January 13, 2017

Atlantic Council
Global Energy Forum

Post-Elections U.S. Climate and Energy Policies

Moderated By:
Maya Raydan,
Business Presenter,
Sky News Arabia

Framing Remarks By:
Todd Stern,
Visiting Lecturer, Law at Yale Law School;
former Special Envoy for Climate Change, U.S. Department of State

Participants:
H.E. Mohammad Sanusi Barkindo,
Secretary General,
Organization of the Petroleum Exporting Countries

Dominique Ristori,
Director General,
DG Energy, European Commission

Amb. Paula Dobriansky,
Senior Fellow, The Future of Diplomacy Project, John F. Kennedy Belfer Center for Science and International Affairs, Harvard University

David Goldwyn,
Chairman, Global Energy Center Advisory Group,
Atlantic Council

Amb. Carlos Pascual,
Senior Vice President, IHS Global Energy, International Affairs,
IHS Markit

Location:  Al Maryah Ballroom, Four Seasons, Al Maryah Island, Abu Dhabi, United Arab Emirates

Time:  4:00 p.m. Local
Date:  Friday, January 13, 2017

Transcript By
Superior Transcriptions LLC
www.superiortranscriptions.com


MAYA RAYDAN:  Well, good afternoon, everyone, and thank you for joining us in this panel.  I would like, first, to thank you for attending this hour’s debate that will try to highlight the future on one of the most crucial sectors, actually, for the global economy. 

A lot of changes happened lately.  Donald Trump had succeeded to make it into the White House, and since then a lot of questions have been on the rise, most importantly, on the future of the global trade, on the future of foreign policy – the United States’ foreign policy and the future of what had been described as one of the most – the biggest achievements over the past few years.  I mean the Paris Agreement.

Accordingly, uncertainties have been on the rise for the future of energy policies, whether renewables or conventional ones, and had too much questioned the ability of OPEC’s efforts to balance the oil market in light of the anticipated geopolitical uncertainties.  We will try to go over through this – all of this through this panel but let me please welcome our distinguished speakers for this panel:  His Excellency Mohammad Barkindo, secretary general, Organization of Petroleum-Exporting Countries; Ambassador Paula Dobriansky, senior fellow, The Future of Diplomacy Project, John F. Kennedy Belfer Center for Science and International Affairs, Harvard University; Mr. David Goldwyn, chairman, Global Energy Center Advisory Group, Atlantic Council; Ambassador Carlos Pascual, senior vice president, IHS Global Energy, International Affairs, IHS Markit; and last but not before last, Mr. Dominique Ristori, director general, DG Energy, European Commission; and now last but not least, Mr. Todd Stern, visiting lecturer in law at Yale Law School, former special envoy for climate change, U.S. Department of Energy. 

You're most welcome again.  Mr. Todd Stern, we will start right away with you.  Could you please share with us your framing remarks for this session?

TODD STERN:  Yes.  First of all, I want to make sure everybody knows it’s Department of State.  I have to defend my old department at – in the government. 

Thank you very much to the Atlantic Council, first of all, and to Abu Dhabi for hosting this conference, and to my very distinguished panelists it’s a pleasure for me to be up here with you all.

So let me – let me try to talk for a few minutes about what we might expect from the new administration with the proviso that we don’t have any idea, really, what they’re going to – exactly what they’re going to do.  But let me give you sort of my perspective. 

I think that – that the – certainly, the early signs from – in the first instance from the campaign and from the transition are, certainly, some cause for concern – for actually quite a bit of concern with respect to the Trump administration and climate change.  During the campaign, the president-elect said that he was actually going to cancel Paris, which is not something the United States has the power to do but it indicated his orientation.

He has named several members of his – of his new Cabinet – heads of EPA, DOE – Department of Energy and the Department of Interior, all of whom have – are some variation of climate skeptic.  The – his nominee for the State Department – Rex Tillerson, the CEO of Exxon – seems as though he may be more of a moderate.  I think six months ago, if anybody would have asked me whether I would be taking some solace in the fact that we were going to have the chairman of Exxon as the head of the State Department, I would have thought you were crazy.  But times have changed and so I’m adapting.

I think we can look at what – at what Mr. Trump means for climate change through three lenses – Paris – the Paris Agreement, President Obama’s domestic policies and then policies that need to be put in place if we’re going to do the sorts of things that we had – that need to be done in the longer range, post-Obama.

With respect to Paris, so, as I said, Trump, obviously, can’t cancel Paris.  He also can’t withdraw from Paris as a formal matter for four years, owing to the fact that the agreement was entered into force this year, which is astonishingly quickly, and so it’s a four-year wait before he could withdraw formally. 

They could withdraw from the underlying treaty, the UNFCCC – the U.N. Framework Convention on Climate Change.  That would be a radical thing to do.  I don’t expect it.  There are people within his transition who have talked that up but I doubt that that’ll happen.  What he could do, more plausibly, is to de facto walk away from it, even though he can’t pull out altogether – to turn his back and say this is – we’re not going to pay any attention to this.

I think that even if he were to do that, the Paris Agreement is going to – is going to go on.  Other countries are not going to – are not going to pull out.  Countries are very vested in Paris.  It was seen, and quite rightly, as a – as an historic landmark agreement.  I don’t think anybody would want to give the United States the satisfaction of thinking they could pull it down.

So I think Paris will continue.  That doesn’t mean it won’t be affected but it will continue.  But I also don’t think that at the end of the day the administration will even walk away de facto because it would – there would be huge collateral damage with respect to all of the other United States foreign policy equities. 

I think it would be a huge headache for Mr. Tillerson to come into the State Department and have to do that.  I think no matter who he was it would be a problem for the secretary of state.  I think it would be an extra problem for him precisely because he’s been the CEO of Exxon.  So I think that he will be quite resistant to that.  And yet, I don’t want to – I don’t want to give a rosy picture, that – I think even though the U.S. isn’t going to – in my judgment, won’t fully pull out, I certainly think the level of U.S. engagement will be significantly diminished. 

