First 100 Days

U.S. President Joe Biden is expected to move quickly to execute his energy and climate change agenda during his first 100 days in office, both through executive action and the launch or rollback of agency rulemakings.

The incoming president will also work closely with the Democrat-controlled U.S. Congress on climate policy as lawmakers draft further legislation to respond to the coronavirus pandemic.

President Biden has pledged to set the U.S. on the path to net-zero greenhouse gas emissions by 2050 with an interim target of decarbonizing the U.S. power sector by 2035. He is expected to use his first 100 days to start the nation down that road.

Trevor Higgins, senior fellow on the climate team of the Center for American Progress, said President Biden needs to quickly set in motion all of the transitions required to achieve his climate goals, which pose an "extraordinary challenge."

Higgins noted Biden has pledged to use "all of the levers in the federal government to accelerate the transitions that are already in motion." That said, "I don't think it's like he's going to come in and snap his fingers and suddenly something is fixed. I think what we're doing is now starting to repair the damage that the Trump administration did to our bedrock environmental laws and get back to the work of stabilizing the climate."

Economy

In S&P Global Ratings' analysis, President Joe Biden's proposed $1.9 trillion stimulus package brings U.S. GDP back to precrisis levels by second-quarter 2021, one quarter sooner than our $1 trillion base case. The boost is demand-driven and temporary, with GDP decelerating to trend growth by 2023.

Additional stimulus lowers S&P Global Ratings' estimated risk of recession over the next 12 months to 20%-25%, near the bottom of the range (from 25%-30% estimated in December). Social distancing will hamper economic activity and inflation for the duration of the virus. While price pressures will accelerate when social distancing ends, the Federal Reserve's new monetary policy framework will likely keep the Fed on hold through year-end.

COVID-19 Stimulus

President Joe Biden's economic relief proposal would sharply expedite the U.S. economic recovery from the coronavirus, but its $1.9 trillion cost to the nation's balance sheet has economists grappling with the trade-off of short-term boost and future debt reckoning.

President Biden's plan, unveiled in a televised address late Jan. 14, includes funding for $1,400 additional one-time relief checks for those earning less than $75,000 per year, as well as an increase in the supplemental unemployment benefit to $400 per week from $300, with the benefit extended to September. The moratorium on evictions and foreclosures would also extend until September, and the plan calls for an increase of the minimum wage to $15 per hour. The proposed package also includes more than $400 billion in direct relief to address fallout from the coronavirus, including $350 billion in aid for ailing state and local governments.

Economists said the need for relief for the unemployed overrides the long-term deficit concerns of the spending package, but only for now, with the added debt burden needing to be addressed later.

"In terms of pushing the economy to pre-pandemic levels, this will certainly help achieve that even faster than predicted," said Erik Lundh, senior economist for the Conference Board, a business-funded research group. "The downside risk, however, is it renews concerns about the government debt that climbed quite rapidly over the past year. That's a longer-term concern." His latest forecast puts U.S. economic output back at pre-pandemic levels in October, but this package, if implemented, could push that milestone to mid-summer.

Tax Changes

Former President Donald Trump's corporate tax cuts may have a longer life than his successor promised, to the benefit of U.S. corporate bottom lines.

Reversing the 2017 cuts was such a priority for candidate Joe Biden that he said he would do it on his first day in office, leading to predictions of hits to corporate earnings by as much as 9%.

But in light of the worsening pandemic and narrow partisan split in Washington, economists and analysts believe that President Joe Biden may not get around to corporate tax increases in the first 100 days or even the first year of the new presidency.

Technology & Communications

Silicon Valley's breakneck pace of growth, owing largely to acquisitions, stands to face more pushback under the new U.S. administration, analysts said.

The size and market power of some of the largest tech firms, including Facebook Inc., Apple Inc. and Google LLC-parent Alphabet Inc., already is a focal point for lawmakers and regulators globally, who in 2020 held heated congressional hearings and filed antitrust lawsuits that called for remedies from fines to divestitures.

Climate Plan

Efforts in Europe to curtail financing of international fossil fuel infrastructure development received a substantial boost from the Biden administration's broad climate executive order rolled out Jan. 27.

A provision in the order directed U.S. treasury and energy secretaries to work with two key financing entities — the Export-Import Bank of the United States and the U.S. International Development Finance Corporation — to identify steps through which the U.S. can "promote ending international financing of carbon-intensive fossil fuel-based energy" while advancing sustainable development.

The wording does not specify the resources to be targeted, but energy market observers, oil and gas industry leaders and environmental groups all suggested the order could put international natural gas project investments at risk. If gas projects are targeted, the order could squelch nascent efforts under the Trump administration, and encouraged by LNG developers, to help spur financing of gas infrastructure and promote gas market development overseas.

