by Natalia Luna and Brian Aronson The analysis by Natalia Luna, Senior Analyst, Responsible Investment and Brian Aronson, Equity Analyst at Columbia Threadneedle Investments
President Joe Biden's early months in the White House fully reflect his administration's commitment to transitioning to a low-carbon economy. Biden rejoined the Paris Agreement and recently announced an extremely ambitious goal: to halve emissions by 2030. Biden's $ 2.250 billion American Jobs Plan, also known as the Infrastructure Plan and announced in a landmark proposal in March , broadly addresses the commitments on climate change made in the election campaign, even going beyond the promises made in certain areas. While the final figures may be subject to compromise in order to gain congressional approval, the plan aims to boost US clean power generation and electric vehicle manufacturing, while also providing modest support for building renovations. At the heart of this approach is the Infrastructure Bill: a $ 2 trillion list of proposals aimed at starting the United States on a zero-emissions path by 2050. The infrastructure proposal includes the promotion of low-carbon technologies and the main objectives relating to climate change. Biden unveiled a broad set of spending proposals and tax incentives, mostly spread over an eight-year period and focused on infrastructure, climate change adaptation and social initiatives. Overall, the plan aims to improve infrastructure, create jobs, promote innovation and accelerate the transition to a zero-emission economy. It is based on three priorities to support the energy transition: accelerating the transition to clean energy, electrification of transport and renovation of energy-inefficient buildings. Even if compromises were to be made to obtain congressional consensus, approval of the plan should accelerate the US energy transition, with positive implications for the long-term growth of sectors that will contribute to the decarbonisation of the US economy. CLEAN ENERGY WITH THE TURBO One of the points of the plan consists in particular in the generation of zero-carbon electricity by 2035, as promised by Biden in the election campaign. This will be supported by surprisingly generous tax incentives for renewable energy and carbon capture and storage, as well as $ 100 billion in investments to improve energy infrastructure. The transition to clean energy could accelerate thanks to the proposed 10-year extension to tax credits for wind, solar and fuel cells, which goes well beyond the two-year incentives previously introduced in December 2020. The proposal would allow developers of new renewable energy projects to realize the cash value of tax credits immediately, which would help their cash flows. Public utility companies could also benefit, albeit less directly, since tax credits could lower the cost of renewable energy for consumers. The decline in bills tends to loosen relations between utilities and state regulators, favoring greater investment spending by the former, to the benefit of growth. The 100 billion dollars allocated for the modernization of energy infrastructures will also be beneficial to utilities, once again supporting investment spending. Biden's proposal specifically refers to investments in transmission grids, as higher voltage lines are needed to move green electricity from larger wind or solar sites to load centers. In addition, any measures that facilitate the site selection process for broadcasting projects will encourage the initiation of new projects. This huge investment program appears to be a positive development for electrical equipment manufacturers, as well as for some engineering and construction companies. Not everyone will benefit, however: Biden's plan would eliminate fossil fuel subsidies for oil and gas companies, but that was hardly a surprise. INCENTIVES FOR NON-POLLUTING TRANSPORT As for non-polluting transportation, the main emphasis of Biden's proposals is on further boosting the US-produced electric vehicle market. The plan provides for the allocation of 174 billion dollars i for the sector, to be spent in particular for the installation of 500,000 electric vehicle chargers by 2030, which represents a modest positive surprise. This could be a significant development, especially when combined with a potential subsidy of $ 7,500 for every consumer who purchases a US-made electric vehicle, and would instill user confidence in the charging infrastructure, making the cost of electric vehicles competitive compared to that of internal combustion engines. The combination of these two measures raises Columbia Threadneedle's forecast for annual lithium demand between 2021 and 2025 by 15-30% and could support companies positioned to address that increase. The plan's initiatives on the clean transportation front also include a $ 111 billion proposal for water infrastructure, which includes modernizing outdated water systems, public transport and rail systems, as well as strengthening infrastructure of importance. critical of the consequences of climate change. Investments in ports and airports are intended to make the United States a global leader in non-polluting air and freight transportation, while investments in water infrastructure can provide support for companies whose products support efficient filtration, treatment and transportation of water. Instead, construction equipment companies should benefit from $ 25 billion in airport funding and $ 17 billion in waterway funding, as well as other more traditional infrastructure spending. In parallel, $ 85 billion in public transportation funding and $ 80 billion in rail funding will help transition clean transportation for rail and delivery company fleets. INCREASE IN THE ENERGY EFFICIENCY OF BUILDINGS In line with Biden's modest election promise to initiate a gradual building renovation, the plan proposes spending $ 213 billion on energy efficiency improvements. Buildings are responsible for about 10 percent of US emissions and one-third of the country's energy use, according to the US Energy Information Administration (EIA). The amount will be used to upgrade 2 million affordable homes, build 500,000 new homes and retrofit more than one million homes with energy efficient improvements. To achieve these objectives, the extension and expansion of credits for the efficiency of homes and businesses is planned, as well as the creation of a "Clean Energy and Sustainability Accelerator" worth 27 billion dollars. to mobilize private investment. There is also a proposal for energy renovation projects for public buildings. The main beneficiaries of efforts to make the US housing stock greener are heating, ventilation and air conditioning companies, which will play a key role in renovations, significantly reducing electricity consumption and replacing harmful refrigerants. WAITING FOR THE CONGRESS As it stands, Biden's plan represents a marked change from the previous administration's policies and, if implemented, should accelerate the greening of US energy, transportation, and buildings, despite the absence of certain commitments. in the election campaign, such as concrete plans for green hydrogen and details on how to decarbonise agriculture. Its implementation, however, remains to be seen. Now it is up to Congress to turn the plan into law and it is highly likely that some of the provisions will not be passed or changed.