Trump Won. What Does It Mean for Low Carbon Fuels & Vehicles?

November 15, 2016 |

screen-shot-2016-11-15-at-10-10-09-amBy Tammy Klein, Future Fuel Strategies

So Donald Trump won and will become the U.S.’ 45th president. But what will it really mean for low carbon fuels and vehicle (LCFV) initiatives such as biofuels, fuel economy and zero emission vehicle programs? With Trump’s outspoken refusal to accept the reality of climate change and promise to reinvigorate the fracking and coal industries, are LCFV initiatives stone dead? What can we expect in a Trump Administration? Let’s break it down.

Trump’s Platform, the Republican Party Platform & “A Better Way”

First, let’s take a look at the respective platforms from Trump and the Republican party as well as the “A Better Way” plan from House Speaker Paul Ryan to see where they stand on the issues. Key provisions of the Trump platform promise to:

  • “Make America energy independent, create millions of new jobs, and protect clean air and clean water. We will conserve our natural habitats, reserves and resources. We will unleash an energy revolution that will bring vast new wealth to our country.”
  • “Declare American energy dominance a strategic economic and foreign policy goal of the United States.”
  • “Become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests.”
  • “Encourage the use of natural gas and other American energy resources that will both reduce emissions but also reduce the price of energy and increase our economic output. “
  • “Rescind all job-destroying Obama executive actions. Mr. Trump will reduce and eliminate all barriers to responsible energy production, creating at least a half million jobs a year, $30 billion in higher wages, and cheaper energy.”

Trump has stated on multiple occasions that he plans to pull the U.S. out of the Paris Agreement, which is a driver for decarbonizing transport and for the spread of LCFV initiatives globally (as I have noted on multiple occasions). But notably, there is no such provision in the platform. And there’s no provision in the platform that references killing renewable energy programs and measures (including for bioenergy). Really, the name of the game is to create jobs and encourage the use of all energy resources. And that’s what was promised to the American people.

The Republican platform, importantly, is different in key respects. It aims to, among other things:

  • Continue opposing a carbon tax, though since Exxon and previous opponents have come around.
  • Roll back the Obama Administration’s Clean Power Plan (CPP), currently in litigation. (Trump has publicly spoken about the same and promised to bring coal jobs back, but tellingly it is not featured in his platform.)
  • Forbid the EPA from regulating CO2 (presumably impacting regulations such as the current fuel economy standards that are now under the mid-term review).
  • The development of all forms of energy that are marketable in a free economy without subsidies, including coal, oil, natural gas, nuclear power, and hydropower.

Paul Ryan’s “A Better Way” would repeal the CPP, and also promote fossil fuels as well as nuclear, hydroelectric and renewable sources. The whitepaper produced as part of this plan notes:

“The stakes could not be any higher. The energy boom has been far and away the best job creator of the last decade, and is estimated to be responsible for well over 1 million direct and indirect jobs. This includes energy production jobs as well as those associated with expanding the system of pipelines, electric transmission lines and other elements of the nation’s energy infrastructure. While the current low energy price environment has led to job losses in the sector, the long-term potential is still very promising.”

Possible Directions and Impacts on LCFVs

Are the national LCFV measures in place in the U.S. now stone dead? Not quite. I don’t see him warming to ZEV initiatives or mandates like the Low Carbon Fuels Standard (LCFS) program. But I see him keeping the Renewable Fuels Standard (RFS) program around. And fuel economy? It just depends. Here are a few guesses about what we could see happen:

  • Biofuels and the RFS program: Trump has been supportive of biofuels and I expect the Renewable Fuels Standard (RFS) program will largely stay intact. My guess is that Trump will not repeal the program, even though in September a document in the campaign noted that (it was quickly pulled and the statement edited out). The refining industry will keep trying, but the most powerful argument the biofuels industry could make is the protection and creation of jobs. Trump can’t very well be the jobs candidate and then be responsible for taking thousands of jobs from the very people in the Heartland who helped elect him. But I could see him taking action to modify the program. One example would be shifting the burden of compliance to blenders rather than refiners, some of whom have been hit hard by compliance costs.
  • R&D and Other Programs that Support Bioenergy, including Biofuels: Trump has talked about removing support for renewables (mainly wind and solar) but again, if job losses could be involved, it’s unlikely to happen. The other powerful argument that militates in favor of keeping programs like these is economic development, trade and staying competitive with other countries like China which is also using R&D in these areas to mitigate climate change and develop its economy. There is a $23 trillion market opportunity for clean tech in emerging countries, according to the International Finance Corporation. And $3.6 trillion of that will be devoted to transport. Trump should want the U.S. to grab a piece of that pie.
  • Fuel Economy: This is the tough one for me. If Trump approves and the Republicans try and are successful in stripping EPA of its authority to regulate CO2 (a possibility), there wouldn’t be much ground to keep the standards (at least post 2022). If jobs are affected, and Trump has consistently pointed to loss of jobs in the auto industry and how he wants to bring them back, the program is doomed. Moreover, he has spoken of and there is in the platform a statement about unnecessary regulations. Would this be one of those? On the other hand, I go back to a Ceres report from earlier this year. The study showed the auto companies would be profitable if CAFE remains as it is, but if they were relaxed (or presumably ended) the bottom line would be negatively impacted because they would be less competitive against other manufacturers. Maybe a middle ground here would be some relaxation, an additional few years to meet the standards, but they remain in place.
  • A National LCFS?: Forget it. I believe, though, a national LCFS based on true carbon intensity could help jump-start the advanced biofuels industry. Reuters reported over the summer that the Clinton campaign explored this policy option with California Air Resources Board (CARB) officials but quickly clarified that the candidate had no intention to alter the existing RFS program. Now, the program is a non-starter. It’s always possible that the states, especially the Northeast, could implement their own LCFS programs but there has been little movement in this area.
  • ZEV Initiatives: Last week, the White House unveiled its latest initiative to spur the development of the EV infrastructure and market. I doubt that Trump will continue initiatives like this, and I expect him to let the current tax credits for electric vehicles to expire. But with the price of models and the cost of production coming down over the next few years, it may not be necessary anyway. Meantime, California will carry on with its ZEV program, and will work with other states (and countries) to implement such programs.

Tammy Klein is a strategic adviser to global automotive and oil industry clients, as well as governments on fuels policy issues, with 20 years experience on conventional fuels, biofuels and alternative fuels policy and market issues. Follow her on Twitter @tammyklein. Visit her website here.

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