United States

Clean energy to carry on under a Trump Presidency

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On the campaign trail, President-elect Donald Trump promised to prioritize America’s energy needs by ending restrictions on coal companies. To many environmentalists, there is an implicit threat in this commitment to U.S. energy dominance: clean energy sources will face their demise as government interest in supporting the industry wanes. Furthermore, there is fear that a lack of U.S. commitment to clean energy will have a contagion effect on other nations, encouraging other countries to abandon climate agreements like COP21. On the face of it, a Trump presidency seems to herald doom for the future of clean energy.

In reality, the fate of clean energy will likely be far from catastrophic. Rapid improvements in technology for renewables like wind and solar mean that most of these products will be cost competitive with traditional fuel sources by 2025 without subsidies, while solar and wind can already compete in some geographic areas. A pro-coal president is thus unlikely to be the killing blow for the clean energy industry. Alternative energy sources like solar and wind will continue to improve and eventually replace outdated, environmentally damaging energy sources. Concern should instead center around the environmental damage that will occur in industries like coal until such a substitution occurs.

The ongoing maturation of alternative energy has ensured it will be a mainstay in the global economy in the future. While still expanding, the clean energy industry has improved far beyond the first, inefficient attempts at harnessing fuel from environmentally friendly sources. The future profitability of this industry as a large-scale energy provider is under little doubt, especially as many renewable energy sectors have matured sufficiently to near-price competitiveness with “dirtier” energy sources.

In most cases, clean energy firms no longer face an uncertain future about their viability in a competitive energy market. As a result, these firms will not suffer the chronic underinvestment that plagues infant industries, making it probable that private investment will fill the void left by a reduction in subsidies. This benefit is especially likely for firms that have moved from research to development stages for their clean energy products, as the commercial viability of such products becomes more apparent and thus appealing to private investors.

Even if the increased quantity of private investment does not entirely replace the funds provided by subsidies, clean energy industries may still benefit from the improved innovative efficiency of private investment. While subsidies add to the total quantity of innovative expenditures made by receiving firms, innovative efficiency has been found to suffer with government subsidies in many cases. More efficient allocation of investment capital would spur improved innovation rates, further making up for any loss in public investment. This results in part from the greater flexibility of private investment, which is better able to keep up with changing market conditions like the entry of new firms compared to more cumbersome public subsidies.

Globally, clean energy will also likely maintain its potential as a replacement for dirtier energy sources, regardless of the direction American energy policy takes. The U.S. currently constitutes a significant share of global energy consumption (18% in 2013), but other large, developing nations like China and India are increasing their shares of energy consumption as they expand their economies. While many expect these countries to do so through dirty energy sources, the reality is that developing nations already make up over half of all renewable energy investment globally. These countries do so because it is the cheaper option, due in part to the lack of fossil fuel infrastructure already in place.

As these nations continue to expand their energy infrastructure in the coming years, demand for renewables and other clean fuel sources will only increase, ensuring a bright future for the clean energy industry outside the U.S.

All of these factors will ensure the clean energy industry’s continued rise toward becoming the primary producers of fuel in the world. The environmental implications of a Trump presidency are not entirely positive, though. Proposed cuts in regulation of the coal industry that would accompany a reduction in subsidies for cleaner sources will result in greater production of environmentally harmful energy as the coal-producing firms would no longer pay for their pollution costs. Thus, there remains valid concern over environmental damage as a result of Donald Trump’s policies for the coal industry. These fears, however, are far more limited in scope and severity so long as clean energy continues along its path of innovation and expansion throughout the world.

 

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