An interesting dynamic is at play as President-Elect Trump prepares to assume the presidency in January 2017. Appearing to signal a rollback of climate-progressive regulations promulgated during the Obama era as promised on the campaign trail, Trump recently appointed Oklahoma Attorney General Scott Pruitt to head the EPA and Texas Governor Rick Perry to head the Department of Energy (DOE). Pruitt has challenged the legality of EPA’s Clean Power Plan while Perry at one point during his presidential run promised to disband and end DOE.
Meantime, and as noted by the WSJ, U.S. companies are urging Trump to stay the course in the Paris Agreement while they plan to stay the course on reducing carbon emissions. Many big corporations, including those involved in transport, appear to see the transition to less carbon-intensive energy as a foregone conclusion—and ultimately good for business. “[E]xecutives in the oil, power, retail, transportation and technology industries said their companies were locked into a lower-emissions trajectory driven in part by market forces, such as cheaper prices for natural gas and wind power.”
This includes emerging economies as well. The chart below from Bloomberg New Energy Finance (BNEF) shows the average cost of new wind and solar from 58 emerging-market economies, including China, India, and Brazil. While solar was bound to fall below wind eventually, given its steeper price declines, few predicted it would happen this soon. BNEF says that unsubsidized solar is beginning to outcompete coal and natural gas on a larger scale, and notably, new solar projects in emerging markets are costing less to build than wind projects.
The figure below shows renewable power purchased by U.S. companies since 2010. Expectations from investors, activists and customers are also factors, along with pressure from regulators in states and other countries. Remember, while there are no enforcement provisions in the Paris Agreement at this time (and something that has been strongly criticized by some advocates) it relies on global peer pressure and public scrutiny to compel countries to act. While Trump may be immune to such pressure, global companies will not be and they will be subject to increasing pressure from the aforementioned groups if Trump tries to pull out of the Agreement.
That’s why after Trump’s win, more than 350 companies, including Intel Corp., DuPont Co. and Monsanto Co. signed a pledge expressing support for the Paris Agreement and U.S. efforts to cut carbon emissions. I think what could happen in the Trump Administration is a return to the “all of the above” energy strategy adopted by the Bush Administration which encouraged all energy sources (fossil fuel and renewable-based) and was reflected in the Energy Policy Act of 2005. The driver will not be climate necessarily but will be economic development, job creation (most especially since Trump campaigned on this) and energy security and dominance.