Donald Trump wants to increase US domestic energy production and reduce regulations Credit: Alamy.
Emily Gosden, Energy Editor.- With a man who says global warming is an “expensive hoax” about to become leader of the free world, it’s no surprise that fossil fuel companies have been seen as some of the biggest beneficiaries of the US election result - while renewable energy investors have taken fright.
Donald Trump’s presidency is likely to herald a seismic shift in US domestic energy policy, unravelling many of Barack Obama’s key environmental policies.
It also threatens the fragile global progress to tackling climate change that Mr Obama helped spearhead – risking undermining the growth of green energy worldwide.
Trump’s “America First Energy Plan” pledges to “unleash an energy revolution that will bring vast new wealth to our country”. America may already have undergone a shale revolution but Trump wants to go further, accessing “$50 trillion in untapped shale, oil and natural gas reserves, plus hundreds of years in clean coal reserves”.
Whereas Hillary Clinton had threatened curbs on fracking, Trump plans to rip up energy regulations, lifting moratoriums on production in federal lands and to “save the coal industry”.
“Less regulation could help energy investments because it could lower companies’ costs to pull resources out of the ground,” Jeff Rottinghaus of the T. Rowe Price US Large Cap Equity Fund explains.
While shares in coal producers jumped on the Trump victory, analysts at Bernstein warn that scrapping environmental regulations may not revive the industry. “Cheap natural gas is the true chief culprit in coal's decline, and if Trump's other campaign promises regarding expanding gas infrastructure are to be believed, gas supply may grow even more quickly than it would have under Clinton,” they say.
Will Scargill of GlobalData, also cautions that Trump’s support for shale may be frustrated by the fact many regulations exist at local or state level. Despite this, he says Trump’s pledges suggest “a positive outlook for the oil and gas sector” – not least with Harold Hamm, chief executive of oil firm Continental Resources, a candidate for energy secretary.
Trump’s victory also brings the Keystone XL oil pipeline from Canada to the US, which was blocked by Obama on climate grounds, back on the agenda, and is likely to mean full steam ahead for the controversial Dakota access pipeline, with Trump owning a stake in the company building it.
When it comes to global oil prices, the ramifications are unclear. An increase in US production could put further downward pressure on prices, as could any slowdown to global economic growth. However, if Trump revokes the nuclear agreement with Iran and reintroduces sanctions, Commerzbank analysts say, “oil prices would presumably rise”.
Renewables, which benefited from support from Obama, look vulnerable under Trump – as evidenced by the plunge in shares in Denmark’s Vestas, the world’s biggest wind turbine maker, and several US solar companies on Wednesday.
Trump has derided wind farms as “very ugly” – not least those planned next to his Aberdeenshire golf course – and blamed them for killing birds, while criticising the costs of both wind and solar.
According to S&P Global Market Intelligence, if Trump were to end investment tax credit incentives for renewables it could “slash solar installation demand by 60pc”.
But Matthew Knight, a UK executive of wind manufacturer Siemens, argues Trump’s climate scepticism doesn’t necessarily spell the end for renewables in the US as prices fall. “If you deny the science, that doesn’t change the economics,” he says. “Solar and wind in [parts of] North America are financially comparable with gas and coal.”
Ashim Paun, director of climate change strategy at HSBC agrees that falling costs may still see some solar and wind deployment but says Trump’s election is “negative” for renewables – and for “global climate momentum”.
While Obama helped negotiate a climate deal with China that paved the way the historic global emissions-reductions deal in Paris last year, Trump has pledged to “cancel the Paris Climate Agreement and stop all payments of US tax dollars to UN global warming programmes”.
Whether countries like China and India would still see merit in green energy in the absence of US action remains to be seen, but Trump’s stance can hardly be helpful – and could potentially be disastrous.
Michael Oppenheimer, professor of international affairs at Princeton told the Washington Post: “If Trump doesn’t change his view of the Paris agreement and doesn’t honor the commitments [Obama] made, that virtually guarantees that the international process will fall into disarray.”
