achieving US carbon neutrality by 2050, President Biden will return the US to climate multilateralism, systematically integrate climate policy across the federal government, and seek to make corporations publicly accountable for their climate impacts and risks.

But slim Democratic majorities in the House and Senate may complicate the new Administration’s efforts to move a broader climate agenda through Congress. President Biden will thus look to employ market-based incentives to combat climate change, specifically tax incentives and public investment in emission-reduction technologies outlined during his campaign, and will lean on his executive agencies to implement regulations ranging from trade rules to agricultural subsidies. At the same time, after four years of reduced regulatory pressure, Wall Street and the private sector will need to adapt to a reinvigorated regulatory state as federal agencies implement climate-conscious regulations on subjects ranging from trade rules to agricultural subsidies.

All these pieces must fall neatly and quickly into place if we are to avoid the worst effects of climate change. President Biden has made clear his intent to use every tool at his disposal to do exactly that.

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