What Can Companies Expect Following the New NDC Announcement?

This blog was coauthored by Elizabeth Sisul.

Speculation is ripe on what the proposed level of reduction of US emissions will be for the revised nationally determined contribution (NDC) that the Biden-Harris administration will soon announce, and the business community is weighing in. On April 13, 2021, a group of large corporations released a public letter voicing their support for a proposed 50% carbon emission reduction by 2030 on the pathway to achieve a net-zero economy by 2050 in line with the Paris Agreement.

Whatever level of reduction is ultimately announced, the direction and intention is clear: carbon emissions and climate change are systemic risks to US and global economies that must be publicly disclosed, assessed, and reduced. Companies will need to start considering investing in new industries and changing how they do business to promote clean energy. They will also likely be subject to enhanced disclosures and increased climate risk oversight.  

Emphasis Is on Climate Risk

Other recent announcements, including Biden’s infrastructure bill, the American Jobs plan, and actions taken by the SEC have included a focus on climate risk. They reinforce the fact that addressing the effects of climate change continues to be one of the administration’s top priorities. Once Biden announces the revised NDC, a debate on the carbon reduction target will begin. The debate will center around important questions, including the following: 

• Will the revised NDC place an undue burden on the economy? 
  
• How do we remain globally competitive?  
  
• What will be the impact on jobs?  
  

These questions are natural. Meeting the targets set by the revised NDC may well mean that businesses will face substantial changes to their business models and strategies.

Although it is true that the revised NDC will pose strategic risks companies have to navigate, there will also be tremendous opportunities for new investments in innovation and clean growth. Companies willing to seek out these opportunities can thrive in this evolving environment.