US President says sweeping infrastructure plan will help country ‘withstand the devastating effects of the climate crisis and promote environmental justice’

US President Joe Biden placed climate action and low carbon infrastructure at the heart of his domestic agenda in his State of the Union address last night, as he warned economic sanctions against Russia would continue to intensify.

In a wide-ranging speech, Biden sought to send a clear message to Russian President Vladimir Putin that the West would continue to provide Ukraine with economic and military aid and the US and its allies would “defend every inch of territory of NATO countries with the full force of our collective power”.  

However, he also warned that a “Russian dictator, invading a foreign country, has costs around the world”, tacitly referencing the soaring global energy prices that have been sparked by Russia’s aggression against Ukraine. 

Biden said the US government was taking steps to protect businesses against inflation, including by co-ordinating the release of 60 million barrels of oil from reserves around the world. “These steps will help blunt gas prices here at home,” he said. “And I know the news about what’s happening can seem alarming. But I want you to know that we are going to be okay. When the history of this era is written Putin’s war on Ukraine will have left Russia weaker and the rest of the world stronger.”

As such, he positioned the White House’s domestic economic and infrastructure plans as part of the wider effort to strengthen the West’s geopolitical position, stressing the need to ramp up investment in US infrastructure and pass the Bipartisan Infrastructure Law that remains stuck in Congress.

“We’ll create good jobs for millions of Americans, modernizing roads, airports, ports, and waterways all across America,” he said. “And we’ll do it all to withstand the devastating effects of the climate crisis and promote environmental justice. 

“We’ll build a national network of 500,000 electric vehicle charging stations, begin to replace poisonous lead pipes – so every child – and every American – has clean water to drink at home and at school, provide affordable high-speed internet for every American – urban, suburban, rural, and tribal communities.”

He also argued that a major infrastructure drive would help create jobs and boost the US manufacturing industry, including booming clean tech sectors. “Companies are choosing to build new factories here, when just a few years ago, they would have built them overseas,” he said. “That’s what is happening. Ford is investing $11bn to build electric vehicles, creating 11,000 jobs across the country. GM is making the largest investment in its history – $7bn to build electric vehicles, creating 4,000 jobs in Michigan.”

In addition, Biden highlighted plans to “cut energy costs for families an average of $500 a year by combatting climate change”.  

Setting out his legislative priorities, Biden said: “Let’s provide investments and tax credits to weatherise your homes and businesses to be energy efficient and you get a tax credit; double America’s clean energy production in solar, wind, and so much more; lower the price of electric vehicles, saving you another $80 a month because you’ll never have to pay at the gas pump again.” 

The White House’s infrastructure and climate plans remain gridlocked in Congress following Democrat Senator Joe Manchin’s refusal to back the sweeping Build Back Better Bill late last year.

Responding to the speech, Manchin immediately rejected the idea the Build Back Better package could be revived in full, but he acknowledged there “might be parts [of the package] they want to talk about”.

The White House will be hoping that soaring energy prices and the prospect of energy sanctions on Russia – something the administration pointedly refused to rule out this weekend – could strengthen the case for measures that boost domestic energy generation and efficiency measures.

Meanwhile, efforts in Europe to drastically curb reliance on Russian energy imports continued to accelerate amidst reports the European Commission is preparing a packaging of measures that would allow for a new wave of windfall taxes on energy industry profits to help fund a massively accelerated programme of energy efficiency upgrades and clean energy development.

The German government is also reportedly working on plans to significantly strengthen its renewable energy targets, while Robert Habeck this week indicated that the government is considering whether to extend the lifespan of the country’s three remaining nuclear power plants.

He said the government would not reject calls to extend the lifespan of nuclear plans “on ideological grounds” but warned that plans for the shutdowns are so advanced they could be difficult to reverse given the need to secure nuclear fuel supplies.

Meanwhile, the FT reported this morning that the UK government has launched an urgent review of the UK’s ties to the Russian energy industry, which is expected to explore how the country could further reduce Russian gas imports and sever ties with Russian energy firms.

A number of leading UK energy companies have moved in recent days to exit investments in the Russian energy industry, as the Ukrainian government continues to call upon its European allies to impose a full embargo on Russian fossil fuel exports.

The UK government’s new review is expected to explore how the UK could reduce the amount of Russian gas brought into Britain, which currently accounts for around five to six per cent of overall gas imports. The FT said the probe would also look at the role of Gazprom’s UK-based trading arm, has extensive ties with both companies and public sector bodies.

Russia’s attack on Ukraine has led to huge volatility in global energy markets and analysts are warning record high gas prices could be forced higher still as Western governments weigh how to extend their sanctions regime

Dr Craig Lowrey, senior consultant at Cornwall Insight, said the “heavy reliance on gas imports across Europe and in the UK has left energy prices increasingly vulnerable to unstable international geopolitical and economic situations”.

“With the potential supply disruption from Russia reverberating throughout the European energy market, volatile energy prices are likely to continue for the foreseeable future,” he said. “While in the past the UK has attempted to shield consumers from global market price rises through the Default Price Cap, these unprecedented events will make setting a fair rate for suppliers and consumers even more challenging, with our predicted winter cap rate changing by over £200 from one day to the next. 

“While questions are predictably turning to how we stabilise the energy market, with countries around Europe looking to rebalance their import rates and diversify the energy they use, it is clear, that in the short-term energy prices will continue in their upward trajectory. To mitigate the impact of rises on consumers and the wider economy, the UK government may need to reassess the level and scale of its financial support to households.”

The volatility in energy wholesale markets also impacted the EU carbon market yesterday, with the market experiencing its biggest fall ever in Euro terms, dropping over €13 to €68.85.

Carbon prices have been pushed to record highs as some power generators have responded to soaring gas prices by switching to coal generation, leading to increased emissions and rising demand for carbon allowances.

However, some analysts suggested yesterday’s sharp fall in carbon prices was triggered by Russian carbon traders dumping their holdings of allowances in response to fears of further sanctions, triggering a cascade effect where others sold allowances as the price fell. The general consensus in the market remains that there is likely to be a sustained shortage of allowances that should keep prices at relatively high levels.

Want to find out more about how the net zero transition will impact your business? You can now sign up to attend the virtual Net Zero Finance Summit, which will take place live and interactive on Tuesday 29 March and will be available on demand for delegates after the event.

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