I spent last week at CERAWeek in Houston, a conference I’ve heard called the Super Bowl of the energy industry. One question on my mind as I headed to Houston was how the energy industry is responding to the Trump administration’s skepticism about climate change. We’ve heard talk of rolling back several climate-related rules from the Obama administration, including the Clean Power Plan and vehicle efficiency standards. But how is this playing out in the halls of industry?
The main message I heard last week is that the energy industry largely isn’t changing course. Instead, energy industry leaders are staying the course on low-carbon investments and strategies, both in the United States and globally. I came away from the conference with three main messages about the industry’s response.
1First, both policy and people continue to recognize the challenge of climate change and support low-carbon energy. Patricia Espinosa, Executive Secretary of the U.N. Framework Convention on Climate Change, pointed out that the Paris Agreement entered into force only 11 months after it was signed, a very fast turnaround for such a complex agreement. Already, 133 countries have ratified the agreement. The focus now is moving toward implementation.
Here in the United States, low-carbon energy policy is largely set at the state level, and those policies aren’t changing with the new administration. In fact, several traditionally Republican U.S. states, where resistance to such approaches might be expected—including Texas, Oklahoma, and Iowa—are hotbeds for renewable energy development, particularly wind power.
Additionally, the energy industry assets are long lived. Four or even eight years is a short time when you are making investment decisions about assets that will last for decades, and investors need to consider how policy may change over the life of the asset. One power industry CEO stressed this point by saying: “We don’t base our strategy on tweets.” The U.S. power industry is focused on natural gas and renewables for new generation; there’s no dash for coal, despite the administration’s promise to revive the industry.
2Second is that low-carbon energy continues to provide attractive investment opportunities. Energy companies are finding value in low-carbon investments, as technology costs fall. One power industry executive said that he expects renewables to be completely competitive when the current U.S. incentives expire in 2020. Fatih Birol, head of the International Energy Agency, said: “Renewables are no longer a rich man’s fuel.”
During the week, I heard of billions of dollars of investment in wind and solar, and of continuing research into carbon capture, storage, and use. Electricity storage was another popular area for research, with the potential to dramatically change the position of renewable electricity in the marketplace. Improved energy storage matters because it makes it easier to integrate even more renewable power into reliable electric grids.
3Finally, there is support among energy industry executives for a price on carbon. Speakers from the oil, gas, and power industries pointed out that a carbon price provides greater regulatory certainty, an important factor when the industry makes long-lived investments. The CEO of Total, a multinational oil company based in France, even got a round of applause during a speech when he said that a price on carbon was the right thing to do. What price level the industry would support is a different question, but there was clearly stronger support for a carbon price in Houston than in Congress.
Innovation was a strong theme throughout the week, both in technology and in policy and funding mechanisms to further the transition to lower-carbon energy. Although policy incentives are still weak in most of the world, the energy industry continues to focus on climate change in the expectation of stronger policies and new technologies in the future.
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[On the politics of climate impacts in the U.S.] The political alignment around climate impacts is almost the exact opposite of the political alignment around emissions control.
[On the geographic distribution of climate impacts in the U.S.] The damages to the Republican-electing congressional districts is almost double what it is for the Democratic-voting districts.