What President Trump could mean for energy and climate policy

Donald Trump, president-elect, is notorious for denying climate change. [a katz/ Shutterstock]

Before Donald Trump was elected America’s new president in yesterday’s elections (8 November), experts told euractiv.com that his presidency would have a corrosive effect on global and EU climate and energy policy.

Divya Reddy is Practice Head, Global Energy and Natural Resources at Eurasia Group. Simon Virley is Partner and Head of Power and Utilities at KPMG. They spoke to James Crisp, News Editor of EURACTIV. You can listen to the interview on SoundCloud or read the transcript below. 

This interview was held as US voters were going to the polls.

If Donald Trump wins the election, what will it mean for climate change policy at global and EU level?

Divya Reddy:  I think it will represent a significant setback for international climate politics because he has made it very clear that he is against the Paris Agreement, so even if he doesn’t formally withdraw the US from the agreement, which I think he will try to do, it certainly will mean that domestically, the US will not pay attention to its Paris obligations. And I think a large driver of the momentum behind the Paris was the leadership from President Obama and bilateral relationships ’round climate change that he formed, particularly with China, but also with India and other emerging markets. So I think it represents a pretty significant setback.

But he can’t just to rip the agreement up?

DR: No, it is more that he can block US participation by not taking it seriously.

And how will that affect the EU’s approach?

Simon Virley: I don’t foresee major changes to the EU’s approach in terms of energy and climate. The EU was committed to decarbonisation well before Trump and will probably remain committed to decarbonisation well after Trump, even if he is elected president. So I think the direct impacts on the EU are smaller, but the bigger question is about the overall international framework. This then raises questions about what countries like China will do if the US is seen not to be implementing the agreement and not following through on the commitments it made in Paris. That is the bigger question. So do I see immediate impacts on the direction of EU policy? No, because the EU is already firmly committed to this path of decarbonisation. The bigger question is how other countries will respond.

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Couldn’t that have a chilling influence? Couldn’t a country like Poland say, “If the world’s biggest emitter doesn’t care, why we should?”

SV: I think a Trump presidency would have an indirect effect. There is enough momentum in terms of the direction of travel of EU energy and climate policy now for that to remain largely in place. Other countries, and indeed some within the EU, may be pushed to question the direction of travel, but I think the broad support for moving to a lower-carbon energy system will remain in place.

+Energy Security+

As president, Trump is expected by some to move closer to Vladimir Putin. Would that weaken the EU’s negotiating hand specifically regarding energy security?

DR: It would certainly open up uncertainties around what the relationship between the US and Russia might become and the role of the EU within that. It may be overstating the case to say that he would make strong overtures towards tightening the relationship between the US and Russia. I don’t think it will be a game changer, a renaissance for US-Russia relations, so on the surface, I would say it is a slightly overstated risk. But I think the main challenge now is that there is a significant amount of uncertainty over what he would actually do, especially regarding foreign policy more broadly, including Russia, and that, I assume, is a source of uncertainty in other capitals in Europe.

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Do you think that unease could have an impact on investment decisions?

SV: I think it does add to the uncertainty, yes. Investors have taken some comfort from the fact that the world has ratified the Paris Agreement and there is a firm direction of travel there, aiming for decarbonisation. But if a President Trump were to withdraw from the process, as he has said, I think it would add to the uncertainty, add the cost of capital and make decisions more difficult for boardrooms around the world.

What is the situation in terms of support for renewables in the US now, and what could presumably happen if he wins?

DR: It is not necessarily a zero-sum game for renewables. This is in large part because last year, we had multi-year tax extensions for renewables. These are now in place and there is very little scope to revisit them in the next five years because they are in law. The other driver of renewables has been state-led policies, rather than federal policies, and those don’t change with the president. The one exception, which is a big one, is President Obama’s policy to cut greenhouse gas emissions in the power sector has been the Clean Power Plan, and that would certainly be rolled back under Donald Trump. This is a longer-term driver for renewables in the fuel mix, and it would be the one factor to certainly be removed.

+Energy Union+

The EU is looking to diversify its energy importers as part of its Energy Union strategy…

SV: Well the amount of input from the US is relatively small at the moment, and as far as I understand it, Trump wants to stop shale gas exports in the future. Certainly, the UK will look to import US shale gas, as our own reserves are in decline. But the big push in the EU will be building greater interconnection between the member states so we can use the energy we do have more effectively.

Interconnection is politically and practically quite difficult. Brexit has made that tougher hasn’t it?

SV: It has made it very difficult for investors thinking about future projects, not those that already have regulatory approval because there is now uncertainty not so much about the commercial case, but about the political support for greater interconnection with the UK market. I think across the EU there are still plenty of projects that will go ahead that will not include the UK market, but the political focus may now become the countries that are staying in the EU, as opposed to the UK. This is a big question because there is one more EU member state – Ireland – that sits at the end of the pipes and wires that have to cross the UK market, and this raises another very complex set-off issues for the Brexit negotiations. How will Ireland guarantee security of supply, given that it depends on energy flowing through the UK market?

Under Obama, the US has been pushing LNG exports to the EU. Will that continue?

DR: Well nobody is really sure what Trump will do on anything, but I think LNG is relatively off the radar. He has definitely taken an anti-trade stance more broadly, but I don’t think LNG exports would necessarily be subject to the strongest opposition. I would expect the status quo to continue around it, a lot of these projects are already permitted, so it is even more likely that there would be a backward-looking, regressive limitation on that.

So much of this gas will probably continue to end up in Europe, based on the projects already under construction, and the market itself will be the indicator of whether future projects get commissioned. Actually, I think the bigger risk is if Hillary Clinton is elected and the Democrats have stronger control. I think she will remain favourable to exports, but there is a growing anti-gas environmental backlash. For a long time under the Obama Administration, gas enjoyed a green status, which it is losing, so the risks to the EU’s gas supply from the US may be even greater under Democratic control.

The EU has made it clear that it sees natural gas as a bridge fuel…

SV: Well I think the EU already has pretty stretching renewables targets, so I think gas does need to have a role as a bridge fuel in the future. The key question now is the diversity of those supplies – where the EU gets its gas from – and hopefully the US will be part of that, but not the only part.

And quickly on TTIP. If Trump wins, is the deal off?

DR: The simple answer is yes.

+Hillary or Donald?+

If Hillary wins, what will be the big difference from your perspectives?

DR: On energy, the climate portfolio stays salient in US politics. That’s the big difference. On energy policy, there is a very clear divergence between Clinton and Trump on climate issues, and if she wins, we will see a continuation of the status quo, which facilitates international climate politics and certainly moves the US towards a green focus on energy policy.

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SV: I think if Hillary Clinton wins, one thing to bear in mind is that she has committed to one billion solar panels, which would be a big push for decentralised energy, and that would add to the trends we have seen around the world in terms of falling technology costs.

So what is the good news if Donald Trump wins?

SV: Pass.

DR: Maybe for some companies it will be good news. For oil and gas, the deregulation is certainly good news, because it would open up more domestic anchorage for oil and gas production.

SV: If exploration becomes easier and supply increases, it could mean lower energy bills for all of us that may benefit from US energy imports.

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