The U.S. was a – was a – really, a leading player over the – over the eight years of the Obama administration, and I don't think we’ll see that.  I don’t think we’ll see the U.S. sweating too hard to try to meet the targets that we put forward for 2020 and 2025 and so I think it will be diminished, and that’ll have some impact on the – sort of the further elaboration of the Paris Agreement – some negative impact.

With respect to domestic policy, I think the centerpiece – President Obama did a great many things with respect to domestic policy on climate but the centerpiece is the so-called clean power plan – the big EPA regulation of our power sector.  I think that is the – that is in probably quite a lot of jeopardy.  Right now, it’s before the courts.  It could be struck down by the courts or it could survive. 

Had the Supreme Court seat that was vacated a year ago been filled during the Obama year – the remaining year of the Obama administration there would be a substantially better chance that the rule would survive in the courts.  As it is, it may – it may anyway.  But either it will fall there or if it doesn’t I think there will be a fair – a fairly good chance that the EPA will seek to unwind it.  It’s a big operation to do that.  You can’t just, you know, take a pen and cross out the rule.  You’ve got to do an entire new rule.  The one that got passed in the first place is 1,500 pages long. 

You have to build a huge record.  There were over a million public comments that came in.  It takes time, and then it’s subject to legal challenge, and if they tried to unwind it – in other words, a new rule to take back the old rule – that would, when it – when it got done, be challenged in the courts.  So it’s a – it’s a big – it’s a big undertaking, but I think that they are invested enough in unwinding it that that’s – that that’s a real risk.  And the new head of EPA has, you know, sort of made his name in opposing – in opposing that.

There’s other rules, methane vehicles, a number of other things.  Some of those will be subject to a potential attack, others less.  So I think you’ll have a fair amount of what Obama did still staying in place.  But at least that one big one quite vulnerable.

With respect to post-Obama policy, in order for the United States to do the kinds of things that, certainly, that we define and that the president defined as wanting to do in the longer run, say, to think out to 2050 where we’ve talked about an 80 percent reduction in our emissions as compared to 2005, you need to – you need to fundamentally decarbonize the electricity system.  You need to fundamentally electrify everything in sight, which is – which includes the transportation sector, and you need to do a lot of R&D, and I don’t think there’s a – there’s a particularly good reason to think that this administration will push very hard in any of those directions.

I think the thing that we don’t know is – in terms of Mr. Trump’s orientation is whether he will be friendly or not friendly toward clean energy.  But in any event, I think that the bigger push to the larger goals is unlikely to happen. 

With respect to U.S. energy policy broadly, I think that we can certainly expect a lot of activity with regard to oil and – oil and gas development.  I think that although Trump has talked a lot about coal, I think it’s very unlikely, in my judgment, that you’re going to see a lot of new coal plants getting built. 

Coal’s not – gas is – undercuts coal and has been doing that for a few years now in price and even if – you know, even if you’ve got Trump for a few years, you know, a new coal plant is a big long-term undertaking.  You’re putting up infrastructure for decades, and the likelihood that there’s going to be any kind of positive environment for coal in the United States, I think, is – think that’s not likely.

I think renewable energy will continue.  Gas will certainly continue actively.  I think renewable energy will also continue actively.  Whether there’s a positive policy on that from the Trump administration or not, there’s so much going on in the economy itself and you already also have the spur of the production and investment tax credits that got done at the end of 2015, which will run out for about five years. 

I think you will see a continued rapid development of renewable energy.  You’ve had huge developments there over the last few years.  The price of solar has dropped 80 percent.  The price of wind has dropped 50 percent in the last few years.  During the Obama years, wind is up by three times.  Solar is up by 23 times.  In the last couple of years, two-thirds of all new additions on the electricity side have come from wind and solar. 

So these thing – this isn’t going away and it’s – you now have, I believe it’s – I think Bloomberg New Energy Finance put out numbers not too long ago that showed that there are more jobs now just from solar than from oil and gas and coal combined, and it’s popular.  Seventy-five percent of Trump supporters favor clean energy.  So there, I think, this is going to – this is going to continue and that’s a good thing. 

I think the other place where you’re going to see a lot of activity is on the state and city side, the so-called subnational actors, insofar as they see a lack of policy action coming out of Washington or a negative – or negative policy action coming out of Washington.  I think that you’re going to have any number of states and cities active.  The biggest state – the sort of leading state on this in this area is California. 

California is actually the sixth biggest economy in the world looked at, you know, as a – as its own entity and it has a climate program that is literally second to none in the whole world in terms of its depth and its reach and its ambition in terms of cutting emissions, in terms of electrification, reducing petroleum in the vehicle fleet, energy efficiency across the board.  California is just an aggressive leader and the governor there, Jerry Brown, is almost itching for a fight with the new administration. 

So they’re going to push hard.  New York’s going to push hard and they’ve also got a very ambitious climate program.  You have – and there’s probably another eight or 10 states that are quite ambitious in terms of their orientation right now.  Beyond that, you literally have 29 states that have renewable portfolio standards.  That – those are really important drivers of renewable energy penetration in the U.S.  Some 62 percent of all – of all renewable energy it can be tracked back to the renewable portfolio standards in the – in the states.  Cities – the C40 is a collection of the biggest cities in the world.  There’s a dozen of those in the United States.  Those dozen cities are also very committed to climate action.  They met – the international group met in Mexico City not that long ago and made clear that they were going to go – continue to go hard on climate action.

Those 12 cities account for about 25 percent of the U.S. population and 30 percent of U.S. GDP, counting their metropolitan areas.  Cities in general in the world account for 75 percent of greenhouse gases.  So city action is important, and I think that you’ll see a lot of that.

