Trump’s Energy Aspirations
During campaigns, politicians make a lot of promises about what they will achieve. The realities of political, legal, and other constraints often prevent realization of these promises. That being said, it is useful to understand a new leader’s aspirations, which will serve as to guide their policy agenda. Here is a quick run-down of what to expect on energy policy from a Trump presidency, based on campaign promises.
Energy Advisors. Energy lobbyist, Mike McKenna, is heading up Trump’s transition team for the U.S. DOE. McKenna has lobbied on behalf of the Koch Companies, Southern Company, and Dow Chemical. Trump has appointed a climate skeptic, Myron Ebell of the Competitive Enterprise Institute (funded by Koch Brothers, and an assortment of fossil fuel interests) to run EPA’s transition team. Trump hasn’t appointed his cabinet, but some names are floating around.
Regulations. For regulations in general, he has an aggressive plan to eliminate regulations that kill jobs, institute a moratorium on certain new regulations, and reform the regulatory code. This is an important foundational point to understand because the President will have broad executive powers over the regulatory agenda (an agenda that of course must be consistent with the underlying statutory framework).
Environmental regulations, issued by the U.S. EPA, impact energy production and use. Trump has pledged to dismantle the U.S. EPA, which he probably can’t do. However, he certainly can work with Congress to reduce funding for the agency and zero-out funding for specific, unfavorable programs.
Climate Change. Regulating carbon emissions has profound implications for energy use. Trump believes climate change is a “hoax” and has promised to back out of the international climate treaty (the Paris Agreement) within 100 days of getting into office (adding uncertainty to the future of the global agreement), cut funding for U.N. Framework Convention on Climate Change initiatives and redirect monies towards domestic infrastructure, and roll back the Clean Power Plan.
Renewables. Deployment of renewables like wind and solar will likely continue due to cost competitiveness. However, I’d expect growth to slow, namely as the country retreats from prioritizing a low-carbon future. Many tax credit programs are scheduled to phase out anyway, but Trump’s plans to lower corporate taxes may reduce the need for tax-equity financing (a valuable contractual tool in renewable finance) further eroding growth. Many solar stocks tanked after the news of Trump’s victory.
Energy Innovation. Expect a slowdown in energy innovation related to low-carbon technologies. I’d expect reduced or eliminated federal funding for early stage research and development or deployment on things like renewables and energy storage or alternative transportation fuels. The resultant market and regulatory uncertainty may also cool private sector investments into non-fossil, low-carbon technologies.
Transportation Sector. In so far as fuel efficiency and greenhouse gas regulations on vehicles increase production costs (and/or lower sales), one could expect these regulations to be weakened or rolled back. Trump’s anti-NAFTA policies are expected to raise costs for U.S. manufacturers and automakers. Higher costs may lead to layoffs, therefore justifying regulatory rollback, per Trump’s stated stance on regulatory reform.
Coal. Trump has promised to end the Obama administration’s “war on coal.” It is unclear how he will do this (especially as low natural gas market prices are driving coal’s downturn), though he’s mentioned ending the moratorium on coal mining leases on federal lands and removing rules to protect streams (and waterways and wetlands) from coal mining impacts. Coal company stocks saw gains on the announcement of Trump’s victory, while coal industry leaders praised the development.
Oil and Natural Gas. Trump has promoted more pipelines (Keystone XL, Dakota Access), more drilling for oil and gas on federal lands, increased exports of oil and gas, and relaxing restrictions on energy development. Some believe Trump’s leadership will cause complications for OPEC, and indeed Trump’s energy plan cites intentions to be totally independent from imported oil from foreign nations hostile towards the U.S. One thing is clear, expect a much more robust natural resource extraction agenda.
Nuclear Energy. Trump has said generally supportive things about nuclear energy, including the need to reform the permitting process. However, he has also promoted natural gas over nuclear. The reduced importance of climate change and low-carbon energy sources may lower the value proposition for nuclear energy. It is unclear if or how this impacts the state-level subsidy justification for zero-carbon nuclear plants. Trump has so far punted on the issue of nuclear waste, as related to Yucca Mountain.
Energy Infrastructure. Trump is keen to use infrastructure development to promote economic growth, citing an “American Infrastructure First” policy that would support investments in a modern electricity grid, among other things. He promotes the idea of deficit-neutral infrastructure tax credits, streamlined permitting, incentive-based contracting, and also maximizing flexibility to the states. He also promotes development of new coal export facilities and pipelines to connect domestic products to international markets.
Electric Power Sector. Electric utilities gave more money to Clinton than any other candidate. She is a known quantity, which is comforting to an industry that makes decades-long investments. There are far fewer details about Trump’s electricity sector policies, but we know he plans on increasing fossil fuel development and use, decreasing support for a low-carbon future, and promoting energy infrastructure investments. Although Trump is pro-markets, I wonder if he will support re-regulation of competitive generation markets in order to protect certain uneconomic coal plants?
Rescinding Energy-Related Executive Orders. Trump has vowed to rescind all of Obama’s “anti-energy” executive orders (E.O.), which could include, for example: E.O. 13693 (Planning for Federal Sustainability in the Next Decade), E.O. 13624 (Accelerating Industrial Energy Efficiency), E.O. 13653 (Preparing the U.S. for the Impacts of Climate Change).
Overall, this agenda does represent a significant policy U-turn compared to the Obama Administration.