WILL TRUMP’S ENERGY POLICY STOP DEVELOPING RENEWABLE ENERGY ?

1-Significant efforts to reduce greenhouse gases around the world

For several years, significant efforts have been made to promote renewable energies. It has been arduous and time-consuming to implement commitments of the Kyoto Protocol and the Conferences of the Parties (COP) United Nations Framework Convention on Climate Change. Almost 20 years were needed to develop concerted action on this issue among the world’s major countries. 1

The Paris Agreement of 2015 (COP21) is historic because it engages 195 countries to reduce emissions of greenhouse gases and to stabilize climate warming due to human activities to less than 2 ° C by 2100. [1]The main means used is the gradual elimination of fossil fuels, the main source of air pollution. It is estimated that global emissions of greenhouse gases (GHG) has reached nearly 49 billion tons of equivalent of CO2 in 2010 (latest data from IPCC ), increasing by 80% between 1970 and 2010.

The 2016 conference in Marrakech [2] reinforced the commitments of 2015 accelerating the adoption of the modalities by two years. The next conference will be held in Poland in 2018 and will provide an opportunity for several countries, such as Canada, Germany, Mexico and possibly the United States, to present their strategic plan.  [3]

Trump compromises 20 years of effort

However the election of Donald Trump has changed the situation and compromises effort of 20 years. Any global agreement cannot be held without the participation of all the major economic blocs lsuch as United States, China or Europe. The United States backing down could have a detrimental effect on other countries for reasons of competitiveness: the cost of producing fossil fuels is still lower than other types of renewable energies. The difference of costs can be regarded as unequal competition. In short, for this reason, the fight against climate change can only be done on a multilateral platform.

The intention of the new president is to break the “green alliance” between countries by increasing oil production on the American territory, hoping that the fall in the cost of energy would make United-States more competitive. On March 28, he signed an executive order providing for the suspension, cancellation and revision of several government measures. These measures, developed over the past 8 years by the Obama administration, were aimed at ensuring the energy transition notably by encouraging the renewable energy and natural gas sectors. The reaction of several industries was immediate. In all, 81 major US companies, including Google, Microsoft and Apple disassociated themselves from the new energy policy. [4]Several US states also reacted due to the commitments they had already made.

2-  Renewable energies are profitable in the long run

Trump is isolated and outphased, not only in relation to other countries but also in relation to the economic leaders of his own country. The confusion is explained by miscalculation that he makes. Several studies show that renewable energies will be profitable in the long term. This vision however is limited to the short term. The following reasons demonstrate this.

The cost of doing nothing is higher

Doing nothing would be even more expensive. Economists have calculated that the costs of doing nothing were higher than those of interventions to combat climate change. In this regard, a study published in 2006 by the economist and former vice president of the World Bank, Nicholas Stern estimated the consequences of climate change to about 0.5% to 1% of global GDP per year by 2050. Given that global GDP stood at US $ 78 280 billion in 2014, the impact would therefore range from US $ 391.4 billion to US $ 782.8 billion per year on worldwide economy. These costs are reflected in various forms, including human health, ecosystems, infrastructure and costs associated with natural disasters. [5]

Renewable energy is becoming increasingly competitive

With time, there is a decline in the cost of producing renewable energies. Taking into account the present value of all types of costs over time, like investment, operation (fuel, maintenance, etc.), dismantling of facilities (eg nuclear), some studies show that land-based wind turbines and ground solar parks currently have a cost per kilowatt-hour close to fossil fuels and lower than that of nuclear power.[6]

The trend seems to continue because of technological improvements. Cost of producing electricity by terrestrial wind turbines has decreased of 58% between 2009 and 2014 in the United States. The same cost of production of solar parks has decreased by 78% for the same period. In the not-too-distant future, renewable energies will be competitive to traditional energies such as oil or coal. The economic arguments to support the fossil sector will therefore disappear over time.[7]

ESTIMATED PRESENT COST OF ELECTRICAL PRODUCTION

CENTS $ (US) PER kw-hour 7

BNEF (2015) for Europe in the second half of 2015Lazard 2014 for the United States
Wind Turbines8.33.7-8.1
Coal10.56.6-15.1
Gas (combined cycle power plant)11.86.1-8.7
Photovoltaic (ground park)12.27.2-8.6
Nuclear15.89.2-13.2
Offshore wind17.416.2
Photovoltaic roof, tertiary and industrial12.6-17.7
Photovoltaic roofing, residential18-26.5

Note: The top of the range corresponds to plants equipped with CO2 capture devices (but not its transport or storage).

Sources: Wind and solar boost cost compétitivité versus fossil fuels, Bloomberg New Energy Finance (BNEF), 2015, http: // www.Bnef.com/content/uploads/sites/4/2015/10/BNEF_PR_20151006_Global-Cost-of-Energy.pdf

Lazard’s Levelized Cost of Energy Analysis, Version 8.0, Lazard, 2014, http: // www.lazard.com/media/1777/levelized_cost_of_energy_-_version_80.pdf

Trump has no control over prices

The demand for certain types of energy is sensitive to the price of other types of energy. For this reason, energetic transition remains dependant to the price of fossil energy which is notoriously difficult to predict.

But Trump has little power to influence oil prices. These are determined in international markets.  Production of oil in the United-Sates is conditional to an international price that should be high enough to justify investment. This is high price of crude oil in the past that has justified the development of gas and oil shale in the United- States between 2000 and 2008. [8] In the oil sector, the extraction and distribution costs are increasingly higher.

Trump’s executive order suspends measures favoring the development of renewable energies. If prices in international markets are too low, there will be no incentive to boost exploration and exploitation of oil installations and coal. Conversely, high prices will reduce the opportunity cost of renewable energies and make them more competitive. In either case, the trend appears to be unfavorable to the development of fossil fuels.

3- Trump’s energy policy is doomed to failure

For the above reasons, Trump’s energy policy is doomed to failure and will have exactly the opposite effect of what is anticipated, that is to say, to undermine United States competitiveness and to delay the progression of new sources of non-polluting energies.

Several US states have joined forces against Trump’s new policy (New York, California, Connecticut, Illinois, Maine, Massachusetts, Oregon, Vermont, and Washington). They have brought legal action against Trump’s executive order, which has the effect of delaying development of new energy standards.

 

 

Louis Bellemare

New Maritime World

References

[1] A historic climate agreement adopted in Paris

Http://ici.radio-canada.ca/nouvelle/754913/accord-final-climat-conference-paris

[2] https://fr.wikipedia.org/wiki/Conférence Marrakech

3 Who will host COP23 and C24? Where were the 22 previous ones? Http://energie-developpement.blogspot.ca/2016/11/conference-climat-pays-organisateurs-COP.html

4 Apple, Google and Microsoft unite against the environmental policy of Trump http://www.msn.com/fr-ca/actualites/monde/apple-google-et-microsoft-sunissent-contre-la-politique-environnementale -de-trump / ar-BBz80TR? Li = AAanjZr & ocid = spartanntp

5 Climate change threatens the economic prosperity http://www.lesaffaires.com/blogues/francois-normand/le-changement-climatique-menace-la-prosperite-economique-/583331

6 Are renewable energies too expensive? Http://decrypterlenergie.org/the-energies-new-sustainable-tools

7 Renewable energy they are too expensive, http://decrypterlenergie.org/les-energies-renouvelables-coutent-elles-trop-cher

[8] Inflation, http://france-inflation.com/graph_oil.php , price movements of oil, monthly averages

 

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