September 17, 2020
Five big questions as America votes: Energy
As part of the Atlantic Council’s Elections 2020 programming, the New Atlanticist will feature a series of pieces looking at the major questions facing the United States around the world as Americans head to the polls.
As the US presidential election looms, the oil and gas industry has suffered from demand shocks during the COVID-19 pandemic, climate change is increasingly in the list of top concerns of US citizens, and there is little overlap between the likely policies of the two presidential candidates.
Below are the five major questions facing the United States on energy as the US elections approach, answered by top Atlantic Council experts:
What domestic choices will the next US president face on energy policy?
The next US president, whether Trump or Biden, will take office amid growing calls to address climate change, while also confronting the worst economic crisis since the Great Depression. Either administration will also confront a struggling oil industry. In response, a second Trump term would likely continue to bolster the oil and gas industry, both structurally—for example, by continuing to roll back regulations while working to open new areas for drilling—as well as through financial support. If oil prices do not continue to recover—or if they fall again—Trump may lean on the Organization of the Petroleum Exporting Countries (OPEC) to set tighter barrel production quotas.
A Biden administration would seek to reverse the deregulation measures of the Trump presidency for the oil and gas industry, while also implementing policy to aid a just transition away from fossil fuels. Moreover, Biden would likely try to create structural economic and policy supports to spur the development of clean energy. Biden is likely to be responsive to demands to commit to renewables, but he would probably break with voices from the left wing of the Democratic Party—such as the Sunrise Movement—that are demanding an end to fracking.
Throughout the Trump administration, Republicans and Democrats on the Hill have been able to work together to advance legislation to spur nuclear energy and carbon capture, utilization, and storage. Such bipartisan cooperation on innovation and advanced energy is likely to continue, regardless of whether Trump or Biden is sworn in as president in January.
Jennifer Gordon, managing editor and senior fellow, Global Energy Center, Atlantic Council
What are the geopolitical implications of volatility and low prices in oil and gas markets?
The immediate consequence of a volatile oil and gas market will be the debilitating impact of prolonged low prices on countries that depend on oil and gas production revenues. In more ways than one, the COVID-driven price crash and stagnant oil price recovery is providing a preview of what a ‘peak oil demand’ world might look like, with producers under considerable economic stress as revenues dry up. For producers with a history of political instability or with significant public spending commitments, market uncertainty will increase the risk of geopolitical volatility.
The longer-term consequences of energy market volatility are more structural. Alignment between Saudi Arabia and Russia has been critical to keeping the market afloat while US shale production has given Washington a de-facto seat at the table at OPEC+, trends that will influence OPEC’s management of an uncertain demand recovery. Meanwhile, although rock-bottom prices have allowed gas to continue to displace coal consumption (especially in Asia), whether cheap gas complicates the ability of governments around the world to incentivize renewables deployment as part of a green economic recovery and climate commitments is an open question.
Reed Blakemore, deputy director, Global Energy Center, Atlantic Council
How do China’s geopolitical actions affect energy supply chains, especially for renewables?
China is a dominant actor in energy supply chains ranging from coal technology to solar photovoltaics to energy storage. Over the last two decades, Beijing took several steps to improve domestic energy security and actively leverage its robust energy supply chains to its geopolitical advantage, most notably through the Belt and Road Initiative. The ongoing pandemic highlights the vulnerability of these supply chains and will accelerate the diversification of energy suppliers as the world shifts to a decarbonized energy system.
The Trump administration previously scrutinized Chinese enterprises for their role in technology espionage and other non-competitive behavior, prompting the US president to sanction Chinese companies and encourage economic decoupling. Trump further targeted solar photovoltaics as a central issue during the US-China trade war to protect US jobs, building on a history of steep tariffs for Chinese-produced solar panels. The Biden administration would also prioritize domestic manufacturing capacity and align with US allies to decrease supply chain vulnerabilities. A difficult question for either administration is how to delineate areas of cooperation with China on clean energy technology as a part of an international effort to overcome climate change, given China’s indisputable place as a clean energy producer.
Margaret M. Jackson, deputy director for climate and advanced energy, Global Energy Center, Atlantic Council
Will COVID accelerate or impede the energy transition?
The COVID-19 pandemic has thrown oil and gas companies into serious financial straits, and further damaged an already suffering coal industry. On the one hand, cheap oil and gas might be a disincentive to greater investment in clean technologies and could also create disincentives for consumers to invest in energy efficient products. On the other hand, the volatility in oil and gas markets might lead decisionmakers (from policymakers to investors to consumers) to decide that it is worth turning away from fossil fuels.
While the pandemic has led to a significant downturn in global emissions, it is unlikely to remain that way once the virus is suppressed, whether through a vaccine or with national testing and tracing regimes worldwide. Additionally, demand for clean energy may be limited—whether domestically or in emerging markets—since cheap oil and gas will be readily available. The pandemic provides an opportunity for US policymakers to invest in clean energy technologies as part of economic stimulus plans, as their European counterparts are doing. However, with the House and Senate not even able to agree on extending unemployment benefits—let alone able to agree on clean energy legislation, such as the Moving Forward Act, which Senate Majority Leader Mitch McConnell referred to as a “so-called infrastructure bill [that] would siphon billions in funding … into climate change policies”—it seems likely that the opportunity for the United States to lead the energy transition will be lost, at least in the short-term.
Jennifer Gordon, managing editor and senior fellow, Global Energy Center, Atlantic Council
How will global climate action impact post-COVID economic recovery?
The post-COVID era will likely see an uptick in investment for new technologies like hydrogen to set the path towards a net-zero future and promote economic opportunity in the process. The economic recovery packages following the 2008 financial crisis lead to the rapid growth in the variable renewable energy technologies of wind and solar and this may be repeated in other sectors. The European Union and the Republic of Korea, for example, already have ambitious strategies to build a greener, more just economic system that builds on a diverse set of technologies such as energy storage, carbon capture, hydrogen, and electric vehicles–key pillars for climate mitigation.
The momentum for action on climate change has been building over the last few years, catalyzed by multilateral efforts such as the historic Paris Agreement, where 197 countries committed to lower carbon emissions, and grassroots movements such as Greta Thunberg’s call for climate strikes across the world. The global pandemic has failed to distract concerned citizens from the issues surrounding climate change, and recent natural disasters in the US have amplified demand for a stronger government response.
Margaret M. Jackson, deputy director for climate and advanced energy, Global Energy Center, Atlantic Council
The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.
Image: A general view of power-generating Siemens Gamesa 2 megawatt (MW) wind turbines on the Kumeyaay Wind farm on the Campo Indian Reservation as the spread of the coronavirus disease (COVID-19) continues in Campo, California, U.S., May 29, 2020. REUTERS/Bing Guan