A Contrarian take: Why Trump’s Second Term Could Unexpectedly Advance the Energy Transition by Stephen V. Arbogast

Looking beyond partisan headlines, this analysis explores how Trump’s second term might actually accelerate decarbonization through an ‘All of the Above’ energy approach. From permitting reform and nuclear expansion to LNG exports and carbon capture, we examine how pragmatic policies focused on energy security could align with climate goals. A thought-provoking read from the Kenan-Flagler Energy Center for anyone interested in the intersection of energy policy, climate action, and political realities.

Energy Transition in the Next Administration

Energy Transition advocates and climate activists can be forgiven for feeling pessimistic.  With the election of President Trump, it seems that many signal achievements are now under threat.  Since time is of the essence in climate matters, four years of backward motion is especially disheartening.  Each day seems to bring more warnings of a Transition moving towards reversal.

Those feeling this way should look more closely.  In the next administration Energy Transition may just move forward on different fronts.  Yes, there will be highly visible ‘setbacks.’  However, there likely will be progress in other ways, and it may be accompanied by a much-improved realism about how to progress an Energy Transition.

Let’s start by noting the obvious reasons for climate activist pessimism.  President-elect Trump makes no secret of his plan to withdraw from the Paris Climate accords.  Moreover, his campaign pledge to unleash America’s fossil fuel production has now received electoral backing.  Drill, Baby, Drill may be a campaign slogan with 2008 roots, but there is little doubt it will result in a resumption of LNG export project approvals, aggressive leasing of federal lands for oil/gas exploration and a determined effort to unblock pipeline construction.  President Trump’s de-regulation plans will certainly target many climate regulations put in place by the Obama and Biden teams.  The Federal waivers of California’s EV mandates is one target, but there are many others.  EPA’s efforts to force coal and gas power plants to decarbonize or shut are will likely end and other ‘coercive’ climate regulatory measures may be dismantled.

So, there are valid reasons for climate activist pessimism.  But there is another side to the story.

Start with the fact that Trump I was not wholly hostile to the Energy Transition.  Despite his widely quoted comments calling climate risk a ‘hoax,’ Trump’s first term did more adjusting than cancelling.  Renewables subsidies were phased down, not out.  Renewables growth continued in many states, including several decidedly Republican in orientation. There was no concerted attack on mandates or elimination of CAFÉ standards.  Some environmental regulation was lightened, e.g., U.S. waterways, methane emissions, but hardly eliminated.

Trumps rhetoric was tough, and the administration did leave office with an image of hostility to climate action.  There was however another side to Trump I.  First, that administration was very pro-nuclear.  Trump I supported development of Small Modular Reactors (SMRs), signed into law the 2018 Nuclear Energy Innovations Capabilities Act and encouraged the export of American nuclear technology.  This latter point is more important widely realized.  New reactor technologies developers need orders to grow their business to industry scale; such growth is key to lowering new plant costs and harvesting lessons for subsequent project executions.  Foreign orders allow U.S. developers to build more plants and go down this ‘industry learning curve,’ with the added benefit of displacing Russian and Chinese technologies internationally.

Carbon capture & sequestration (CCS) was another area of focus.  Trump asked the National Petroleum Council for a detailed CCS study.  The resulting work identified the level of subsidies CCS would need to get started, i.e. ~$90/ton.  Trump I then expanded the 45Q CCS tax credits to promote starter projects.  This effort laid the groundwork for the enhanced 45Q adopted by the Biden Administration’s Inflation Reduction Act.  It also underpinned the 2023 effort by the EPA to require utilities to equip their coal and natural gas power plants with CCS by 2034.

Trump I’s approach to coal was even more ‘under the radar.’  Trump touted ‘clean coal,’ which essentially means equipping coal power plants with CCS.  This is more challenging than for natural gas power plants it typically requires the coal to first be gasified. This has only been accomplished in U.S. lab and demonstration plant projects, and one commercial plant in Texas. ‘Clean coal’ has thus proven more difficult and expensive to accomplish than its promoters, including President Trump, imagined.  It’s importance, however, is widely overlooked.  Most critics considered Trump’s support for the idea his gift to the domestic coal industry in electorally important states.  This was certainly a Trump I motivation.  However, coal CCS’ greater importance lies elsewhere.  More on that when we discuss Trump II below.