And there’s – there is more corporate engagement than there’s ever been before.  Now, the degree to which you see corporations vocal or corporations losing their voices a little bit in the – in the light of the new politics I don’t know.  But there were 154 companies who signed on to a pledge, part of the American – I think it was the American Business Act for (sic; on) Climate, in the leadup to Paris, which included both a strong statement of support for the Paris process, as well as their own targets for what they – what these companies were going to do.  There was another – there’s 83 companies worldwide, including 26 in the U.S., who have pledged to go 100 percent renewable.  And those include big companies in the U.S. of all sorts – you know, General Motors, Johnson and Johnson, Apple, Google, and many others.

So you’re going to have action in the states, action in the cities.  There will be action, again, in the corporates.  I just don’t know whether that’s going to kind of that full voice or a quiet voice.

None of this is going to make up for the fact that – well, it’s not a fact yet, but if in fact the new administration pulls back to the – to the degree that I think that they will, none of these other things makes up for that.  So I don’t – I don’t – again, I don’t mean to say don’t worry about that, it’s all taken care of in the states and the cities.  No, that’s certainly not true.  But what you are going to see is real activism, and I think that will be important and an important message to convey to the world.

And the only other thing that I want to just say before I relinquish the floor here is a kind of generalized comment on where we have to go.  There is – the action that is needed to meet the goals laid out in Paris and the goals that science – that scientists and researchers have all endorsed, which is to hold the increase of global average temperature to 2 degrees Centigrade above pre-industrial levels.  So that – what it’s going to take to do that is enormous.  And Fatih Birol was here from the IEA this morning.  He was terrific, and he walked through what was – what he anticipated across the board, from fossil fuels to renewables.  And it was – there was a lot of really good news.  And yet, if you added it all up – and I asked the question from the floor – Fatih said that would put us at about 2.7 (degrees C).  That’s not anywhere close to where we need to be.  It’s going to be – it’s very aggressive what needs to happen.  It’s very doable from the point of view of innovation, policy and financing.  The thing that’s hard is the politics.

But it’s going to be a big challenge.  And I think the thing that – on the political side, there’s a – there is some challenge from the point of view of climate deniers, but that’s – that is a diminishing problem and it’s mostly a U.S. problem.  There is also a problem from the point of view of well-meaning people who think that we can go more gradually than, in fact, we can.

So, with that little last comment, I will – I will turn the floor over.  Thanks.

MS. RAYDAN:  Thank you, Mr. Todd Stern.

We will start this discussion from what you have just raised.  Mr. David Goldwyn, what are the prospects, especially for the Paris Agreement and the clean power program?  Do you agree with the more positive, maybe, look that was reflected by Mr. Todd Stern’s remark(s)?

DAVID GOLDWYN:  Yes, thank you.

Well, yeah, I agree with Todd’s take on I would say almost everything.  I think the utility sector in the U.S. has incentives from the investment tax credit and production tax credit, and they have a 30-year horizon, not a four-year horizon.  Last year, half of all the increases in generation were from renewables; the other half were from natural gas.  So I don’t really see the – I don’t see anything that the Trump administration will do on climate change really affecting the utility trend in the U.S.  It more affects what we’re able to do long term.  And I was heartened a little bit by Tillerson saying that we might as well be at the table on Paris.

I think the other thing is that the – I think even the Obama administration realized that, in terms of reducing emissions, we have pretty much come to the end of the regulatory string in the U.S.  There were a series of steps on methane still be taken – methane from existing sources – which will not happen, but the real step change to get to 2 degrees has to be in technology.  So I think this is the possible deal space with the Trump administration, is to try and look at measures which leverage private capital in research and development.  I think carbon sequestration, because of his concern for the coal industry, will remain.  I think he will learn the power of senators who have national labs in their states, and they like to protect those labs and they like to protect their research budgets.  So I think that will provide some support for research.

And I wonder whether there isn’t a deal to be had also between the gas industry and the environmental movement – which was really not able to happen, I think, so far – which is to perhaps let the Trump administration reconfigure our contribution to the – to the Green Climate Fund or our role in gas – in the climate change movement in general to say that we would support penetration of gas for sub-Saharan Africa and South Asia in particular, and that we might be able to leverage some of our contributions to help countries with credit support to get gas importation infrastructure – so that we would be on the decarbonization trend, but for those countries that need baseload energy we would have renewables and gas.  And he might be able to deliver something.  We would be talking about using private capital – a small amount of government capital to leverage private capital.  And it might give him something that is more private-sector-friendly.  I think that’s at least worth a shot.  And, given his concern for exports and gas, it might be a new, more friendly approach that they could tolerate, and therefore stay at the table in Paris.

MR. RAYDAN:  Here, Mrs. Dobriansky, let’s say in case the pullback from the Paris Agreement is somehow not favorable, at least in the near future, but what about if Trump had – went with his promises, let’s say, to stop funding the climate federal program and funding instead to be redirected to infrastructure projects.  Less interest in the current administration in the friendly power programs, let’s say.  How would it affect these long-term efforts exerted so far?

PAULA DOBRIANSKY:  Well, let me – let me take it from this direction, if I may, and build on the comments that have been made here.

First, I think it’s worth noting that when an administration – a new administration comes in, as you can imagine, there’s always a review process.  And you have things that are, of course, debated/discussed during campaigns, but almost in every area – at least in administrations that I’ve been in, from one to the next – you have a look at what has worked, what hasn’t worked.  And this particular issue, taking the broad stripe of environmental issues and no less climate, I mean, it affects so many areas.  It affects, of course, not only the State Department.  It affects EPA, the Environmental Protection Agency.  It affects the Department of Commerce.  It affects the White House.  It affects the Department of Energy.  And there are others.  So I think that there are – we have to recognize, one, there are many components here.

