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Biden positioned to shape clean energy transition without ending oil development

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Essential Energy Insights - February 2021

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021


Biden positioned to shape clean energy transition without ending oil development

President-elect Joe Biden will not end oil and gas development in the U.S., but his administration is poised to help shape the global clean energy transition, industry observers said.

The incoming Biden administration will take a 180-degree turn on energy policy compared with the Trump administration, placing a much greater emphasis on mitigating climate change, observers said on a Jan. 19 panel during the Atlantic Council's Global Energy Forum.

For Biden, halting fossil fuel development is "just not possible in terms of his commitments to maintaining and growing jobs," said Mary Nichols, former chair of the California Air Resources Board. "But more importantly, I think it would be extremely divisive and difficult to do."

Following the Jan. 20 presidential inauguration, the energy sector will be more focused on reducing emissions from fossil fuels rather than replacing them with batteries, hydrogen and other clean energy technologies, Nichols said. The U.S. will continue to produce and consume such fuels, especially for transportation, for decades to come, she noted.

It is unclear what sort of role Biden might play in the international oil market, given the nation's recent leadership and new influence in the space. While President Donald Trump played an important role in helping broker a deal with OPEC+ during the 2020 market downturn, the organization has not been in touch with the incoming Biden administration, said H.E. Mohammad Sanusi Barkindo, OPEC's secretary general.

"We believe that we have established very mutually beneficial, productive relationships with the industry in the United States," the secretary general said. "And I think going forward we have no option but to continue to strengthen this relationship under President Biden."

During the campaign, Biden repeatedly pledged not to ban fracking, despite calls from progressives and some environmentalists for him to do so. Given Biden's foreign policy experience, he recognizes the important international role of the U.S. oil and gas industry, said Daniel Yergin, vice chairman of IHS Markit. Initially, the former vice president will likely boost incentives for electric vehicles and renewable energy while also increasing regulation across the board, he said.

"I think what he's going to do is step on the gas on climate. It's one of the four priorities of his administration," Yergin said. "There's no question they're going to go all-out on climate."

Fatih Birol, executive director of the International Energy Agency, said he expects Biden to focus on "very rapid innovation" in renewable energy as well as other clean energy technologies, including carbon capture, hydrogen and a new generation of nuclear power.

He also hopes that the new administration helps promote stronger international cooperation to address climate change "in a fair and just way among the countries around the world."

"The political position of the United States, most powerful economy in the world, will give unmistakable signals to the investors around the world," Birol said. "The decision process will be reshaped with the signals coming from Washington."

Biden has pledged to rejoin the Paris Agreement on climate change early in his term and appointed or nominated climate experts to head key posts across his administration, Nichols noted.

"Every part of the government now is being run by people who are putting this at the top of their agenda," Nichols said. "I think we're going to see rapid action and very much of an internationally oriented approach."

IHS Markit is subject to a merger with S&P Global pending regulatory and other customary approvals.