President Joe Biden’s pledge to halve US net greenhouse-gas emissions by 2030 is less ambitious than the EU or UK pledges but shows Washington’s wish to regain global climate leadership after four years in the cold. It gives the US clout in climate diplomacy and puts pressure on other major emitters to align their 2030 targets to a net-zero pathway.

The Paris Agreement, which the US re-joined this year, aims to limit global warming to 2°C or, even better, 1.5°C, above pre-industrial levels. And the UN’s Intergovernmental Panel on Climate Change says the world needs to achieve net-zero emissions by 2050 to stay within 1.5°C.

The US pledge of a 50 per cent-52 per cent emissions reduction from 2005 levels aligns to net-zero pathways. It is roughly equivalent to a 42 per cent to 45 per cent reduction from 1990 levels.

The target is economy-wide, with the president mentioning buildings, transport, industry and agriculture while aiming for zero-carbon electricity by 2035.

However, it is a net target. Net-zero allows sources of emissions such as fossil-fuel combustion to be balanced against sinks such as forestry or carbon capture. So the US can still emit greenhouse gases so long as the net impact on atmospheric concentrations is zero.

Achieving net-zero across the US economy will not be easy. On our calculations, a continuation of the 5 per cent-5.4 per cent decarbonisation rate from 2030 would mean only an 82 per cent-84 per cent emissions reduction in 2050.

That suggests the US needs carbon offsets. The president mentioned the enhancement of carbon sinks through “nature-based solutions for ecosystems ranging from our forests and agricultural soils to our rivers and coasts” and also “ocean-based solutions”.

His April announcement made no mention of a national carbon-pricing programme such as emissions trading, but having previously announced the re-instatement of its social cost of carbon, starting at USD51 a tonne, we expect an updated version early in 2022 at a much higher rate.

There was also no direct reference to climate finance, but the president has already asked for USD2.5 billion for international climate programmes and USD1.2 billion for the UN’s Green Climate Fund: that shows the US is not just helping itself, but also helping developing economies, and hence the world, to move towards net-zero.

The US announcement means around 25 economies have net-zero pathway alignment plans, with about half of global emissions under some form of net-zero pledge or alignment.

There were calls for even greater US emissions cuts – the EU is targeting at least 55 per cent from 1990 levels and the UK a 68 per cent decline from that date, hopefully rising to 78 per cent by 2035. Mainland China has no absolute reduction plan for 2030 yet, but there is growing pressure on larger emitters to make net-zero pledges.

The global climate process is regrouping following a pandemic-induced pause. This US pledge should be a catalyst for other parties to commit to more ambitious climate pledges and actionable policies, with many more businesses responding by aligning their operations to a net-zero pathway.

First published 23 April 2021.

Would you like to find out more? Click here to read the full report.

Disclosure and disclaimer

More, collapsed
Carbon capture’s crucial decade
Technology can help world achieve net-zero emissions, but companies must be attracted
Join the conversation?

Join our Linkedin group to get an unparalleled view of macro and microeconomic events and trends from a bank that is a leader in both developed and emerging markets.