Secondly, I think it’s also crucial to note that an emphasis that I think has been made by the incoming administration and by President-elect Trump himself is the premium that has been placed on infrastructure, monies that should go into infrastructure.  I didn’t mention transport or transportation, but that’s one of the areas highlighted, which also has impact here and relevance to this conversation.  But he has placed a high premium on not only monies going into bolstering the infrastructure in the United States, and has felt it’s been in decline, but also in terms of jobs and in terms of the economy, bolstering the economy.  So I think it’s crucial to look at this issue domestically and also internationally.  I think the issues that I’ve just mentioned are the kind of prism through which this will be looked at, in addition to the energy issue and a number of the statements that have been made, and the importance placed on technologies.

But let me say a few words about, if I can, the Paris Agreement in particular.  David mentioned the fact that during his confirmation hearings Rex Tillerson did mention, when he was asked about the question of the Paris Agreement and issue of climate change, he underscored the importance of being at the table.  I’ve mentioned the importance, also, from administration to administration, where each looks at its review.  In this case, I think if you look at the Paris Agreement, there are a number of core elements that I think that provide a kind of foundation and compatibility with, in fact, many of the statements that have been made during the campaign.  In particular, it is a bottom-up approach to the particular way of dealing with climate change, and places an emphasis on national plans and the differences.  What the United States will do is as different from China as is different from India, and so forth.

Here, I think one of the areas that will be tackled – and because, Todd, you mentioned some of the domestic – is this issue of executive orders, and EPA and the issuance of executive orders.  I think there is a strong desire not to have that kind of action taken with regard to environmental issues, but rather to engage Congress in the decision-making process, as well as the executive branch.

But going back to the international, you not only have the national plans as part of the Paris Agreement, but you also have the emphasis and the embracement of diversified approaches.  And at least as far as I could see, that’s been another aspect that also has been emphasized during the campaign.

Interestingly enough, I happen to know that statements made by President-elect Trump, he’s placed a premium on conservation, if you look at a number of his statements; also, on the issue of water and the problem that the United States has been facing, no less other countries, in terms of water shortages, in terms of clean water.  Case in point, you look at and we know what happened in the state of Michigan.

And then I’d also add into this mix is that the agreement itself is one that does bring the developed and the developing world together at the table in a non-binding way and in a way which also seeks to provide certain incentives, and also to do it in a way in which one can continue to grow one’s economy.  So, in that – in that context, those particular threads are ones that I think need to be highlighted and one need to remember in this mix.

So, quite frankly, I see from statements already made – I am optimistic that the foundation of it – there might be some pieces of it where there may be differences, and again that wouldn’t surprise me because from administration to administration, each administration in this particular area has had its own emphasis and its own way of approaching.  But as I said, I’m optimistic that it has a core foundation that will be relevant both to the domestic policies emphasized, but more specifically to the international policies emphasized.

MS. RAYDAN:  Thank you, Mrs. Dobriansky.

I would like to hear the viewpoints of the rest of the speakers, of course, but let me please first – let’s try to figure out how OPEC looks into the coming changes in the policies in the United States.  Mr. Barkindo, does OPEC expect a tough four years ahead, especially that the organization was no exception; Trump’s statement had hit hard on OPEC?

MOHAMMAD SANUSI BARKINDO:  Thank you very much.

And let me also thank Atlantic Council for giving us yet another opportunity to share with colleagues and friends our perspectives on these very important and critical issues of climate change from the perspective of OPEC.

And for the avoidance of doubt, let me say that from the inception OPEC has been a constructive player in this process.  I have had the honor and opportunity of participating in various co-ops with Ambassador Paula Dobriansky when she was in State, where she provided great leadership not only for the United States but for developing countries, which we very much appreciated.

The Paris Agreement – so far, 13 of our member countries have signed up to this climate agreement.  About four of them have already ratified.  Before coming into this session, I checked with my office:  all the others are in the process of ratification.  And this demonstrates our commitment as an organization to be part of this multilateral process.

And as I have said, we have been part of it not from Paris, not from Copenhagen, but way back from the inception, because for obvious reasons – we are all developing countries.  We are more impacted by the effects of climate change, probably, than our colleagues in the advanced countries.  But also, we are also impacted by some of the policy measures that are taken by the industrialized countries in mitigating climate change and meeting their targets under the convention, or under Kyoto, or now probably going forward under Paris.

In Paris, we worked for the consensus of the global community in order to avert the unfortunate outcome of Copenhagen, knowing fully well that the agreement itself had its own shortcomings.  And this we did with our eyes wide open because we all believe in the multilateral process and we believe in this process going forward, and to have a seat on the table, to continue to dialogue with parties, to take into account our various concerns as developing countries who are dependent on one commodity for our national livelihood.

You have heard yesterday from Minister Suhail Al Mazrouei, one of our key member countries, the great efforts they are making in diversifying their economy, as well as sources of energy.  They are spending over $160 billion U.S. in alternative sources of energy.  So, while we are dependent on oil and gas, looking at the future projections, every source of energy has a role to play in the medium-to-long term.  And you have heard from my friend Fatih Birol this morning, from the IEA, almost debunking the peak theory of demand for oil.  Therefore, the issue of technology in order to continue not only to make the hydrocarbon resources available in an efficient and cost-effective manner, but also to improve the environmental credentials of this resource, is extremely important, not only to us as producers but also to consumers that we are striving to meet their current and future demand.  What we have been battling of late, particularly 2015-2016, was clearly with that in mind:  to restore stability to the market, to bring back investments to this industry, in order to secure not only current supplies but future supplies to meet this increase in demand that you have heard from almost every speaker going forward.

