Clean energy stocks were among yesterday’s best gainers as Joe Biden, presumptive US Democrat president, outlined a $2tn green energy and infrastructure spending plan. Traditional oil companies also rebounded, with Chevron and Exxon up over 3% and Schlumberger, EOG Resources and Halliburton both adding over 5% as Biden appeared to steer clear of any fracking bans.
First the numbers – it’s more money, faster with a more ambitious target than in the primaries after – it has all the hallmarks of Bernie Sanders on it. The $2tn over four years exceeds the $1.7tn over ten imagined in Biden’s primary campaign.
An irreversible path to net zero carbon emissions
Biden outlined plans to set the US on an “irreversible path” to net-zero carbon emissions by 2050, with an ambitious goal to build a carbon pollution-free power sector by 2035. There is a clear break being made with the oil and gas sector implicit in this, but crucially we did not hear an aggressive take on fracking or proposals to restrict US shale.
“The focus was on job creation in new industries, not on going after the oil and gas sector per se, albeit the proposals clearly imply a far more aggressive shift away from fossil fuels than a Trump administration would pursue,” comments Neil Wilson, Chief Market Analyst at Markets.com “As much as it cemented the Democrats as the green party, this is an election pitch to voters in some key swing states who may have lost their jobs.”
Meanwhile, the Democrat proposals would also involve upgrading millions of commercial and residential properties over four years to increase energy efficiency, with among other things the installation of solar panels, which is a potentially huge growth area.
“We also note a positive policy position on EV (Tesla, Nikola Motor Company) with plans to invest in 500,000 electric vehicle charging stations,” says Wilson. “Biden’s goal is to combine going green with economic recovery: to Build Back Better. He is promising to create 1 million new jobs in the auto industry, domestic auto supply chains, and auto infrastructure, from parts to materials to electric vehicle charging stations, which will depend on the repurposing of the auto industry from ICE to EV.”
Whilst Biden is playing a strong hand here in tying jobs and economic recovery to the green economy, killing two albatrosses with one very large boulder, there are of course risks to this strategy, notably among the millions of workers in the oil & gas sector in states like Pennsylvania and Texas.
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Biden boasts of creating more than 250k jobs “immediately to clean up local economies from the impacts of resource extraction”, but they may see Trump as a better guarantor of their jobs when it comes to the crunch.
Broadly the announcement appeared to be positive for the S&P 500 Energy sector, which rose 3.43%. Markets.com says its Biden20 Blend clean energy constituents, selected as potential gainers from a Democrat clean sweep, notched broad gains, with some solar energy names taking off after Biden’s announcement (e.g. Sunrun up 12.26%, SolarEdge shares up 8.74%).