Like most people, the results of the 2016 election left me shocked and surprised. But, given that my primary area of research has been the economics of climate change and clean energy, I’ve been trying to understand what impact the Trump administration will likely have on US greenhouse gas emissions trajectories and clean energy markets. I discount some of the actions the President-elect has taken that would suggest a moderation on the issue of climate change, like his recent meeting with Al Gore, in the face of the news that Oklahoma Attorney General Scott Pruitt will take over as Environmental Protection Agency Administrator (he is currently suing the agency over the Clean Power Plan). Additionally, his pick of South Carolina Governor Nikki Haley as UN Ambassador suggests that the US will indeed retreat from international efforts to reduce emissions. The very slight silver lining in all of this is that this probably does not mean that emissions in the United States will start to increase drastically or that markets for new wind and solar installations will collapse. However, at a time when policy needs to become much more aggressive in order to reduce emissions at a rate that will avoid catastrophic climate change, it will be moving in the opposite direction. Because the world has perhaps two to three decades to seriously begin to reduce emissions before very dangerous levels of climate change are locked in, this represents a serious setback. It will be even more difficult and costly to make up for this lost time later. Overall, I would expect generation from natural gas and renewables to continue their expansion under the Trump administration, and oil production in the US will likely increase (with significant environmental consequences for land that is opened for drilling). It is unlikely that coal generation will see a revival, however, despite Trump’s promises to bring back coal mining jobs. Much of the collapse in coal use has come from a combination of cheap natural gas and recent depressed demand from China. In many cases, coal is simply not a cost-effective fuel for power generation. Coal power plants take many years to build and are designed to last 50-75 years. Utility executives will be all too aware that an administration friendly to coal will almost certainly be replaced with one that seeks to phase it out over the coming years. When natural gas or renewable generation has similar or lower costs with much less risk of having to close plants early, it makes little sense to expand coal power generation or to defer plans to retire existing plants. Similarly, communities and workers suffering because of the collapse of coal will need help beyond hollow and false promises to bring their jobs back. The deployment of wind and solar power will almost certainly continue at a rapid pace in the US. Energy policy positions outside of climate change tend to be determined regionally instead of by party, meaning that there is support for production tax credits vital to the wind industry by representatives from places like Texas. Existing EPA rules are extremely difficult for the agency to roll back, and Republicans lack the 60 Senate votes needed to pass legislation to substantially change EPA authority to regulate things like greenhouse gas emissions (though Congress can de-fund offices in charge of enforcement and cripple the agency in other ways). However, clean energy markets should remain relatively healthy because, as the chart below from the Department of Energy shows, the costs of clean energy technologies fell drastically under the Obama administration. Source: Department of Energy
Outside of electricity generation, I would also expect businesses to continue to set and achieve clean energy and greenhouse gas emission reduction targets. About half of the S&P 500 has set emission reduction goals, and, as my research has found, for most companies, federal policy is only one of several considerations. I conducted interviews with executives at large U.S. firms about their process for setting goals, and my primary finding was that various stakeholder groups, such as consumers, activists, (state and federal) regulators, shareholders, and workers would typically prompt a firm to examine its production process. While the direct threat from federal regulators will be diminished under the Trump administration, threats from other groups remain. Shareholders, for example, may see this administration as an aberration and believe that it is not worth abandoning clean energy goals for short-term gains. Consumers, state regulators, and activist groups may become more vocal in the absence of pressure from the federal government. Once a firm is prompted to examine its production process, it embarks on an internal review in a profit-maximization framework. Several of my subjects said that they found goal setting to be useful because they were actually able to reduce costs and improve overall production efficiency once they looked at their processes through the lens of environmental sustainability. Such efforts are therefore unlikely to stop. Of course, there will be fewer firms setting goals and those goals that are set will be less aggressive than if a more normal administration took over and set aggressive emission reduction goals. And in order to achieve emissions reductions on the scale required, much more will need to be done than what is profit-maximizing for firms under the current cost regime. My point is merely that I would not expect this process of incorporating cleaner technologies into production processes to stop or reverse; at worst, it will slow down a bit. While this more nuanced look at what may happen with some aspects of environmental and energy policy shows that we are probably not destined to see pollution-spewing plants reappear all over the country, it is clear that the election of Trump is an absolute disaster for the planet. His administration will likely imperil global efforts at aggressive emission reduction by abandoning the Paris agreement, and a policy that favors the domestic development of industry at all costs will boost emissions above what they would have been under a Clinton administration. It is important not to be distracted by superficial gestures of moderation on the part of Trump, like his meeting with Gore, and instead focus on the policies being implemented by his appointees. Those of us in the academic and activist communities will need to agitate for more aggressive actions at every turn.
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AuthorEconomist. Professor. Environmentalist. Archives
July 2017
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