Now, on the implementation of the Paris Agreement itself, as I said, we have our concerns, just like many other groups that joined this global consensus in Paris.  Ambassador Dobriansky knows very well.  We had dialogue with her, leading the U.S. delegation for several years, that for us the issue of equity – the principal issue of equity that is enshrined in the convention itself, and repeated in Kyoto and subsequent COP agreements – is now under threat, in our opinion.

Energy poverty.  We are all developing countries.  And despite the demanding – the conflicting and sometimes rise in demand on our natural or national resources, you have seen almost all our countries are trying as much as possible to adapt to climate change, and even investing not only in hydrocarbons but also in alternative sources of energy.  So the issue of poverty – energy poverty is central within the context of the principle of equity, which we have seen in Paris to have (been bled ?) in order to maintain the global consensus.  The principle – convention principle of common but differentiated responsibilities and respective capabilities of parties, which is a key principle of the convention also endorsed in Kyoto and subsequent COPs, we have seen also been watered down.  Hence, the emergence of the INDCs, which, as Paula has just said, are not legally binding and almost been reduced to certain voluntary commitments by parties.

Now, because of the status of the United States in this consensus and within the global community, of course it’s only natural if there’s a transition in Washington the rest of the global community should pause and take cue from the incoming administration when they begin to roll out their policies.  I was at the Marrakesh COP.  It almost turned out to be a non-event because the U.S. delegation was not in a position to negotiate.  So that’s the importance of the United States, whoever is coming to the White House.  Particularly on this issue, the United States has always been playing a leading role in this process.  Without the role that the U.S. played in Paris, probably we would not have had this consensus.

So, for us as OPEC, we welcome the Paris Agreement.  Yet, we have our own concerns – fundamental concerns.  And we are also watching with keen interest the new administration in the U.S. and the policies that they are likely to come up with.  We have also checked the requirements, as David has said, and also thought that it may be a little bit challenging to pull out of such an agreement.  There are certain procedures.  And I have not heard – I mean, I’m probably the odd one out in this group, but we try as much as possible to keep abreast of happenings in Washington these days, for obvious reasons.  But I share the optimism of Ambassador Dobriansky:  what you say during campaigns may not necessarily translate into policy decisions when you take office.  And the 200 or so nations that reached this climate agreement I believe all look up to the United States for continued leadership.

Thank you.

MS. RAYDAN:  Yeah.  Thank you, Mr. Barkindo.  We will come across the other policies that might affect the energy market in particular.

But, Mr. Pascual, on the issue of deregulation and more incentives to shale and fossil producers, do we – do we expect easier regulations to have a real influence in more production, and hence reflect on oil prices in the near future?

CARLOS PASCUAL:  That’s a really good question, and I think it points to some of the things that we know about what President-elect Trump has said about his energy policy.  And it raises the question of what will actually happen.

So let me give you four ironies and one observation.

First irony is that he has said that what he wants to do – very clearly he stated what he wants to do is remove regulations that affect the production of oil and gas in the United States.  And the irony is that he may take some action to reduce regulatory constraints on access to land, open up territories in the West on the part of the United States, but the irony is that it won’t actually have an impact on production.  Today, the biggest constraints on the production of oil and gas in the United States are the global market.  And, indeed, what’s going to have the biggest impact on the production of oil in the United States is the agreement that was ironically negotiated by OPEC, which has raised the level of prices.  And that’s going to happen:  up to a certain point, there’s going to be a supply and demand balancing factor on price.  But I don’t think that the deregulation of land in particular will have a direct impact on production.

Second irony is that President-elect Trump has indicated that he wants to remove regulations that are related to emissions.  He will take those measures or seek those measures, but it will actually have very limited impact in the next four to five years on U.S. emissions overall.

So, as Todd indicated earlier, steps will probably be taken to either block, stop or derail the Clean Power Plan, but it will actually have almost zero impact on emissions.  And the reasons for that are the transition from coal to gas, as have been mentioned; and, secondly, the implementation at the end of 2015 of the production tax credit on wind and the investment tax credit on solar, which, as one of my colleagues said earlier, the two of those together virtually doubled the investment in renewables in the United States.  And when you put those two together, under the Clean Power Plan – this is one of those things that is a little bit nerdy but it’s kind of instructive in a way – there’s either a mass goal, which means that in the way that you measure the amount of CO2 per unit of production, or a rate goal – the rate of CO2 that is emitted per the amount of time that you generate electricity.  Each state can pick one or the other under the Clean Power Plan.  Seventy percent of the states will actually achieve those goals even if the Clean Power Plan doesn’t exist because of the other measures that are in place.

All right, so that brings me to my third irony, which is that President-elect Trump has indicated that the United States will pull out of the Paris accord.  But I think that, in the end, as others have suggested, that we will not.  And the reason we won’t is, on the one hand, pretty straightforward:  why do you want to take on that battle if, in the end, you’re probably going to actually meet the targets or be consistent with the targets?  And in addition to that, you have a series of other challenges that you have internationally.  So why do you want to get into a battle that may not, in fact, actually have an impact or make a difference to you in the short term?

But what it will do is actually sacrifice a degree of American leadership.  It will sacrifice American leadership on the mobilization of resources for clean energy that will have a(n) impact globally.  It will mean that some states, ironically – like China and India, that have taken a huge interest because of pollution issues – will become much more central to the global environmental debate.  And even countries in the Gulf region, as we’ve heard over the past two days, are talking about the diversification of their energy resource to have an integration of fossil fuels with clean and renewable energy, because they realize they need it both for commercial purposes and for environmental purposes as well.

