The greenest president in US history is to be succeeded by his anti-green predecessor. Another lurch in the never terribly stable field of US energy policy is guaranteed, but remember that like gray, green comes in different shades. It is worth checking assumptions on what the switch from US President Joe Biden to president-elect Donald Trump means for energy.
The first thing to recognize is that, in a sector this big and capital intensive, presidents mostly inherit rather than create from scratch. Biden wanted to move the US away from fossil fuels, but began with an economy overwhelmingly dependent upon them. Even two terms would not have changed that, and the renewed invasion of Ukraine in 2022 forced Biden to pivot somewhat back to immediate security and affordability concerns. He ended up approving a major new oil development in Alaska and presiding over the third-biggest increase in US oil and gas production of any administration in history. The biggest one of all time was under his old boss, toasted with gusto in the Houston-area country clubs, former US president Barack Obama. Red and blue is not as useful a guide here as you might think.
Likewise, as much as Trump calls the energy transition a scam, he entered office in 2017 amid sustained declines in the price of clean technologies. Developers’ decisions are certainly influenced by policy, but few can resist the siren call of lower costs. For example: More US wind power capacity was installed under the former president who speculates that the sound of spinning turbines can cause cancer than under Biden (who still wins big on solar and batteries).
Similarly, anyone expecting another round of energy dominance to spark a big jump in US oil and gas output should remember that the industry has in recent years grown rather fond of profitability. The same day Americans went to the polls, shale darling Diamondback Energy Inc hosted an earnings call luxuriating in the company’s efficiency gains, but warned against using that extra firepower to boost production.
“I think that spreadsheet math is what’s gotten this industry in trouble in the past,” Diamondback Energy chief financial officer Matthew Kaes Van’t Hof said.
Trump would certainly reduce hurdles for producers; expect lower royalties and easier environmental rules on federal lands as well as more lease auctions. However, federal lands account for a minority of oil and gas production and there are far bigger forces shaping the outlook for prices — and, therefore, the path of domestic production.
Chinese oil imports have slowed, exacerbating an excess of supply that has forced OPEC+ to delay bringing back production. If the group decides to pull the trigger in the first quarter — seasonally weak for oil demand — Trump’s inauguration could coincide with a slump in prices. That is before we get to the negative impacts on oil and gas prices from a potential easing of sanctions on Russia or the chilling effect on global trade, and the opposite effect on US inflation, of his promised sweeping tariffs.
Similarly, Biden’s signature green policy, the Inflation Reduction Act, is not necessarily dead come January. The vast majority of announced clean tech manufacturing investment and associated jobs, underpinned by individual retirement account (IRA) subsidies, are in “red” House of Representatives districts.
It is still unclear who is to win control of the House. Regardless, even a Republican majority might well number in the single digits again. In August, 18 Republican representatives signed a public letter urging the leadership not to overturn the IRA’s subsidies, motivated by a mix of protecting investments on their home turf or signaling moderation in purple districts (swing states).
Even if self-interest on the part of members of Congress prevents outright repeal, that does not mean Biden’s legacy would be left untouched. The Loan Programs Office, which was revived and expanded under Biden as a government-owned green venture capital fund, is almost certainly about to go into hibernation.
Trump’s protectionist bent might also see his administration curb the IRA’s subsidies in more subtle ways by, for example, interpreting domestic content provisions in a more restrictive way. This would raise costs in a clean tech sector that has relied heavily on Chinese manufacturing for price deflation. As for the macroeconomic chill he might unleash on oil and gas, higher inflation and interest rates would present a headwind to renewable power development — as happened notably with offshore wind last year — only now with the added twist of policy uncertainty in a more hostile Washington. Shares of big renewables-exposed stocks fell heavily on Wednesday morning.
Continuing that theme, Trump would also trash the Biden administration’s efforts to decarbonize the electricity sector with tighter rules on greenhouse gas emissions. These were in danger under the right-wing majority on the Supreme Court anyway, but another lurch back toward pro-fossil fuel power policy is now assured.
However, again, the implications are not clear cut. Most utilities and other power developers have long-standing decarbonization targets that rest, in part, on state-level mandates and pure economics — it is just too expensive at this point to build and run a coal-fired power plant in the US relative to other options. A change at the White House is not going to change that. However, what it would likely do is extend the lives of existing coal and gas-fired plants that might otherwise have shut down when faced with the prospect of costly upgrades to meet tightening environmental standards. We have seen signs of this happening already amid the frenzy around datacenters and artificial intelligence (AI), as a sudden upswing in electricity demand projections has made even old coal plants the target of acquisitions. If Trump’s newest and biggest fan, SpaceX CEO Elon Musk, enters the administration, we could also see more support for nuclear power, given Musk’s own AI interests and big tech’s fascination with reactors.
Trump’s re-election is undoubtedly a blow to efforts to deal with climate change with any urgency. Beyond that, the limitations of the presidency and the raft of details matter — and often clash with the received wisdom.
Liam Denning is a Bloomberg Opinion columnist covering energy. A former banker, he edited the Wall Street Journal’s “Heard on the Street” column and wrote the Financial Times’ “Lex” column.
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