IEEJ：January 2021©IEEJ 2021
Special Bulletin
A Japanese Perspective on the International Energy Landscape (516)January 21, 2021

Significance of Japan-U.S. Energy/Environment Cooperation under the Biden
Administration
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn January 20, Democrat Joseph Biden was inaugurated as the 46th president of theUnited States, launching the Biden administration. The inauguration ceremony took place amid
unusually tight security arrangements in the U.S. capital of Washington. Following an unprecededincident in which supporters of former President Donald Trump stormed into the Capitol building on
January 6, the inauguration came amid a tense situation rather than in a celebratory mood.
President Biden is set to lead the United States as a political, economic, and military
superpower. As symbolized by the abovementioned inauguration ceremony, however, he is expected
to walk a very difficult and rocky road. First, the new president must tackle the still expanding
COVID-19 pandemic that has infected more than 24 million people and killed more than 400,000 inthe United States. In a manner to welcome the inauguration of the new administration, New Yorkstock prices hit record highs in the hope of economic recovery. Given a mountain of challenges
including unemployment and economic recovery amid widening income gaps, however, the U.S.
economy is in a difficult state.
A challenge that is greater than anything else for the Biden administration is how to heal
serious divisions in America. He must lead the United States in the presence of such divisions. For
Biden who took up the U.S. presidency after winning a fierce race with Trump, it is a grave fact thatnearly half of American voters still listen to Trump’s claim that it was a rigged election and are notsatisfied with the legitimacy of President Biden. Will Biden successfully restore American solidarity
and unity by healing the divisions that have deepened further through presidential election
campaigns and results? His skills and competence will be tested.
To address the abovementioned divisions in U.S. public opinion or society, Biden mustsecure unity within his Democratic Party. Democrats won run-off elections for two Senate seats inGeorgia on January 5, managing to avoid a divided Congress as the worst result. Nevertheless,Democrats vie with Republicans in the Congress more squarely than assumed before lastNovember’s elections, meaning that Biden would have to secure bipartisan support for his key
policies. A key precondition for bipartisan cooperation would be unity within Biden’s DemocraticParty. Within the party, however, leftists (environmentalists), centrists, and conservatives have been
racing for leadership. Biden’s political base is far from being stable.
Global attention is focusing on what policies the Biden administration plagued with amountain of challenges would offer regarding politics, economics, diplomacy, and security. Among awide range of key Biden policies attracting global interests, I here would like to discuss key points inthe energy and environment fields and the potential and importance of relevant Japan-U.S.
cooperation.
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The most attention-attracting point would be how the Biden administration would proceedwith climate change-oriented policy. Just after his inauguration, President Biden signed an executive
order to come back to the Paris Agreement, an international framework for climate change
countermeasures, reversing former President Trump’s unilateral exit from the agreement. He hasoffered to achieve decarbonization and carbon neutral status in the U.S. power sector by 2035 and in
the whole of the U.S. economy by 2050. To realize carbon neural status, the thorough promotion of
non-fossil energy sources including renewables and nuclear would have to be combined withelectrification through the accelerated diffusion of electric vehicles and the zero-emission power
sector. Priority would be given to the promotion of advanced technologies and innovations thatwould be indispensable for carbon neutral status, including small nuclear reactors and hydrogenutilization. Infrastructure development and investment would be required to fundamentally reform
U.S. energy supply and demand, and the system. Strong federal policy measures would be required
to promote and support such infrastructure development and investment. Senior officials appointed
for the energy and environment fields indicate that the Biden administration gives greater priority toclimate change initiatives than earlier expected. The problem is how and whether the Biden
administration could direct policy resources to the fields and enhance relevant initiatives in theabovementioned difficult political and social situation.
Another point attracting my attention is how the Biden administration would balance theambitious future-oriented initiative to enhance climate change countermeasures with the importanceof fossil fuel and relevant industries that now support the U.S. economy. Particularly, I am interested
in and would like to watch what policy or stance President Biden would adopt for the oil and gas
sector while being aware that the shale revolution has contributed much to enhancing the U.S.
economy and national power. Regarding fossil fuels, I also pay attention to the Biden
administration’s policy on the Middle East. President Biden has indicated his potential return to theIran nuclear deal, but the relevant situation is not so simple. In early January, Iran announced a plan
to resume enriching uranium to 20%, indicating its grave violation of the nuclear deal. How would
the Biden administration respond to the Iranian plan that has been interpreted as shaking the newU.S. regime? Depending on the U.S. response, a conservative hard-liner could win Iran’s presidential
election in June. How to deal with Iran is a difficult challenge for the Biden administration. If
U.S.-Iran relations go in the direction of improvement, Iran may come back to the international oil
market someday. If the improvement becomes difficult or bilateral relations worsen further, however,the Middle Eastern situation may become more fluid. Saudi Arabia may have no choice but toagonize over how to adjust its distance with the Biden administration. The new U.S. administration’s
relations with the Middle East may be difficult to handle. The Biden administration’s specific Middle
East policy will attract much attention.
In the meantime, the potential and importance of Japan-U.S. cooperation in the energy andenvironment fields also attracts attention. The reconstruction and enhancement of Japan-U.S.
cooperative relations is significant not only for Japan positioning the bilateral alliance as a pillar of
its foreign policy but also for the United States that faces various international challenges while
trying to enhance international cooperation and alliances under the Biden administration. Japan is themost important Asian ally for the United States. The two countries’ common target of achievingcarbon neutral status by 2050 is a major base for bilateral cooperation in the related policy areas. Asa matter of course, bilateral differences regarding energy supply and demand and natural resources
endowment would lead the two countries to have different priorities or policies. Regarding energy
efficiency improvement, renewable energy promotion and the use of nuclear technologies including
new technologies such as SMR, however, Japan and the United States can find common benefits
from the enhancement of the so-called 3E’s – energy security, environmental protection and2

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economic efficiency. Japan-U.S. cooperation will be important in the utilization of hydrogen andother innovations that will play a key role in realizing carbon neutral status and enhancing the 3E’s.
It is important for Japan and the United States to promote bilateral and multilateral cooperation inenhancing the 3E’s. In this regard, I would like to pay attention to potential Japan-U.S. cooperationin supporting an energy transition that would enhance the 3E’s for the Asian market growing
important as the gravity center of the global energy market. Given energy realities in growing Asia,
it is hoped that Japan and the United States will jointly consider a strategy to minimize energy
transition costs and will promote initiatives to diffuse non-fossil energy, effectively utilize natural
gas and LNG, decarbonize fossil fuels, reform energy markets, and vitalize market functions.

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