Prior to the 2016 election season, Donald Trump famously tweeted that climate change is a hoax created by the Chinese to gain economic advantage over the US. During the campaign, he promised to undo many of former President Obama’s initiatives like EPA’s Clean Power Plan rule and that he would withdraw the US from the United Nations COP21 Paris Agreement, in which 177 countries pledged to act on climate change. And most recently, the President has nominated a series of cabinet appointees with deep connections to the oil and gas industry, while questioning whether the science of climate change is settled.
These actions have led to concerns among some that the Trump Administration will rollback progress surrounding climate change policy, with articles reporting that scientists are frantically racing to archive climate data in fear that it will be lost under the administration’s new policies. However, recent trends suggest that while federal action is an important driver of climate policy, the business leaders, as well as local, state, and international governments are poised to fill any gaps and continue forward momentum in the absence of robust federal policy.
For businesses and investors, climate change represents long-term uncertainty, which creates risk. Just one week after the election, a group of 360 business leaders met during the UN conference in Marrakech and sent an open letter to President Trump urging him to “continue US participation in the Paris agreement”. This group included Starbucks, General Mills, DuPont, and Nike.
The RE100 group is a global initiative of businesses committed to 100% renewable electricity. This group includes 22 Fortune 100 companies and is led by such common household names as IKEA, Apple, Coca-Cola Enterprises, GM, Google, Bank of America, and Wal-Mart. Google recently announced it is on target to achieve 100% renewable electricity in 2017.
On December 12, Bill Gates announced Breakthrough Energy, a partnership of wealthy business leaders including Jeff Bezos, Richard Branson, and Jack Ma with the goal of $1 billion of investment in clean energy advancements. Gates had previously pledged to personally commit $2 billion. The business community appears poised to continue investment in clean energy and act as a driver towards a low-carbon economy.
President Trump campaigned primarily as a business leader who could bring an outside perspective to Washington, rather than a traditional politician. He also has suggested a willingness to listen to advisors and consider new ideas. In this role, he may be amenable to hearing the climate change concerns of other business leaders, particularly if they can express the problem in economic value terms.
State governments have also reinforced their commitment to pursuing action on climate change. California, which has long been a leader in climate policy, currently has a cap-and-trade policy and recently signed additional legislation to increase renewable energy and electric vehicles and improve energy efficiency. The policies are propelling California to reaching the goal of educing its greenhouse gas emissions to 40% below 1990 levels by 2030.
California Governor Jerry Brown recently said of the implications for his state, “We’ve got the scientists, we’ve got the lawyers, and we’re ready to fight.” California’s willingness to lead on climate policy is especially striking when you realize that the state represents the world’s sixth largest economy in terms of GDP.
Nine northeastern states have joined together to form the Regional Greenhouse Gas Initiative , a cap-and-trade program called the “first mandatory market-based program in the United States to reduce greenhouse gas emissions”. Twenty-nine states currently employ Renewable Portfolio Standards, which require that a certain percentage of electricity is generated from renewable energy sources like wind, solar, or biomass. Meanwhile, Hawaii has a law mandating 100% renewable energy in the state by 2045. As we can see, individual states still have significant power to shape climate action in America, meaning that a reduction of federal climate action by President Trump may have negligible impacts in certain regions.
Finally, President Trump indicated during the campaign that he would “cancel” the UN Paris Agreement. Ignoring the fact that he would not have the authority to cancel the agreement, all countries’ emissions reduction targets are voluntary, so it would be quite easy for the President to simply refuse to support US action. However, there has been little indication that a US withdrawal would dampen broader participation in the agreement. Given that the US is the largest emitter of CO2 in the world, a refusal to participate would certainly have an impact, but the international community appears prepared to move forward regardless.
In particular, China and India view retreat by the United States as a competitive advantage and an opportunity for those countries to become the global leaders shaping climate policy. Some countries have even floated the possibility of a “carbon tariff” on US goods, although there is some question as to the willingness of countries to enact such a policy, as it could lead to retaliation. The UN Climate Change Conference in Marrakech, Morocco was held just after the American election in early November and parties reinforced their commitment to move forward, with 111 countries formally ratifying the Paris Agreement. If President Trump pulls the US back from international cooperation on climate policy, look for other countries to take on leadership rolls.
Under the Obama Administration, energy policy and climate policy were intimately intertwined. Former President Obama’s support for the Paris Agreement and EPA’s Clean Power Plan had a direct impact on electric utilities future state planning. The promises made by President Trump during the campaign suggest that climate policy may become uncoupled from federal energy policy. While the federal government in the United States pursues energy policies supporting fossil fuels, business leaders, state and local governments, and the international community will continue to support initiatives aimed at combating climate change. It remains to be seen what impacts this divergence will have on the broader energy and utilities industry.