By Syed Rashid Husain
WHAT does all this mean for the fossil fuel industry? Could demand go robust and markets firmer?
Last Thursday, the Trump administration unveiled budgetary proposals for the next fiscal. And what a budget it has been – with the energy sector emerging as the focus of the ongoing revamp by the new administration.
As a candidate, Donald Trump had been expressing doubts about the very science of global warming, the rising temperatures and about people’s influence on global warming. He has been blaming wind turbines for killing eagles and lamenting the push towards solar power – as the costs of harnessing solar energy were too high. He stood for the fossil fuel era to continue – longer than anticipated.
Now his proposals turn those words into numbers, Mick Mulvaney, the White House budget director, was quoted as saying. “You will see a reduction in subsidies, a reduction in participation in those types of programs,” Mulvaney told reporters a day before the unveiling of the proposals.
And he was dot on the line. In the new proposals, the Environmental Protection Agency has taken the biggest hit – 31 percent – from $8.2 billion down to $5.7 billion. Already people were concerned about the appointment of Scott Pruitt as the new head of the EPA. And the new proposals meant the funding for the EPA has now come to the lowest levels in 40 years. This means zeroing out funding for many of the agency’s climate programs. Currently, the EPA is the main US entity working to monitor and reduce greenhouse gas emissions.
Just before the unveiling of the budgetary proposals, the former EPA spokeswoman Liz Purchia was quoted as saying that a cut of up to 25 percent would “be unprecedented and would really dismantle the agency’s ability to protect the health of Americans and the environment.”
The cut announced was even higher – 31 percent!
The budgetary proposals appear directly hitting programs that addressed climate change. The proposal eliminated funds for the Clean Power Plan and by “reorienting” the US EPA on air pollution. Trump definitely wants the US government to pull back sharply from any effort to stop global warming, adapt to its impacts – or even study it further. And, once the proposals are enacted, there would be no more money for work on the Clean Power Plan, an Obama-era regulation to control CO2 emissions from power plants (by law, the EPA would still have to work on emission rules for vehicles). There are cuts to “international climate change programs, climate change research and partnership programs, and related efforts” – totaling $100 million. One doesn’t still have the line-by-line numbers, but that could include killing EPA programs like the Climate Resilience Evaluation Awareness Tool, which helps utilities adapt to extreme weather events.
The proposals also suggest eliminating Energy Star, a voluntary certification program that helps companies release energy-efficient products, helping prevent more than 300 million tons of CO2 emissions per year. It proposes axing climate research funding for the EPA’s Office of Research and Development, the agency’s scientific research arm. As per the proposals, the overall budget of this entity would be cut in half.
One EPA climate program that would likely survive from Trump bashing is the Greenhouse Gas Reporting Program, which measures emissions from industries around the country. Congress has mandated this monitoring, and getting rid of it would require legislative changes. So the EPA would still be able to quantify US greenhouse gas emissions.
As per the budgetary proposals, the US Department of Energy’s R&D programs also seem in for a considerable cut. The Trump Administration is proposing a 5.6 percent cut to the Department of Energy. The White House now plans to impose a steep 17.9 percent cut – roughly $2 billion – from core energy/science programs intended to accelerate the transition to new (and cleaner) energy technologies.
All this might mean closing DOE’s programs, such as Sunshot Initiative. This initiative was basically to help solar companies look for ways to cut costs. As per reports, the new budget proposals might also mean that DOE’s Office of Fossil Energy will no longer be able to help utilities build the carbon capture and sequestration technology for coal (as DOE did with the Petra Nova plant in Texas).
The proposal also proposes eliminating ARPA-E. This program was funding early research into long-shot energy technologies that the private sector felt as too risky and avoided taking up. However, working on such ideas could be fruitful too in the longer run. These included programs such as making biofuels from algae or flying wind turbines. The unveiled programs also eliminate loan programs to what is at times termed as ‘disruptive energy research’ like the Advanced Technology Vehicle Manufacturing Program, which gave early support to Tesla.
Government funding for such programs is often deemed essential. Of course for the private sector to take such initiatives would have been difficult. Now the new budgetary proposal could bring all this to a halt.
In the meantime, the State Department funding for climate change has also been axed. As part of the Paris climate deal in 2015, the United States pledged not just to cut emissions, but also to offer $3 billion in aid to poorer countries to help them adapt to climate change and build clean energy. So far, the Obama administration has chipped in $1 billion. This was seen as crucial for bringing these countries into the deal. The proposals want the US to get out of this business, proposing to “cease payments to the United Nations’ (UN) climate change programs by eliminating US funding related to the Green Climate Fund and its two precursor Climate Investment Funds.”
This doesn’t mean, at least for the time being, that the United States is leaving the Paris climate deal altogether. The White House is apparently still debating that. But it means they don’t plan on contributing any funds toward making the deal work.
NASA’s Earth-monitoring programs are also in for a cut. One reason we know so much about climate change is that NASA has deployed a fleet of Earth-observing satellites since 1999. They collect data on everything from temperature and precipitation to underground aquifers and ocean currents to wildfires, soil moisture, and storms. Trump’s proposal would trim the agency’s Earth science budget to $1.8 billion – a $102 million cut.
A key program to help coastal communities adapt to climate change would also be gone under the new proposals. The National Oceanic and Atmospheric Administration’s (NOAA) Sea Grant program provides grants for research efforts intended to help coastal communities deal with a wide variety of challenges, including adapting to a warmer world. All this is now under the cloud.
The United States of America under Donald Trump seems pulling itself back from the leadership role in many sectors. And energy is no exception. Although, the direct impacts of the proposals on the fossil fuel industry are still to be viewed, measured and quantified – yet the Trump push toward extending the fossil fuel era remains very apparent.