We doubt that President Biden’s moratorium on new drilling will result in an outright ban. As we discuss in the ESG report today, the lack of unity on the idea of a carbon tax in the US means that the administration has to approach climate change issues in a more piecemeal fashion and one of the easiest triggers to pull, is to limit any new investment that adds to emissions. Our guess is that we will see an EPA-led agenda shortly that will only allow new US energy (and probably industrial) investments that come with a carbon-neutral plan. Drilling will likely be allowed to continue as long as the new wells have zero emissions or have offsets to counter any new emissions. It is unlikely that this will be restricted to oil and gas, and CP Chemical with their 1-Hexene project announced above may be in for a surprise when they apply for a permit.
Carbon prices are working in other regions and rising to reflect the increasing cost of carbon abatement, see chart below.
Source: Bloomberg, Reuters, C-MACC Analysis, May 2021