Investments

A Breath Of Fresh Air With The New Biden Administration


Nicolas Vachon

Intern, Investments

nicolas.vachon@bluebridge.ca

For the past four years, efforts against climate change have been scarce in the United States. In the absence of a true leader, during the Trump administration, states and cities have done what they could and, for some, what they wanted. The new Biden administration aims to equalize the field so that everybody does its part to address the climate crisis, not just at the national level but also internationally. Biden wants to be the leader the American people need to tackle this challenge and be an example for the rest of the world. He wants to lead the discussion for a greener tomorrow in the hopes that other countries rally behind him to force the hand of polluting countries that don’t want to comply with the efforts to stop climate change. Since the transfer of power, Biden has already rejoined the Paris Climate Agreement, stated that he wants to revoke the authorization for the Keystone XL pipeline and highlighted at least 10 other executive actions he wants to pursue. Team Biden has a bold plan for the next 30 years to tackle the current environmental problems. During his time as president, Joe Biden wants to invest 2 trillion $ in the economy to make the future of America greener. This new direction for the United States is going to impact a number of industries, most notably, energy, autos, infrastructures and basic consumer goods.

Firstly, and most important on his agenda, the President plans to reform the energy sector. He wants to completely transform how energy is produced in the US. His goal is to a have zero-emissions for the power sector by 2035 and for the country by 2050. He hopes that by injecting $400 billion in the infrastructure and in the innovation of greener energy, better technology will be developed to capture greenhouse gas emissions. In addition, these investments would help create 10 million good paying jobs. As expected, these propositions impacted the market in 2020, especially after Biden was officially elected president. As can be observed on the chart below, there was a lot of positive momentum and demand for the renewable energy sector, as well as for other related sectors. Furthermore, these planned measures also put a lot of pressure on the more traditional energy players, forcing them to invest in R&D so they don’t become obsolete.

Indice SP500

Secondly, another sector that is going to benefit from Biden’s election is the electric vehicle (EV) sector. Indeed, the Biden administration wants to reinstate electric vehicle incentives to promote the purchase of zero emission cars. He also recognizes the need to develop and improve on the charging station network, especially in the more rural zones. Coupled with the general euphoria of the market, the EV sector, in the last year and a half, has reached valuations that are through the roof. Even more traditional automakers like GM and Ford, that have announced plans to transition towards EV, are starting to get some love from electric vehicle enthusiasts. Last month, GM surpassed its all-time high. It had been trading sideways since its IPO in 2010.

Lastly, with Biden’s ambitions for a greener planet, we could expect the tension with China to persist, given its lack of concerns for its high levels of pollution. One of the ways that Biden proposes to encourage or force heavy polluters to do their part, to tackle climate change, is to impose a tax on the goods that come from these countries, based on their level of pollution. However, this would certainly increase the rhetoric. Furthermore, this would go hand in hand with Biden’s “American made” mentality. To sum up, this is a complete turnaround from the policies during the Trump administration. This new breath of fresh air seems to have been taken positively by the market. Hopefully, President Biden can come through with everything he has proposed and make the world a greener place.

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By Nicolas Vachon,

17/02/2021

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