Trump’s stunningly self-destructive move on climate
Predictability is a necessity for the key industries that fit into America’s energy puzzle, especially electric utilities, oil and gas producers, and automobile manufacturers. All of these businesses make huge capital investments with very long lifespans. Utilities build power plants that provide electricity for decades. Oil companies drill wells that take years to complete. Auto companies plan car models five or more years in advance. None of these industries turn on a dime.
That’s why President Trump’s efforts to systematically reverse Barack Obama’s energy and environmental policies represent such a gamble for them.
Before Trump took office, technological advances, consumer preferences, cost trends and government policies were all jointly pushing toward a lowercarbon future.
Now Trump, working through Environmental Protection Agency Administrator Scott Pruitt and Energy Secretary Rick Perry, has steered federal policy in direct opposition to those forces, a redirection capped by his decision Thursday to withdraw from the Paris climate accord.
Elements of the oil and auto industries (and a much smaller share of utilities) welcome the president’s moves. His whiplashinducing reversal, however, is exposing these and other industries to what they fear most: uncertainty. Their executives and investors must now decide whether Trump’s direction represents a lasting shift away from concerns about climate or a final bump in the road to a lowercarbon future.
Melissa Lavinson, chief sustainability officer at PG&E Corp, the Northern California utility, frames the choice — as well as the most responsible answer — when she says: “If you have to go to a board of directors and say, ‘I have to make a multibillion-dollar investment that is multiyear,’ are you going to base it on two or four years in the political cycle or … on long-term economic, technological, and consumer trends?”
The unifying thread through Trump’s environmental agenda is an attempt to resurrect an earlier energy order that maximized fossil-fuel production.
His EPA has already started to reverse Obama-era regulations that required continued improvements in fuel efficiency from auto manufacturers and reduced carbon emissions from power plants.
The Interior Department is working to open more onshore and offshore public lands for oil, gas, and mineral extraction.
And Perry has suggested the administration may try to preempt state mandates that require utilities to use more renewable power. (He claims that such rules undermine the dependability of the electrical grid.)
Trump’s withdrawal from the Paris accord brings this crusade of restoration to a head with a stunningly self-destructive act of diplomatic and environmental isolation.
It’s difficult to overstate how directly this revanchist agenda collides with the marketplace and policy at all other levels. Trump’s moves affecting electricity generation, for instance, are intended to bolster coal. But coal’s share of power generation has declined for years, first under pressure from lower-cost natural gas, and now from increasingly affordable solar and wind. In 2016 alone, the amount of new capacity utilities added in wind and solar equaled the total amount of coal power brought online over the past 15 years.
Some in the auto industry are also fighting the last war by pushing Trump to loosen Obama’s long-term mileage-economy standards so they can sell more (highly profitable) light trucks and SUVs.
As the veteran environmentalist Dan Becker notes, however, no matter what Trump does, the industry will face tougher mileage restrictions in most European and Asian markets.
Companies will also face higher standards in the U.S. states that follow the rules California imposed with the unique authority it exercises under the federal Clean Air Act; those states represent about one-third of American vehicle sales. For Detroit, shifting investment toward gas-guzzling behemoths — what Becker calls “Trumpmobiles” — risks ceding those domestic and international markets to greener competitors.
Likewise, policy and marketplace risks will confront oil companies even if Trump can overcome legal and political challenges to opening more offshore waters to exploration. For one, they wouldn’t be able to finish new wells before a possible new administration in 2021 could again change the rules governing any drilling. The bigger problem is cost: “There is a question of how much new drilling we’d see in deepwater offshore in a world with $50 oil,” said Joseph Aldy, formerly Obama’s top environmental economist.
While Trump pursues restoration, states like Virginia, California and Nevada are debating proposals for further carbon reduction. All the G-7 industrial nations, except for the United States, last week reaffirmed support for the Paris climate accord. Big industrial consumers like Wal-Mart and Google are demanding cleaner power from utilities. Breakthroughs in the development of self-driving vehicles could rapidly accelerate demand for electric cars.
Fossil fuels will remain critical to powering America for years. But with the balance in the nation’s energy mix tilting toward cleaner fuels and greater efficiency, it’s likely Aldy is correct when he calls Trump’s crusade a temporary “aberration” in the world’s long march toward confronting potentially catastrophic changes in the climate.