A Trump regulatory test?

by Robbin S. Johnson
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Donald Trump
E.P.A. moves may present President-elect Donald Trump with an early challenge to his promise of regulatory reform.

WASHINGTON — In a somewhat surprising move, the Environmental Protection Agency (E.P.A.) on Nov. 23, 2016, set the total renewable fuel requirements for calendar 2017 at 19.28 billion gallons while also raising the conventional biofuels mandate to 15 billion gallons. The targets were up 480 million gallons and 200 million gallons, respectively, from the E.P.A.’s May preliminary goals. The 428-million-gallon advanced biofuel goal also was up significantly from prior levels.

Coming just two weeks after the November election, those moves may present President-elect Donald Trump with an early challenge to his promise of regulatory reform. It also may pose a new challenge to the Renewable Fuel Standards (R.F.S.) Congress established in 2007. Renewable fuels generally have depended heavily on governmental support, an approach that seems to run counter to Mr. Trump’s economic philosophy, his political support for fossil fuels and his choice of Scott Pruitt as E.P.A. administrator. It promises to be an interesting test.

Energy policy

While there are some inconsistencies — like international trade — President-elect Trump’s economic philosophy seems to favor market forces over governmental management. He seems to oppose shaping developments through governmental regulations and controls in favor of public support for research and innovation.

Applying these general principles to energy policy, it seems likely that Mr. Trump will be prone to remove regulatory impediments to fossil fuels, like permitting delays holding up gas and oil pipelines, restricting exploration on public lands and the like. During the campaign he took specific aim at Obama administration regulations that had the apparent goal of discouraging coal-fired power plants. Whether and how this stance would translate into changes in administration of the R.F.S. are a little less clear.

The attitude of Mr. Pruitt, Mr. Trump’s designee to run the E.P.A., will be an important factor. In his past activities as State Attorney General for Oklahoma, Mr. Pruitt has been a leader in challenging E.P.A. restrictions on the oil and gas industries. Moreover, many of the “red” states that carried Mr. Trump to the presidency are energy-producing states. Fossil fuels play a large role in their economies.

However, solar, wind and biomass energy sources, though still modest in size, are growing in many of these states. And a Republican-controlled Congress extended subsidies to these industries last year. Tampering with them may be a waste of political capital.

The larger picture of climate change also may color the new administration’s approach. Mr. Trump frequently expressed skepticism about global warming, promising among other things to withdraw from the recent Paris accord. More recent statements, however, have suggested some softening in that posture.

At the center of Mr. Trump’s political promises was the creation of more good-paying jobs. His success in “saving” 1,000 jobs at Carrier Industries in Indiana symbolized that commitment. But “bringing back” manufacturing or mining jobs may prove harder and less appealing than attempting to create new jobs through lower corporate taxes, less heavy-handed regulation and more public support for research and innovation.

Other aspects of the larger energy picture may further cloud this already murky assessment. President Barack Obama made a large effort to collaborate with China, especially in bringing the Paris climate agreement about. President-elect Trump, in taking a call from Taiwan’s president and threatening special duties on imports from China, may be signaling a much tougher stance toward that country. For energy and climate issues, that is important because China’s annual greenhouse gas (GHG) emissions are nearly twice as large as America’s.

Looking ahead

Of course, President-elect Trump is not yet inaugurated, Mr. Pruitt is not yet confirmed and Mr. Trump’s economic philosophy and political promises have not yet passed through the sieve of practical policies. It is too early to predict where all of this will sort out.

One option may prove tempting. It would build around a lighter touch of government’s regulatory hand and a larger boost to private ingenuity and enterprise. This would remove some of the regulatory rules and decisions that have slowed pipeline construction and domestic energy exploration and development. It also might dampen down some of the biofuels and clean-energy mandates, leveling the playing field while trusting the marketplace to sort out the winners and losers.

Coupled with the possibility of tax reform and increased stimulus spending, Mr. Trump might get the job creation he has promised, along with greater energy independence and continued reductions in CO2 emissions. The former has been rising and the latter falling with the increase in domestic natural gas production and the falling costs of solar- and wind-energy production. Continuing that trend may end up advancing the combined goals of greater energy independence and lesser GHG emissions. Of course, much also could go wrong along the way.

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