Summing up the lessons, Trump I sought to counteract the anti-fossil fuel messaging of the climate lobby and strongly promote fossil fuel production.  The approach gave more recognition to the ‘Dual Challenge,’ i.e., that what we face is a need for secure affordable energy AND decarbonization.  Trump I then emphasized technologies which would better reconcile fossil fuels with climate concerns.  Finally, it sought to unblock infrastructure construction across the energy value chain. Taken as a whole, this was not a case of simple climate denial.

Should we look for anything different from Trump II?  Perhaps the better question would be, are the likely Trump II energy/climate policies more suited to ‘this moment’?

Here there are surprising reasons for optimism, principally because ‘this moment’ is one where certain ‘Dual Challenge lessons’ have become obvious.  In brief, these lessons are:

1. That Energy supply, reliability and cost must continuously be addressed, or they will cause disruptions that sidetrack Transition progress.
2. Consequently, only an ‘All of the Above’ approach to Energy supply can address the ‘dual challenge’ of adequate, affordable energy plus decarbonization.
3. Decarbonization progress in OECD nations means little if it is more than offset by increasing emissions in China, India, and other developing countries.
4. China, India and other developing countries are not going to give up coal anytime soon.
5. If time is of the essence in climate strategy, we cannot wait for ‘perfect solution’ technology breakthroughs that are uncertain or may never come. Affordable ‘bridge’ strategies that lower global emissions now should be embraced and then improved as better technologies materialize.
6. Parts of the Environmental lobbies in the U.S. and Europe have become unwitting obstacles to de-carbonization because of their reluctance to accept the above lessons.

The argument here is that likely Trump II policies fit this moment very well.  Here is the mix of Trump I policies that with some additions could address the lessons listed above:

• Expanded domestic oil & gas production
• LNG export liberation
• Permitting reform, facilitating new pipeline construction and long-distance power transmission
• Renewed support for nuclear, carbon capture, Coal CCS
• A possible fiscal deal inaugurating some form of carbon taxes

Expanding the production of domestic oil and gas will help assure adequate global supplies and moderate prices.  Indeed, the lack of ‘drill baby drill’ enthusiasm shown by some oil company executives hints at an anti-inflation component to Trump’s ‘unleash production’ strategy.

Growing U.S. oil production will also assure plentiful associated natural gas (C4) is produced for the new LNG facilities Trump II will approve.  As a Biden Administration Energy Department report just stated, robust U.S. production can support aggressive growth in LNG exports while limiting the rise in U.S. domestic prices to less than the inflation rate.  The exported gas, however, will be there to support decarbonization in European and Asian economies now forced to burn coal.  This LNG liberation policy is a textbook example of a bridging solution that also brings supply security and price affordability plus decarbonization.

Permitting reform would be the new point of emphasis in the Trump II policy mix.  It is hard to overstate its importance to addressing the Energy Dual Challenge.  Climate activists routinely assert that they can decarbonize the power grid almost entirely by deploying renewables and hydrogen (H2).  Seldom do they consider the realities of delivering these to all market at anything like an acceptable cost.  Wind and solar are most economic where there are strong natural resources, i.e., powerful wind and sunlight.  In most cases, such resources are located far from large power consuming markets.  Long distance transmission is then required to deliver their power at affordable costs.  Ask any utility about building such transmission – they’ll tell you it’s very difficult to get the approvals which are keys to predictable schedules and budgets.  Serious permitting reform would address much of this issue.

A similar story applies to pipelines.  Climate activists oppose new pipelines out of legacy concerns for wilderness areas or impacted species.  However, large scale, affordable hydrogen will probably be produced on the Gulf Coast.  If the rest of the country wants it, new pipelines are going to be needed; existing gas lines can only handle a fraction of H2 blended into its C4.

