The United States, under the Biden administration, announced plans to achieve carbon neutrality by 2050. In this regard, it plans to reduce its greenhouse emissions by 50-52% from its 2005 levels within the next eight years or by the end of the current decade.. Moreover, the government aims to reach net-zero carbon emissions in the power sector by 2035.
The Department of Energy (DOE) has been working toward reducing fossil fuel emissions and replacing them with wind and solar energy. Known as America’s solutions department, the DOE announced its plans to deploy 30 gigawatts of offshore energy generated by wind and cut the current cost of solar energy by 60% within 2030. This would reduce carbon emissions by 78 million metric tons.
President Biden, who has been a long-term advocate of climate change, rejoined the Paris Climate Agreement on his first day in the chair. Furthermore, the country reiterated its ambitious climate change goals at the COP 26 climate summit. The U.S. and China, the top two greenhouse gas emitting countries, partnered to cooperate on limiting emissions in light of the global climate crisis during the COP26 conference.
President Biden also backed the landmark methane emissions reduction deal at the summit, aiming to cut methane emissions globally by 30% by the end of the decade. This aligns with the United States' aim to reduce greenhouse gas emissions by at least 50% within 2030.
Landmark Infrastructure Bill
The $1.2 trillion infrastructure bill announced in 2021 aligns with the country’s carbon-neutral goals, with $555 billion earmarked for climate-related spending. The bill contains $65 billion for developing sustainable grid infrastructure and $50 billion for cyber and climate resilience.
Moreover, the bill includes a $550 billion provision for investment in clean energy initiatives. It plans to invest $8 billion in at least four clean hydrogen hubs, $3.5 billion in funding to establish hubs that remove CO2 and $6 billion in subsidies for uneconomic nuclear power plants.
This once-in-a-generation investment also contains provisions for a $7.5 billion investment to build the first-ever national network of electric vehicle (EV) chargers across the country. Also, the bill plans to invest $66 billion to develop a sustainable nationwide transportation network.
Solar and Wind Energy
According to an S&P Global Market Intelligence Report, the U.S. energy transition will surpass historical figures in 2022, with record solar and wind generation additions. The report states 44 gigawatts of solar power, 27 gigawatts of wind power, and 8 gigawatts of battery storage are expected to be installed this year. The government is expected to invest $63 billion in upgrading and modernizing the country’s water and energy infrastructure and $15 billion in utility renewables.
The United States Energy Information Administration (EIA) estimates that 22% of electric generation will be powered by renewables and 20% by nuclear energy. Further, 35% of total electricity generation is expected to be produced by natural gas this year, down from 37% in 2021. In addition, electricity generation from coal is expected to fall 100 basis points year-over-year to 22%.
Clean energy ETFs have been slumping over the past year, as the country has remained focused on combating the coronavirus pandemic and other macroeconomic headwinds.
As climate change was not a top priority of the government over the past year, the majority of the clean energy ETFs delivered negative returns over the past year. The iShares S&P Global Clean Energy Index ETF (NASDAQ: ICLN) slumped 37.1% over the last 12-months, compared to the S&P 500 index's 23.46% gains over this period. However, given the promising growth outlook of this sector in 2022, clean energy stocks are poised to make a stellar rebound this year.
The views and opinions expressed in this article are those of the contributor, and do not represent the views of IRIS Media Works and Advisorpedia. Readers should not consider statements made by the contributor as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click here.