And then, finally, the fourth irony that I would talk about is that President-elect Trump has indicated that there will be a weaker federal structure on energy and environmental policy, deferring more action to the states.  But on some issues, that will actually result in tougher national standards than you might have had otherwise.  And in particular here, the point to come back to is Todd’s point on the state of California.  California is so big that when it comes, for example, to fuel efficiency standards, auto manufacturers are going to produce to the standards in California.  So, if California is acting in the absence of no federal regulation, it’s going to take actions that are actually more extreme and probably push the agenda further, and is going to result in actually, in some specific areas, in potentially tougher action.

So I’ll just leave you with the final sort of point on a challenge.  I think that potentially what we’re at is at a moment where we need to change the narrative about clean and renewable energy.  There is a risk that – risk that it could be taken over by ideology on both sides.  Ideological on one side, which simply says that unless something is zero-carbon it’s bad; ideological on the other side that anything that has the word “climate” in it is seen as a political ploy to somehow get us into a climate debate.  

But in the end we need to look at these issues also as a major commercial business opportunity of a global – enormous global scale.  One of the things that IEA has estimated is that over the next 30 years, through 2040, investments in power generation and renewable energy will be between 7 (trillion dollars) and $11 trillion.  This is – these are additions – new additions to power generation.  The amount depends on the scenario that you look at, but in neither the base scenario or the more extreme scenario, the amount that will be invested in renewable energy is bigger than the investments that we will see in coal, gas and nuclear combined.

So does the United States want to be part of that market?  And do we want to take policies that in fact make us a global player in what is going to be the biggest growth element of new additions to the energy sector?  And I think that’s where we can potentially find a point of harmony where clean and renewable energy and commercial interests actually coincide, and that’s going to be the biggest factor that’s going to allow us to be able to go back to Todd’s points on what’s necessary to implement the Paris Clean Power Plan.

MS. RAYDAN:  Thank you, Mr. Pascual.  Many of the points that you said intersects with the paper that Mr. Goldwyn had released here in the summit, and we will come across.

But first, to close this discussion over the future of the Paris Agreement, Mr. Dominique, what if, in case U.S. less interest or maybe it, let’s say, freezes some of its initiatives in the area of climate change, how would Europe react, the European countries who signed the Paris Agreement?  What would be the outlook?

DOMINIQUE RISTORI:  Yes, let me say, first, the following:  energy is at the core of Paris Agreement.  Energy will be even more decisive for ensuring a successful implementation of Paris Agreement. 

Second, this report of U.S. for concluding Paris has been decisive.

Third, the gas revolution in the U.S. has also facilitated this report of U.S.  And let me say, this is important because it is crucial to well-integrate our rapid arc for present evolution affecting all forms of energy’s use.  It is important to underline the fact that, for example, the production of gas in the U.S. increased 27 percent in less than 10 years, and as a result decreasing massively emissions. 

Accordingly, we should look also not only back but to the future, having in mind all of this management of energy system – crucial for successfully implementing Paris Agreement – has to be seen as an economic opportunity and less as a sort of negative constraint. 

If we will proceed in that direction, things should be and could be more promising, because many refer to some priorities of the new president oriented to infrastructure.  The adaptation of energy system will also require massive investment in new infrastructure, not only for gas or oil but also for electricity, opening new potential of market, new opportunities for business. 

Let me only give two example(s).  At a time, it will become crucial to decarbonize the transport system in particular in – (inaudible) – area, where the level of pollution is extremely high.  And not only in China.  Electro-mobility will require more capacity to produce electricity, through gas, through renewables.  The same when we are considering the incorporation of ICT and intelligence, in fact, in the new grid:  crucial in order to organize those things with active consumers in situation to ensure stability of the grid and stability of the world system. 

All these points will be decisive, I think, regarding the decision to be taken by the key players, including in the States.  And in that regard, two or three things will be fundamental.

First of all, the creation of the adequate regulatory framework, because, as you said, Carlos, this will require enormous amount of investment – you referred to trillion(s) of dollar(s), and it is right – only to implement by the energy sector, because the energy sector is representing at least two-thirds of global emission(s).  But all this amount of investment should be facilitated by an adequate and robust and – (inaudible) – regulatory framework.  Otherwise, the lack of regulation will kill the investment in that direction.

The same is valid when we are speaking about new technologies and innovation.  Obviously, we are speaking there also about renewables.  If we have some technologies mature, in particular for onshore wind or photovoltaic solar – it is not the case when we are speaking about offshore wind or when we are speaking about new renewables linked to ocean and seas.  We have invested a lot – U.S. have invested a lot, and Europe also, (into this ?) space.  We have not invested a lot on ocean and seas, representing a fantastic potential for new renewables. 

Accordingly, what is important is to well-identify the key priorities to be developed, having in mind implementation of Paris Agreement, but representing, in fact, fantastic economic opportunities for the business.  And when I see the level of commitment of the main companies in U.S., when I see the commitment of research centers in California and in different others part – Chicago and so on – of U.S., when I’m visiting some lab, I am comforted and more confident regarding the future, because we have developed with U.S. a real strong level of cooperation between U.S. and EU, not only on energy security, but also on research and development, on electro-mobility and standard.  And this will be crucial for tackling this new challenge. 

MS. RAYDAN:  Thank you, Mr. Dominique. 

Actually, thank you all for easing much of the concerns that had been hovering around the future of clean energy policies. 

Mr. Goldwyn, let’s look into the other, let’s say, significant policies that are expected to impact the energy markets under Trump’s new administration.  Actually, in your study you have looked into two major things, his position on global trade and the change in the foreign policy in the United States. 

Let’s start with the foreign policy.  His posture over – I mean, the bold lines are his posture over fighting ISIS, closer relationship with Russia versus more conflictual relationship with China, and of course more, let’s say hard line on Iran sanction.  Could you briefly explain to us, how would this, let’s say, mix of twisted policies, let’s say, affect the energy markets?

