The contradictions of Trump’s ‘national energy emergency’

“Am departing presidential councils. Climate change is real. Leaving Paris is not good for America or the world.”

That was Elon Musk in 2017, when Donald Trump announced that the US would withdraw from the Paris agreement on climate change. Musk was joined in a chorus of critical statements by high-profile chief executives including Tim Cook of Apple, Mark Zuckerberg of Facebook and Sundar Pichai of Google.

This week, Trump declared a US exit from the Paris accord for the second time, on the day of his inauguration, as he had promised. Musk, far from repudiating the president, got so excited while celebrating Trump’s return that he gave a crowd two straight-armed gestures that looked to some observers like fascist salutes (Musk described this suggestion as “dirty tricks”). Cook, Zuckerberg and Pichai were all in attendance as Trump was sworn in. They and other major US corporate leaders have been silent on Trump’s Paris agreement decision. It’s a stark illustration of how far the culture has shifted among top executives in the country when it comes to public positioning on green policy.

Trump’s declaration on the Paris accord was one of several first-day executive orders that shredded Joe Biden’s climate policy, as the new president aims to speed fossil fuel development and slow low-carbon energy growth. In today’s edition, we look at the implications for clean energy businesses and investors — and why Trump would be politically wise not to push his anti-green drive as far as he might like.

renewable energy

Trump’s perplexing plan for energy security

Faced with what he considers a catastrophic energy shortage, the new US president has slammed the brakes on one of the country’s fastest-growing sources of power.

Donald Trump’s flurry of executive orders on Monday, in which he announced a “national energy emergency” while imposing an indefinite ban on new approvals for wind farms, looks incoherent if one assumes that energy security and affordability is truly his main concern. It makes sense only through the prism of a culture war in which — at least in Trump’s eyes — fossil fuels are associated with conservative values and renewables with the left.

While the subjects of Monday’s 26 executive orders ranged from foreign terrorists to renaming the Gulf of Mexico, the several dedicated to energy or climate issues made clear that this field is right at the top of Trump’s second-term agenda. 

In addition to the well trailed declaration pulling the US out of the Paris agreement, there was the hammer blow aimed at the wind farms Trump has so often excoriated. The latter suspends the approval of new wind projects pending a federal review, sending a chilling signal to investors and developers in what had become one of the world’s most important wind power sectors, providing 10 per cent of US electricity generation. Shares in wind turbine maker Vestas fell by 5.5 per cent (wind farm developer Ørsted fell by more than 17 per cent, having announced a major US asset writedown shortly after Trump’s inauguration). 

The wind farm order was couched in language about environmental concerns, ordering a review to “consider the environmental impact of onshore and offshore wind projects upon wildlife, including, but not limited to, birds and marine mammals”. This strikes quite a contrast with the silence on the welfare of birds and mammals in the Alaska National Wildlife Refuge, which Trump yesterday declared open for oil and gas drilling in a third declaration. Two other orders instructed federal agencies to identify measures to promote fossil fuel production, and to find restrictive energy regulations to be junked.

Green optimists can point out that, despite Trump’s long-standing scepticism towards clean energy, investment in that sector surged during his first term in office. Installed renewable capacity (not including hydroelectric power) rose from 141GW in 2016 to 235GW in 2020, according to BloombergNEF. 

Their pessimistic counterparts will note that Trump’s antipathy towards renewables seems to have hardened since then. In 2018, his energy department issued an announcement titled: “BIDDING BONANZA! Trump Administration Smashes Record for Offshore Wind Auction”. After Trump’s strike against the sector at the outset of his second term, it’s hard to imagine any such green energy cheerleading from his second administration.

Further bad news for green investors came with the order to halt all disbursement of grants and loans under the Inflation Reduction Act, putting more than $300bn of potential federal funding at risk, according to FT analysis. The Biden administration, seeing this coming, had rushed to deploy funds during its last months in office.

A bigger question is over the future of the tax credits created by the IRA, which account for the lion’s share of its projected economic impact. Academics at the University of Pennsylvania’s Wharton School of Business have estimated that the total value of the climate and energy-related fiscal support under the legislation would amount to $1.05tn between 2023 and 2032.

Eliminating the IRA tax credits would require legislation to be passed by Congress, and it’s far from clear that this is on the cards. The bulk of the green investments stimulated by the legislation have been in Republican-voting congressional districts — notably in Texas, now a hub for renewable energy. Last August, 18 US House Republicans wrote to speaker Mike Johnson pleading for the law to be kept in place, given its positive impact on local employment.

For Trump, policy on low-carbon energy is a matter of conflicting priorities. On one hand, supporting continued investment into the sector will create jobs, boost energy security, bolster the US’s long-term economic competitiveness and help it in its strategic contest with China.

On the other hand, undermining green investment will play well with a large number of Trump’s supporters who view it as part of a leftwing agenda, and especially with the oil industry magnates who have been major donors to his and his allies’ campaigns.

Yesterday’s executive orders have still left a huge amount to be decided, pending the outcome of the slew of reviews that they announced, and the legal and legislative challenges the administration will face on many of its goals. But as Trump’s second term proceeds, we’ll discover which of those competing priorities will win out.

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