The US elections were supposed to clarify policy uncertainties, and on the economic front, US president-elect Donald Trump’s victory over Vice President Kamala Harris has done just that. All three major US stock indices and US Treasury yields jumped the morning after election day, reflecting expectations of both strong economic growth and soaring debt and inflation.
On climate and — especially — environmental policy, another Trump presidency is clearly bad news, and it is exacerbated by extreme policy uncertainty and decidedly mixed signals, especially in cases where Trump might try to stand in the way of larger technological and market trends.
Consider electric vehicles (EVs). Casting himself as a champion of the internal combustion engine, Trump says he will eliminate tailpipe-emissions rules on “day one.”
Doing so would be well within his power, and it might provide some life support for a waning industry. At the same time, Tesla’s stock jumped 15 percent on the election news, with investors clearly betting the company could benefit from its CEO, Elon Musk, having spent more than US$100 million of his own money to help elect Trump.
All this is happening at a time when EVs are demonstrating their fundamental superiority to the technology that has preceded them. EVs convert 90 percent of their power into distance traveled, compared with only 20 percent for gasoline-powered vehicles. While the full efficiency gain depends on how much of the electricity is derived from renewables, even coal-fired power plants are more efficient than an internal combustion engine. In West Virginia, where about 90 percent of power comes from coal, an EV cuts carbon pollution by about 30 percent. The US average efficiency gain is already about 50 percent and rising.
Thus, basis physics dictates that any attempt by Trump to stand in the way of the EV transition is bound to fail. That said, he can still do a lot of damage along the way, especially when it comes to US competitiveness. US automakers already face stiff competition from China and elsewhere, and no US policy reversal on EVs or other clean technologies would curtail the rest of the world’s green industrial expansion.
Already, more than half of newly registered cars in China are EVs or plug-in hybrids — more than twice the global average. The US is a laggard, and Trump’s victory all but ensures that it would remain one for some time to come. Imposing 10 percent to 20 percent tariffs on all imports and a 60 percent tariff on Chinese goods would not protect domestic manufacturers as he claims. Trump already levied a 25 percent tariff during his first presidency, and it did nothing to help US automakers prepare for the electric future; neither did US President Joe Biden’s 100 percent tariffs on Chinese EVs.
Trump’s efforts to halt the low-carbon transition might be even more futile when it comes to solar, wind and other low-carbon technologies. Here, too, China dominates the global market, producing 97 percent of solar wafers, 85 percent of solar cells and 80 percent of solar modules. That is why the Biden administration tried, with the Inflation Reduction Act (IRA), to onshore some of the renewables supply chain by subsidizing domestic manufacturing. This resulted in projects like Illuminate USA, a joint venture with Chinese solar manufacturer Longi in Pataskala, Ohio. The plant is expected to assemble more than 9 million solar panels per year, enough to power 1 million US homes.
The Trump administration might well want to continue the IRA’s production tax credit, which subsidizes about 25 percent of Illuminate’s costs. Either way, Trump’s approach would have implications mainly for the 1,000 Ohioans now employed by the plant. The effect on the global solar panel market would be negligible; Longi would simply find ways to manufacture the panels more cheaply elsewhere if it needs to.
Of course, Trump can and would stand in the way of deploying renewables domestically as well. He has said that he will halt offshore wind leases; shares of turbine producers Orsted and Vestas lost almost as much on the election news as Tesla gained. The Trump administration could also make it more difficult to connect new renewables to the grid, and try to extend the life of aging fossil-fuel infrastructure, while handing money to vested interests. However, such tactics would merely delay the inevitable.
During his first administration, Trump tried to revive the domestic coal sector. He failed. Coal had been on its way out long before he came to office, and the industry’s decline has only accelerated since then. The shift has been led by states like Texas, which recently surpassed California in total utility-scale solar power installed.
Yes, Trump can and would do plenty of damage, including to public health through the rollback of environmental rules and safeguards. During his previous term, he rolled back more than 125 such rules, most of which were re-established under Biden. This time, he would be more ruthless and effective in ensuring that his reversals stick. In 2019, an estimated 22,000 extra US deaths were attributable to higher levels of local air pollution; such figures could become the new normal.
However, Biden repaired the damage that Trump caused on the climate front, and then went further. The outgoing administration’s climate policies were even more ambitious than what US Senator Bernie Sanders proposed in his 2016 presidential platform. Biden’s strategy, anchored by the IRA, jump-started the green tech race in the US. Trump can and will handicap domestic industries in jockeying for positions in that global competition, but he cannot halt it.
Gernot Wagner is a climate economist at Columbia Business School.
Copyright: Project Syndicate
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