A shift in American leadership, the UK political agenda, and sluggish political will in the EU, makes the US and UK strong contenders to lead the global green agenda for setting standards, says Aegon Asset Management’s Robert-Jan van der Mark.
With the EU committed to green initiatives such as the Green Deal, but slow in its bureaucratic and political processes, there is an opportunity now for the UK and the USA to step in and drive the agenda and set the standards of such a Green Revolution.
The new President-elect in the US has committed to a program of green initiatives that will also help push them to the fore of this revolution.
The UK has also joined the race for greenification, with the government recently publishing its own 10-point plan for a Green Industrial Revolution, providing investment boosts to renewable and clean sources of energy.
But van der Mark, co-manager of the Aegon Diversified Growth Fund, warns that falling behind in the race to set standards is “not an option” for serious players in the sphere of global greenification.
“After Biden has been formally installed and gets approval for his ‘Clean Energy Revolution and Environmental Justice’ program, the US will quickly get started with the green agenda,” said van der Mark.
“This will unleash competition on a key area of the green revolution: setting the standards on global greenification. Who will set the rules for a decarbonisation? What will become the default model?
“As part of the EU Green Deal, the European Commission has launched public consultations on energy taxation and a carbon border adjustment mechanism. Biden’s plans show a similar type of measure for the US.
“The UK’s 10-point plan follows a similar direction to those of the EU and US; however, the plan is more aligned with UK strength, and is arguably more clearly defined than the EU and US high level plans.
“An interesting point in the UK government’s plan is the tenth point: ‘Innovation and finance’, a step that will make the City of London ‘the global centre of green finance’. This will ultimately allow the UK a significant role in setting the global standards for sustainable finance and will be vital for the UK to secure a seat at the table in global sustainable finance taxonomy discussions.
“With the EU taxonomy for sustainable finance, the European Union is developing definitions for what constitutes sustainable investments. The dominating standards will have a great influence in directing areas of future investments into sustainable initiatives.”
But the manager said that the EU may lose ground on the US and UK, thanks to sluggishness in its political processes.
“The EU has however shown that its complex political system can be quite slow, while the US and UK has shown more political flexibility in past years. It will be important to stay on the forefront of standard setting and construct partnerships to keep influence.
Van der Mark argues that the US is at a critical point, where it can now overtake the EU on the global green agenda.
“The US accounts for 15% of global emissions, which is a significant global footprint. Biden wants to re-join the Paris Agreement and raise the ambition. Within his first 100-days after being elected he wants to convene a climate world summit to persuade other nations to join the US in making more ambitious national pledges, above and beyond the commitments they have already made.
“Biden also wants global leaders to embrace the Kigali Amendment to the Montreal Protocol, adding momentum to curbing hydrofluorocarbons, and especially potent greenhouse gas, which could deliver a 0.5 degree Celsius reduction in global warming by mid-century.
“The President-elect’s proposal vows to make a federal investment of $1.7 trillion over the next ten years, which is around 8% of current US GDP. The idea is to leverage additional private sector, state and local investments to reach a total of more than $5 trillion, which amounts to 23% of current US GDP. If these plans are put into practice, the US will soon be outpacing the EU on the sustainable front.”