MR. GOLDWYN:  Sure.  Thank you.  And thanks for the plug for the paper done for this summit, “The Outlook for Energy Under a Trump Administration,” so our good friends from the Global Energy Center don’t have to lug it back to Washington.

I think that the – there are a couple of things about Trump’s potential foreign policy that could be disruptive to markets.  At the greatest level, the fact that you have very few people who are experienced at all and no sub-Cabinet and very few staff means that decision-making will be complicated.  That creates uncertainty.  The questioning of all the fundamental tenets of U.S. foreign policy – commitment to NATO, commitment to the European Union, commitment to alliances, enforcement of trade agreements, perhaps even the Carter Doctrine itself and the protection of sea lanes here – all that creates at least the opportunity for mischief among other countries.

But I think the – to pick three of the greatest risks, you have a huge potential swing on Russia.  One is, I would say the Trump-asserted policy, which is essentially a grand bargain with Russia to fight ISIS, and that might mean relief of sanctions; it might mean a more permissive policy towards Russia’s conduct in its near-abroad; it might mean a shift of sides in the Libyan conflict to side with General Haftar and the position taken by the UAE and Russia to try and use the strongman rather than the GNA.  And so that could mean an incentive for Russia to be much more adventurous, and perhaps even license in Syria to conduct a bombing campaign that might even spread to Iraq.

On the other hand, you might have congressional rejection of that policy, as we’ve seen already from Senator McCain, and you might see Congress react to a Trump policy by sustaining the sanctions that we have on Russia, imposing the cyber sanctions, and maybe even doing more. 

And so the swings there are huge.  The impact on European energy policy and the, you know, 25-year-odd commitment to diversification of supply could really be in question.  So I think it both freezes investment, and you could either look at disruption of gas supplies to Europe and oil supplies to Europe, or you could look at significant disruptions in Libya. 

In China, I think the risk there is of miscalculation.  The line that Rex Tillerson drew in his nomination hearing, which is we will not allow China access to the islands on which it has established, you know, landing strips – that’s a pretty hard line.  So if we’re not firing, you know, water cannon across these ships but we’re actually preventing access, you have the potential for conflict in the South China Sea.  You have this challenge over North Korea, which could either lead to pressure on China to do more, leading to tensions with China; preemption on North Korea, if we decide that their nuclear tests and their missile tests can’t be abided; or you could have the absence of a U.S. reaction, which could lead to a call for nuclearization of the Korean Peninsula. 

All of that is pretty bad for shipments of LNG to Korea and to Japan, and if you look at what Korea makes – offshore platforms, tankers – you could look at significant disruption of supply chains there as well.  So, you know, any place you’ve got carriers floating, insurance rates go up and transit lanes are difficult.  And you’re talking now the South China Sea and offshore Korea as well.

So I think those are – those are two big ones.  And the other great area of risk I think is here in the Middle East, where the swing is from abandonment of the Iranian agreement, which I think is unlikely, to a much more aggressive posture and possibly taking sides in the Sunni-Shia conflict.  So you can say that that might be better containment of Iran, but what is the reaction that you get from the other side, and where does it pop up, and how well equipped are you to combat it?  And all of that points to potential disruptions.  You know, pushing IS out of Libya – what does that do to Algeria?  What does that do in other areas?  And how much more intense does the conflict in Yemen get if this is seen as the United States taking an existential position in this conflict? 

So I think all of those, with trade policy aside, are potentially disruptive to oil supply and to transit of oil and gas.

MS. RAYDAN:  Mr. Barkindo, in light of this brief presented by Mr. Goldwyn and the twist in the U.S. foreign policy, let’s pose a little bit on the potential renegotiation of the Iran deal.  What does that mean for OPEC?  What does that mean for the oil prices? 

MR. BARKINDO:  Well, we as OPEC – as a matter of policy we do not dabble into the domestic policy agenda of countries, including our own member countries for that matter.  But as a group, we look forward to this administration coming into office to join hands with us, showing leadership in restoring stability in markets that would enable us to re-attract the huge investments that we require in our industry that has been contracting in the past two years, threatening future supplies.  We’ve had numbers of this morning from the IEA echoed by our friend Carlos.  According to our oil outlook going to 2040, we will require an estimated $10 trillion in order to meet the rising demand.  There is a consensus in the focus in industry – in the oil and gas industry that demand will continue to grow for the foreseeable future.

Now, for us as producers, we have a vested interest in ensuring that we continue to supply these markets, to meet this demand as reliable suppliers.  But the major obstacle here, in our view, is to restore the stability on a sustainable basis, which is beyond one group.  Hence, the decision we entered with non-OPEC.

One of the key reasons was because OPEC accounts for nothing more than 40 percent of the market.  And we have seen this disruption that has happened in this current cycle, and we have been struggling the past two years to play our own part.  But we came to the conclusion that it was not possible.  We needed the support of the non-OPEC to join us.  And we worked with them, and we get this landmark and historic agreement on the 10th of December.

But, as they say in soccer – in football – this is halftime.  So, going forward, we need to solidify this global platform of 24 countries.  We need to intensify dialogue and restore confidence with consuming countries, led by the United States.

MS. RAYDAN:  Exactly.  Let me – let me just stop here.  You’ve asked lately – you’ve called the United States for future cooperation to limit oil production since, as you said, the OPEC deal is a short-term necessity.  But how do you think this could be made possible?  How do you see this future cooperation by the time Trump promised, as we discussed, incentives for shale producers, more U.S. energy independence?  And above all, he promised to escape what he called being OPEC hostage.  How do you see this future cooperation happening?

MR. BARKINDO:  We see the U.S. producers, particularly tight oil producers, playing a key role in the global energy mix.  Just for a moment, think of what would have happened to the global economy if we had not had the shale revolution in the United States.  They have played a very important role in ensuring that the U.S. and probably other parts of the world also benefited from continuous supply of energy.  And in all our focus going forward, shale producers – tight oil producers, they have a very important role to play.  And in the global energy mix going forward, the investments that are required, be they in the conventionals or the non-conventionals, at the end of the day we are all in the same boat.

