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Joe Biden offered American voters a radically different vision of energy policy from President Donald Trump, focused on addressing the threat of climate change.
He will enter the White House with a goal of setting the US on course for net zero greenhouse gas emissions by 2050 and will take the US back into the Paris climate agreement. But there is a good chance the Republicans will retain control of the Senate, limiting how much of his agenda he will be able to deliver.
With the federal government constrained, state policies will continue to be important. The key influences shaping the US energy industry are likely to be market forces, just as they were under Barack Obama and Donald Trump. But the change of federal government will have some significant consequences. According to Ed Crooks, Wood Mackenzie Vice-Chair – Americas, these are some of the most important:
- A boost for offshore wind. The Trump administration has slowed the process of approving offshore wind and proposed to close off a section of the US Atlantic coast from Florida to Virginia. A Biden administration will act faster to support states and companies seeking to develop offshore wind industries.
- Restrictions on oil and gas development. There will not be a ban on fracking, but Biden has pledged to end sales of new leases for oil and gas development on public lands and waters. Onshore, the impact would be minimal. Offshore, the effects would be more significant, although they would take some time to become apparent. A ban on new leasing, if permanent, would mean that by 2035 US offshore oil and gas production would be about 30% lower than if lease sales had continued.
- New hurdles for oil and gas infrastructure projects. Decisions on federal permits for infrastructure projects will take into account their implications for greenhouse gas emissions and climate change, creating new hurdles for developers of oil and gas pipelines and export facilities.
- Support for electric vehicles. Biden plans to impose tighter fuel economy standards, which will help sales of electric cars. By 2030 there could be 4 million EVs on US roads as a result of those standards, almost 60% more than if the Trump administration’s rules had taken effect. However, the impact on US fuel demand this decade will be minimal. Even 4 million EVs represent only about 1.5% of the total of 275 million vehicles we expect on US roads in 2030.
- No quick relaxation of sanctions on Iran. Although Biden has been strongly critical of Trump’s decision to take the US out of the international deal over Iran’s nuclear programme, and has promised a change in approach, that does not mean he will move quickly to relax the sanctions that have been imposed since 2018. Negotiations about a possible renewed deal are not likely to begin until June 2021 at the earliest, after Iran’s elections, and there is no guarantee that the two countries will reach agreement.