The order also called for the U.S. to develop a climate finance plan, which would make use of multilateral and bilateral institutions to help flow capital "toward climate-aligned investments and away from high-carbon investments." The treasury secretary and secretary of state are tasked with submitting a plan to the president within 90 days.

U.S. LNG developers have encouraged steps such as Ex-Im credit support for potential buyers of long-term LNG contracts. During the Trump administration, there was also discussion of using the newly reconstituted U.S. International Development Finance Corp., to take an equity position in LNG and other gas projects. Former Secretary of State Mike Pompeo in 2018 announced the "Asia-EDGE" initiative, which included a $50 million investment to help Indo-Pacific partners import, store and develop energy sources.

While the Biden administration's stance on natural gas is still unfolding, a Jan. 27 comment by President Joe Biden's international envoy for climate change, John Kerry, was seen as cool to the resource by some market observers. Speaking at a virtual World Economic Forum event, Kerry warned that a large build-out of gas infrastructure now risks being "stuck with stranded assets in 10 or 20 or 30 years."

Outlook for Oil

President Joe Biden is expected to announce a moratorium on new oil and gas leases on federal lands and waters on Jan. 27, a move that critics said would hurt U.S. production and pick winners and losers between states.

The anticipated moratorium — with no time limit — would help fulfill Biden's campaign pledges on climate change and would come one week after the acting secretary for the U.S. Department of the Interior suspended agencies' authority to issue oil and gas permits and leases for 60 days.

Cabinet Selections

There are plenty of reasons why the U.S. Treasury has not issued a 50-year bond since 1911.

Fixed-income strategists point to limited demand, the potential to drain liquidity from other corners of the bond market, an unwanted steepening of the yield curve, and a disruption to the Treasury's long-standing "steady and predictable" bond issuance mantra.

However, after the average maturity of U.S. government debt fell dramatically in the past year amid a wave of new issuance to pay for pandemic relief, newly appointed Treasury Secretary Janet Yellen is again looking at the idea. "There is an advantage to funding the debt, especially when interest rates are very low, by issuing long-term debt," she said at her Senate Finance Committee confirmation hearing Jan. 19.

Public Health

President Joe Biden has used the power of his pen to order federal agencies to ensure the U.S. is not reliant on foreign nations for protective equipment and essential medical products and supplies when disaster strikes.

The COVID-19 pandemic has highlighted the nation's reliance on foreign suppliers for drugs, vaccines and other medical supplies, like personal protective equipment, such as masks and gowns, and the urgency to have a stronger domestic manufacturing base after many healthcare providers found themselves unable to obtain certain products.

"We can never again be in a position where we have to rely on a foreign country that doesn't share our interest in order to protect our people during a national emergency," Biden said Jan. 25 before signing an executive order under his "Buy American" pledge.

Social Equity

In the early days of the new Biden administration, U.S. mine workers may get the additional COVID-19 protections they have sought since March 2020.

After calling on federal officials at the U.S. Mine Safety and Health Administration to issue an emergency temporary standard for workers in the early days of the pandemic, the United Mine Workers of American International Union, or UMWA, later joined with United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union to sue the agency. While the U.S. Court of Appeals for the District of Columbia Circuit sided with MSHA, which said a rule was not necessary, there are indications that the agency will take a different approach under a Biden presidency.

Tariffs

The Biden administration's direction on trade, including tariffs affecting the energy sector, is likely to be driven by the administration's broader domestic or foreign policy objectives, a panel of Washington trade lawyers and experts said Jan. 11.

Speaking during a webinar held by Bracewell, the participants did not predict a rapid unwinding of tariffs on China imposed under Section 301 of the Trade Act of 1974. Chinese retaliatory tariffs, such as a 25% tariff on US LNG imports into China, have been viewed as slowing long-term contracts to support a new wave of US LNG export terminals.

"It's about sorting out what the highest priority issues are for the incoming administration and how these trade policies serve those objectives," said Bracewell Senior Principal Josh Zive. "If the current tariffs are consistent with those Biden objectives, it's going to be harder to get rid of them; if they are at odds, easier."

Global Trade

President Joe Biden has published an eagerly-awaited "Buy American" Executive Order that starts to set the framework for support for the development of critical U.S. supply chains. From a practical point of view, 97% of U.S. federal contracts already go to U.S. companies, according to the U.S. Chamber of Commerce, with these regulations set to tighten tier-2 supplier rules of origin.

Details will only emerge following the creation of a "Made in America" office in the Office of Management and Budget and with the appointment of a director responsible for implementing the revised policy.

One limitation to delivering a meaningful change to a breadth of industries will be limited by many critical supply chains resting largely in private sector hands. Additionally, there is also the risk of challenges to the new policies under the World Trade Organization's Government Procurement Agreement as well as under United States-Mexico-Canada Agreement, both of which could delay implementation or raise planning uncertainties.

Further Reading