The decisions that we took were in the interest of all producers, not only the 24 countries that signed this agreement.  But I personally received several messages of encouragement from U.S. companies who have been battling to stay afloat in the last two years since we entered this severe cycle.  So this cooperation that we are seeking does not necessarily have to be in terms of supply management.  But there are many other areas, especially in areas of technology, in data, in modeling, that we think is beneficial, not only to us but to the U.S. and other producers.  And whatever you say we do in OPEC, whatever is good for us in OPEC, is good for the United States.  And what is good for the United States is good for the whole global economy.

So we remain cautiously optimistic that the Trump administration will take up its leadership, particularly in the energy sector, not less because we have Rex Tillerson coming in as secretary of state, which we welcome – not because he’s from our constituency, but because he’s an accomplished, may I say, oil diplomat.  There is a thin line between oil diplomacy and geopolitics.  So I will join Paula in remaining optimistic.

MS. RAYDAN:  Thank you, Mr. Barkindo.

In the couple of minutes left that we have – I’m sorry we’re late to turn to the floor, but actually we couldn’t stop the discussion.  Let’s have some questions or comments from the floor.

Yes, please.  Gentleman at the front.

Q:  Thank you.

If the panel wouldn’t mind taking the question on the potential impact on renegotiating trade agreements.  So, whether it be the probability of NAFTA or TPP, what would the potential impact and ramifications be on the energy market?  And how probable do you see this happening?

MR. GOLDWYN:  Jump in a little bit.  I think a couple of direct impacts.  President-elect Trump has questioned the free trade agreement with Korea and threatened to withdraw from NAFTA.  So, for LNG exporters who rely on exports to free trade agreements, having challenges to the Korean market would be an issue.  The investments in Mexico depend on the investor protections provided by NAFTA.  I think it would be pretty damaging to the – to the Mexican upstream opening.  And then you have, you know, the potential enforcement, which is this proposal for a border adjustment tax, which would tax imports but not tax exports.  So it would be very positive for LNG.  It would be very positive for exporters.  It would be hugely damaging to the U.S. refining industry because the heavy oil industry depends on imports from Canada, Mexico, Saudi Arabia and Venezuela.  So you could have huge discontinuities, I think, from those, as well as the disruptions of value chains throughout North America, which would suppress demand.

MS. DOBRIANSKY:  May I just add on that, just a footnote?

MS. RAYDAN:  Yeah, sure.

MS. DOBRIANSKY:  It struck me during our elections – and as you know – that both Secretary Clinton and also now-President-elect Trump, there was some compatibility on this issue, which I think it’s worth noting that in the broader sense they were questioning not per se trade agreements, but the content of those agreements.  My own personal view is I think that there is some value in reexamining where we’ve been, where we are, where the benefit has been, and where we – where it’s been detrimental to our economy.  But it struck me that both came at that – at that issue.

MS. RAYDAN:  Yes, please.  Can we pass the microphone there?

Q:  Jan Mládek, minister of industry and trade, Czech Republic.

I have additional question to the first one.  Besides those three that mention, there is in the process of negotiation TTIP between EU and the United States.  Is there any chance of continuation debate about this treaty, is the question for the panelists?  And, if yes, is there any chance to have there reasonable energy chapter?  Thank you.

MR. GOLDWYN:  Not much would be my answer.

MR. RISTORI:  Yes, I can say what is important.  First is to see the new administration continuing to support open, competitive and transparent energy market.  Let me say that even without TTIP, it has been possible to finish with positive decision such as the one finishing the ban to export oil and gas.  And for us, for European, what is important is to be confronted to competition.  This is now the case.

And in the hypothesis of relaunch of TTIP, of course, what is important will be – largely be on the substance of the provision.  And for finishing work, it will be crucial to well-prepare things for an increasing level of dialogue between all characters – all characters, not only the negotiators, because at the end the negotiator is the final face.  But the key player:  I mean operators, transmission system operators; regulators; and so on.  And, based on the successful transatlantic Energy Council, we have managed until now.  I think we can be confident this could well be the case.  But this will require a clear increase in (come and went ?), first of all, of characters, in order to identify common priorities.

MS. RAYDAN:  Thank you.

Yes, please.  We have two questions from the back.  OK, we have room for only one question.  Briefly, please.

Q:  Yeah, hi.  Mohammed al-Barrak (ph).  I am a Kuwaiti student.

I just have a question to His Excellency Mr. Barkindo.  What measures will OPEC take to countries – to the member countries that do not comply with the Paris Agreement?

MR. BARKINDO:  Thank you very much.  It’s very interesting that this question is coming from a distinguished student from Kuwait who is chairing the Joint Ministerial Monitoring Committee that was set up on the 10th of December to police compliance.  It’s a very important question.

I’m just coming from Kuwait, where I met with Issam Al-Marzooq, the new minister and incoming chairman.  And we’ve been consulting here today with other ministers who are attending this summit on a mechanism, a framework of compliance that we hope to adopt in Vienna on the 22nd of this month, January.  And I think I will be in a better position to answer your question when we adopt this mechanism.  So it’s a work in progress.  But I want to assure you that we are all committed to a high level of compliance to this landmark and historic agreement.

Thank you.

MS. RAYDAN:  Thank you, Mr. Barkindo.

With your answer, we have to finish this panel.  Thank you all for your contributions.

And thank you for attending.  I would kindly ask you, for the ones who wish to attend the next session, it’s going to begin right now, entitled “Breakthrough Energy Technologies and Their Disruptive Market and Geopolitical Impacts.”  Thank you.  (Applause.)

(END)

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