Clean Energy Investment
Since coming into office, the Biden administration has prioritized a shift toward clean energy. Should a Democratic nominee win, we expect that the new administration would continue to push for investment within the clean energy space. Since signing the IRA in Aug- 2022, the Biden administration has directed roughly $400 billion in federal funding to the clean energy sector, including R&D and commercialization of energy transition technologies across carbon capture and storage, green fuel, clean hydrogen, and heat pumps. Should a Democratic nominee win, we would expect funding to continue flowing into clean energy investments.
We believe a Democratic administration would likely continue deprioritizing fossil fuels in favor of cleaner energy alternatives. This trend is evidenced by the Jan-2024 pause in approvals for new LNG terminal projects, announced by the Department of Energy. The decision, which was subsequently reversed by a federal judge in Jul-2024, demonstrates the Democratic administration’s willingness to challenge the fossil fuels industry’s expansion plans. We think a Democratic victory could signal a more cautious approach to fossil fuel infrastructure due to the potential impact on the climate. Furthermore, Democrats’ emphasis on transitioning to renewable energy sources such as wind and solar suggests that a second term would likely see continued support for clean energy initiatives and potentially stricter regulations on fossil fuel projects.
Water Protections
Consistent with President Biden’s environmental agenda, we would expect a Democratic administration to emphasize stringent measures to protect water resources. We would expect a Democratic administration to aim to strengthen regulations under the Clean Water Act, targeting pollution from industrial activities and agricultural runoff to ensure safe drinking water and clean waterways. Policies would likely advocate for tighter controls on industrial discharges and increased funding for wastewater treatment infrastructure. We note that the EPA under Biden has implemented new standards for PFAS in drinking water, recognizing the health risks associated with them. For industrial and water companies, this means facing more rigorous compliance requirements, potential investments in advanced filtration and treatment technologies, and increased focus on sustainable practices to avoid pollution penalties.
Corporate Income Tax
Assuming that an eventual Democratic nominee would support a stance on a tax policy similar to the Biden administration’s, we expect the centerpiece of a Democrat’s proposal to be an increase in the corporate income tax from 21% to 28%. Among other proposed changes, Biden had aimed to reform international taxation by raising the global intangible low- tax income (GILTI) tax rate from 10.5% to 21% and repeal the reduced tax rate on foreign derived intangible income (FDII). Additionally, we would expect a Democrat to continue to propose increasing taxes specifically on the fossil fuel industry. These measures collectively aim to boost corporate tax revenue and address perceived inequities in the current corporate tax structure, particularly for multinational corporations.
