ZEUS: 5 climate things we know now as election nears end
Welcome to a special election edition of Callaway Climate Insights. Please add us to your climate readings and if you like, please share.
(David Callaway is founder and Editor-in-Chief of Callaway Climate Insights. He is the former president of the World Editors Forum, Editor-in-Chief of USA Today and MarketWatch, and CEO of TheStreet Inc.)
SAN FRANCISCO (Callaway Climate Insights) — The average Parisian wouldn’t be able to find Wisconsin, Michigan or Pennsylvania on a map, and after yesterday they won’t ever have to. The U.S. officially dropped out of the 2015 Paris Agreement to fight climate change Wednesday, and that’s one of the only things we know for certain after the wildest election night in 20 years.
But as we await the final counting of the votes for president, Wall Street isn’t wasting any time laying bets on what the next presidency will be like with it all but certain the Republicans will keep the Senate. The prospect of no big tax hikes either way, including a federal carbon tax, was enough to spark a huge rally Wednesday and into Thursday.
Consumer stocks, health stocks, and tech stocks led the way, but beleaguered energy stocks were carried higher as well. Renewables stock faltered, however, as investors bet that a gridlocked U.S. government will prevent any over-regulation of fossil fuels should Biden win, or any aggressive clean energy spending.
It’s the best of both worlds for Wall Street. If Joe Biden wins, it gets a rise in U.S. stature in the rest of the world, the end of the trade wars, and no new taxes. If Donald Trump prevails, it gets another four years of the same — which for equity investors wasn’t so bad.
It was a tough election night for climate enthusiasts, but there are some positive takeaways. Former Colorado Gov. John Hickenlooper won a Senate seat, as did Mark Kelly in Arizona, the husband of Gabby Giffords. Both support a transition to renewable energy, though Hickenlooper does have a background that includes support for fracking. Both will be welcome additions to the Senate, though will have less impact with the Republicans keeping control.
The only climate scientist to seek a Senate seat, Merav Ben-David in Wyoming, looks to have been soundly beaten. Also, in Alaska, an initiative to increase taxes on oil companies lost big.
So while we struggle through the next few days with what we do not know, we can deduce five things we know for certain from last night’s results:
We’re out of Paris, and it may take a while to get back in. Biden has said he will rejoin immediately if elected, and it doesn’t require congressional approval. But it’s important to remember that the U.S. dropped out of the Kyoto Protocol in 2001, and is still not back. At the very least, it will take until January or February.
Political will to support the fossil fuel industry still runs deeper than financial will, and so it will be up to the BlackRocks and BNPs of this world to push the transition, at least with respect to U.S. energy company holdings.
A federal carbon tax is out the window. This is a significant setback, as most economists and financial regulators acknowledge a carbon price is the only real way to rapidly make progress reducing emissions. States will have to lead on that issue, as well as international companies which are used to paying some sort of carbon tariff overseas. Expect more creativity, including using market forces, to put a common price on carbon emissions.
Renewable energy companies, including wind, solar, ocean, and battery, will need to rely more on investors and again, on state initiatives, for funding. A Biden presidency will be able to help with executive orders, and importantly, with fostering creativity among existing energy companies in the renewable space. But any big congressional action will be blocked in the Senate.
The lack of a blue wave or green wave will cap, but not halt, any push by the progressive wing of the Democratic party to push Biden into initiatives he doesn’t want to do. It remains to be seen how much the progressives hurt Biden in the swing states, but certainly a narrow win will send a warning to the party going forward. Still, the progressives enjoyed some important House victories Tuesday night, with all four members of The Squad winning, as well as at least two or three new ones.
This is all assuming Biden still manages to eek it out in the coming days. As of this writing, he has secured Wisconsin and Michigan, which gives him a big boost. Trump’s only path to remain in the White House is quite clear now, and I expect him to charge down it with guns a-blazing, flinging lawsuits and recount demands.
The worst-case scenario for election results is here, but the reaction of global markets at least illustrates that there is always a way forward.