Permitting reform will also help CCS and nuclear.  The CCS story resembles hydrogen – new pipelines will be needed to move it from capture point to final disposition.  Utilities in much of the U.S. could retrofit their gas generation with carbon capture.  However, many, like Duke Energy, don’t enjoy nearby geology suitable for sequestration.  Thus, captured CO2 will have to be transported elsewhere, probably to the Gulf Coast.  CO2 is denser and more corrosive than C4; thus, it requires both more compression and corrosion resistant pipe.

Permitting reform would thus help utilities by giving them options – they can progress decarbonization either by reworking their turbines, securing hydrogen and backing out natural gas, or they can retrofit existing plants with carbon capture and secure pipeline capacity to a sequestration site.  In either case, permitting reform that supports new pipeline construction will render these options more feasible.

As for nuclear, we’re talking about accelerated licensing provisions for SMRs and support on two other fronts – re-licensing of shuttered plants coming back online and the permitting of brownfield sites to host nuclear facilities.  Utility Integrated Resource Plans already contemplate potential use of coal plant sites to host next generation nuclear.

Looking at what’s potentially unleashed by permitting reform, it becomes clear that it would enable an ‘All of the Above’ approach to the Dual Challenge.  It will also drive today’s bridging solutions towards deeper decarbonization.  Today’s natural gas substitution for coal will become tomorrow’s gas with CCS, or gas converted to H2.  Meanwhile more nuclear backstops growing renewables with firm, high capacity, generation.  Having more options for utilities that face different situations should also allow costs to be optimized across different markets.

A last aspect of permitting reform is that it may require a political bargain to be reached.  Unless Trump II can somehow find a way to cram it into a Reconciliation Bill, this reform will need 60 votes in the Senate.  It would be a shame if this measure, so critical to tangible progress, were to die on the alter of climate lobby purity.  A far better outcome would be to see this reform passed as the parties trade concessions. For example, one could envision permitting reform being secured in return for protection of wind/solar subsidies, or the removal of solar tariffs, or even the introduction of carbon taxes.

The latter element could also be a component of a deficit reduction fiscal deal, and could take the firm of either carbon taxes per se or a border adjustment tax that formed part of Trump II’s trade policies.

The last policy area is a holdover from Trump I – ‘Clean Coal.’  Long considered “dead, dead, dead”, its resurrection would accomplish two things.  First, it would reinforce the momentum towards transporting and sequestering CO2.  Both coal and gas-fired facilities would now be helping build out the transport/sequestration industry.  Of more importance however would be the scale up of technologies that could be adopted by coal-burning developing countries.  As noted above, it matters little what the U.S. achieves if China, India, and others keep putting more coal-fired emissions into the global atmosphere.  Giving these countries a path to decarbonize that doesn’t require abandonment of their huge coal-fired generation is perhaps the most impactful Transition export that the U.S. could provide.

The Trump II inauguration is still one month away.  This is an easy moment to speculate on what ‘could’ be accomplished – political realities and resistance have yet to present themselves. Still, it is worth making the case that Trump II’s Energy Transition policy could be surprisingly productive.  It seems that many policies they want to pursue for other reasons, e.g., abundant domestic supplies, robust economic growth, exports that help national security – these goals now coincide with what this Dual Challenge ‘moment’ requires.  Considerable progress could be made, progress which would be complementary to much that has been accomplished to date.

For this to happen however, two things must be avoided.  The traditional energy industry, relieved of the pressures faced in the past decade, must avoid reverting to ‘business as usual.’  If it turns out that their interest in ‘Low Carbon Solutions’ was mostly defensive and green washing, they will not spend the money or political capital to push the above solutions forward.  On the other side of the aisle, the climate lobby must see the potential for progress residing on these alternate frontiers.  A knee-jerk resistance response to all reform and deal proposals may sink some high-profile projects, but it will perpetuate the scorched earth politics that has plagued Energy Transition policy throughout.

Meanwhile, the climate clock keeps ticking towards that unknown date with potentially unhappy outcomes.