PRESS RELEASE
U.S. CLIMATE CHANGE PLANS ARE MORE CREDIBLE COMPARED TO LAST YEAR - REPORT
Net zero transition plans more “midterm-proofed” than previously
NEW YORK, November 4 2022 U.S. climate change policies and plans have become more credible in the last 12 months, and are less vulnerable to rollback even when factoring in midterm election political changes, according to research by management consultancy Baringa. This progress reflects the passage of the Inflation Reduction Act (IRA) as well as plans for the state-level actions required to implement it, according to the report’s authors.
Baringa’s Global Energy Perspectives team assessed more than 1,750 U.S. data points in October 2021 and again in October 2022*. Nationwide, the report concluded the U.S. had increased the “credibility” of its net-zero transition plans from 3 to 4, meaning that measures announced to combat global warming have become objectively more robust in the past 12 months. Of four major economies surveyed, this puts the U.S. ahead of China (which has a durability score of 3 in 2022) and India (1 in 2022), and behind only the European Union bloc (6 in 2022).
Likewise, the “durability” of U.S.’ climate policies – the likelihood that they could be reversed should political leadership change, a figure calculated by factors such as party polling and stated policies of both parties – has strengthened in the last 12 months, moving from -2 in 2021 to -1 this year. This is on par with China and India (both -1 this year) and behind the EU which currently has a durability score of 2.
“From an environmental standpoint – and from the standpoint of businesses who value long-term investment certainty on the issue – the U.S. has made great strides in the last twelve months,” said David Shepheard, Partner, Energy and Resources for Baringa in North America. “Our direction of travel on decarbonization is better-charted, and we are less likely to be diverted from it. Much of this change is driven by elements of the Inflation Reduction Act, which represents a significant step in the U.S. decarbonization journey. But the IRA’s ultimate effectiveness will hinge on state- and local-level implementation – and as these measures are announced and implemented with capital flows funding the energy transition, the U.S.’ net zero credibility score will continue to improve.
“Likewise, climate policy durability is a key point ahead of the midterms,” Shepheard continued. “While the issues are far more nuanced than sometimes portrayed, net-zero has nonetheless become objectively more ‘midterm-proof’ in that even if all branches of government flipped into the hands of politicians less amenable to net-zero transition planning, it is less likely that existing net-zero policies would be rolled back.”
The report illustrates a strong variance in existing state and local policies that address decarbonization, and indicates that, even if overall durability has improved, much future policy may be impacted by the midterm elections.
Key state-level takeaways from the report include:
- States such as Illinois, Michigan and Pennsylvania have made steady climate policy progress. Based on current polling data, the report suggests these states are likely to see continued positive momentum following key state-level midterm races.
- States such as North Carolina, Oregon and Virginia have also made substantive progress in recent years implementing policies that support net-zero targets but, are at risk of seeing potential climate policy rollbacks or a “go slower approach” toward net-zero post-midterms based on current election projections and the stated climate policies of leading candidates.
- Climate policy leaders such as New York, California, Washington and Massachusetts rank the highest in terms of both credibility and durability scores and appear to be heading towards continued progress.
- Delaware and Colorado have mid to high credibility scores but are at risk of stagnation due to candidates’ stated opposition to more progressive climate policy initiatives.
- Twenty-one states score low on both credibility and durability measures of decarbonization policies. These states lack the necessary policy maturity to achieve national targets and currently have decarbonization agendas that are vulnerable to changing political and economic factors. In these states, the fate of net-zero will depend heavily on actions of superior economics and actions of individual cities and company interests.
“Despite the state-by-state political variability, we have seen that committed net-zero targets paired with localized implementation and investment strategies are good for business in nearly every region and sector of the US economy,” said Shepheard. “While political interests and approaches may vary across the country, we believe that ready access to capital and strong economic returns will continue to trump even the most hardened views on climate risks.”
“Broadly, the states have split in two, with some pursuing climate policies aggressively, and some throttling back,” said Caspian Conran, from Baringa’s Global Energy Perspectives team. “This diverse policy landscape could pose challenges for investors looking to deploy green capital. Nonetheless, the passage of the IRA has successfully contributed to greater optimism for the US’ decarbonisation trajectory."
###
Learn more about Baringa at www.baringa.com/en.
*About the report
Baringa's Credibility & Durability assessment focusses on publicly available targets and policies national executives have put in place to achieve decarbonisation. Specifically, it looks at policy and regulatory maturity across emissions, power generation, buildings and transport.
All data sourced for the model is objective. Weightings are applied.
About Baringa
Baringa is a global management consultancy operating across sectors including energy, financial services, consumer products and services and government.
We set out to build the world’s most trusted consulting firm – creating lasting impact for clients and pioneering a positive, people-first way of working. We work with everyone from FTSE 100 names to bright new start-ups, in every sector. We have hubs in Europe, the US, Asia and Australia, and we can work all around the world – from a wind farm in Wyoming to a boardroom in Berlin. Find us wherever there’s a challenge to be tackled and an impact to be made.
Find out more at baringa.com or on LinkedIn and Twitter.
Media Inquiries:
Pat Burek
Financial Profiles
+1-310-622-8244