Weekly Analysis

Weekly Analysis

Biden Takes Office With Late Trump Decisions Hampering Climate Options

January 15, 2021

President-elect Joe Biden will take office on Jan. 20 with a number of 11th-hour regulatory decisions by the outgoing Trump administration that could hamper the new administration’s climate policy options.

For instance, a new Treasury Department rule limits the ability of banks to consider climate change risks when making lending decisions, a move intended to benefit fossil-fuel projects and which could undermine or at least complicate Biden’s efforts to encourage clean-energy investments.

And a new Trump EPA plan would delay compliance with renewable fuel standard (RFS) requirements to blend lower-carbon biofuels into petroleum , a move that will benefit refiners.

Both the Treasury rule and EPA plan will present the Biden administration with an early test on how to reverse or limit what climate policy advocates say is the damage left in the wake of the Trump presidency, underscoring the challenge to Biden’s ambitious climate goals of creating a zero-emission economy by 2050.

The Treasury Department rule, issued by the Office of the Comptroller of the Currency (OCC) on Jan. 14, prompted a swift attack from environmentalists who accused the outgoing Trump administration of handing the fossil fuel industry a “parting gift” and calling on the Biden administration to quickly block it.

“We call on the Biden administration to pursue all available courses of action to ensure that this rule never takes effect,” the advocacy group Public Citizen said in a statement.

In a Jan. 14 statement announcing the final rule, OCC argued it is consistent with its long-standing policies. “The rule codifies more than a decade of OCC guidance stating that banks should conduct risk assessment of individual customers, rather than make broad-based decisions affecting whole categories or classes of customers, when provisioning access to services, capital, and credit.”

OCC, which is an independent agency within Treasury, proposed the “fair access to financial services” rule on Nov. 25 in response to concerns raised by Alaska’s Republican congressional delegation that oil and gas exploration in the Arctic was being denied support from banks and lenders because of climate change risks.

Supporters of the OCC proposal, which include independent petroleum drillers, said the rule is necessary to prevent “discriminatory” practices against the fossil fuel industry, setting the stage for a likely early battle with the Biden administration, which has called for transitioning from fossil fuels as part of a sweeping climate agenda.

Along with the other 35,000 public comments submitted on OCC’s proposal, House and Senate Democrats sent a letter accusing the Treasury agency of violating its statutory obligations. The lawmakers said OCC’s decision to exclude climate risks from lending practices undermines its responsibility for ensuring a secure and safe banking system, previewing likely arguments by Democrats and the Biden administration in trying to rein in the new requirements.

Renewable Fuels

Similarly, an EPA proposal issued Jan. 15 would delay RFS compliance deadlines for small refiners and others subject to the program’s biofuel blending mandates, giving the industry more time to comply while the agency grapples with whether to issue a slew of pending waivers and how to set RFS production goals for 2021.

Refiners have long claimed that the targets are unachievably high and that the program forces them to buy expensive compliance credits known as renewable identification numbers (RINs), while biofuels makers say the targets are too low and that issuance of RFS waivers hurts demand for their fuels.

The proposal was issued as the agency has yet to act on dozens of outstanding waiver requests from small refiners for compliance years 2019 and 2020 and has yet to even propose blending volumes for 2021, despite a statutory duty to issue final volumes by Nov. 30, 2020.

The incoming Biden administration and the new Democratic majority in Congress face a dilemma over a series of looming policy decisions on the future of the RFS, contending with how to resolve ongoing fights between fuel producers, environmentalists and others over major RFS decisions including biofuels production goals.

At the same time, the petroleum industry is bracing for the Biden administration’s pro-regulatory stance by offering to work together on methane emission standards which have been the focus of litigation for years.

American Petroleum Institute President and CEO Mike Sommers said the industry “look[s] forward to working with the Biden administration on policies to continue [a] downward trend on methane emissions,” in his annual State of American Energy speech on Jan. 13.

But during a call with reporters, Sommers was pressed on whether API has changed its stance – articulated during both the Obama and Trump administrations – that EPA in 2016 unlawfully imposed direct methane standards on new oil and gas sources.

“No,” he responded. “Our position even when the Obama administration first enacted these regulations was that these regulations were not promulgated in the right fashion. That they weren't done in compliance with the Clean Air Act.”

Yet industry’s offer to help in setting methane rules was quickly dismissed by environmentalists.

“API’s credibility on methane regulations evaporated when it spent the Obama and Trump years attacking sensible regulatory measures to reduce emissions, even as many producers, utilities and investors took leadership positions,” said Environmental Defense Fund lawyer Ben Ratner in a Jan. 13 statement.

“There is no reasonable debate on whether the federal government should regulate methane emissions. A broad coalition of stakeholders supports federal methane regulation of new and existing sources, and what matters now is speed and ambition,” Ratner added.

Whether Biden takes up API’s offer to work on methane rules and other climate policy initiatives remains to be seen, and perhaps the first clear glimpse of how the new president plans to address climate change as part of his infrastructure and economic recovery strategy will come during his first address to Congress in February.

“Next month, in my first appearance before a Joint Session of Congress, I will lay out the second step, my Build Back Better Recovery Plan,” Biden said Jan. 14 outlining his plans for countering the pandemic.

“It will make historic investments in infrastructure and manufacturing, innovation, research and development, and clean energy,” Biden said about his outcoming economic recovery plan.


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