Donald Trump may not care about climate change and renewable energy now, but the global economy will force him to – The Independent

December 15, 2016 Facebook Twitter LinkedIn Google+ Uncategorized

Big oil is back. It is back in two quite different ways. It is back in the US, with several appointments to Donald Trump’s new administration having energy connections. And it is back in the world at large with the Opec production-capping agreement now backed by a similar accord among major non-Opec producers, notably Russia. These two forces may, however, be pulled in different directions.

Trump’s first. There are three particularly significant appointments. One is Rick Perry as his nominee for energy secretary. He is a former governor of Texas, a leading oil producer, and during his failed bid for the presidency in 2011 he proposed to eliminate the Energy Department, which oversees US policy on this issue. 

The second nominee is Rex Tillerson as secretary of state. He is chief executive of Exxon Mobil, and has close ties to the Russian government – in 2013, he was awarded Russia’s Order of Friendship by Vladimir Putin.

And third, he is seeking to appoint the Oklahoma Attorney General Scott Pruitt to head the Environmental Protection Agency (EPA). Pruitt has been a strong opponent of President Barack Obama’s regulations to curb climate change, and his nomination seems particularly incendiary, as these recent remarks by Scott Pruitt show.

“The American people,” he said, “are tired of seeing billions of dollars drained from our economy due to unnecessary EPA regulations, and I intend to run this agency in a way that fosters both responsible protection of the environment and freedom for American businesses.”

These appointments have to be cleared by Congress, part of the checks and balances of the American system, but the working assumption we ought to make is that the Trump administration will be much more favourable to the fossil fuel lobby and much less concerned about carbon emissions than its predecessor.

If this is alarming to many people, there is however the prospect of a countervailing force: higher oil and gas prices.

Before the recent Opec meeting, the idea that there might be an agreement on production curbs was dismissed as idealistic. Many think even now that it will not hold. But the support from “Nopec” – the non-Opec producers – seems to have bolted it down. The oil price has responded, with Brent climbing to around $55 a barrel. No one should take forecasts or oil (or indeed any financial forecasts) too seriously, but the market is now talking about a trading range of $60-80 a barrel next year.

This is encouraging for it makes alternative sources of energy close to being competitive without subsidies. The cost of alternatives, in particular solar power in sunny states such as Arizona, is just about there already. As the price of panels falls further, you can see a crossover point within a couple of years.

And the good thing here is that in the hot states of the US, power is needed during sunlight hours to run air-conditioning. The pattern of use is quite the opposite of northern climes, where the greatest power need is during the winter. Of course solar only runs during the day but the cost of battery storage is falling fast too. The idea that households in sunny areas can use solar and batteries to go off-grid, producing all the power they need, carries a powerful attraction for the more libertarian-minded citizens of America.

Kanye West meets with President-elect Donald Trump at Trump Tower

There is a further twist. Oil use for road transport in the US has probably peaked. A combination of more fuel-efficient vehicles and the spread of pure electric cars has put a cap on demand. This peak has not yet been reached worldwide, with oil and gas demand in China, India and, increasingly, Africa rising fast. But what the US does, the rest of the world tends to follow.

So there is a tug-of-war. On the one hand, the US is going to ease up on restrictions on the use of fossil fuels, certainly gas and oil, maybe also coal. On the other hand, market forces will push the country towards a shift to renewables.

Big oil is back in political terms, and the recovery in the oil price is good news for the oil producers. But the market is encouraging the shift away from fossil fuels, so in environmental terms the impact of looser regulation may not be as damaging as at first sight would appear.