Joeri de Wilde: Even with Trump, energy transition continues

November 12, 2024

^{This column was originally written in Dutch. This is an English translation.}

By Joeri de Wilde, Investment Strategist at Triodos Investment Management

With Donald Trump at the helm, we can expect more CO2 emissions. But even he will not be able to avoid the strong momentum of the energy transition.

Trump won, and so we should unfortunately brace ourselves for an attempt to revive the fossil economy. Especially now that the Republicans also regained control of the Senate AND are on course to retain their majority in the House of Representatives. This will make it easier for Trump to pursue his ‘America First’ policy agenda in the coming years. At the same time, a lot has changed on the global energy front since Trump's last term in office, and even Trump cannot completely ignore that.

Bad news for the climate

A key part of Trump's plans is aimed at making energy in the US as cheap as possible. Because energy is power, and power is money. And that's what entrepreneur Trump is all about. Hence his ‘drill, baby, drill’ appeal to US fossil fuel companies. So it will come as no surprise when he again withdraws the US from the Paris Climate Agreement. A worrying prospect, especially when it looks like the world will have warmed more than 1.5 degrees by 2024 for the first time, while the goal of the Climate Agreement is to stay below 1.5 degrees.

Renewables may not be the victim this time

That shares of renewable energy companies went down after Trump's election win was therefore no surprise at first glance. A focus on fossil is bad news for clean energy, according to recent market movements. But in the US, it could well be both-and-one policy in the coming years. Indeed, momentum for green policies has accelerated since Trump's last term in office, with the EU's Green Deal, China's carbon neutrality targets and widespread investor interest in ESG investment opportunities. Going green has become economically advantageous, making the sustainability transition more resilient to political shifts. So if the US wants to compete, it needs to continue its climate efforts to some extent. But climate efforts do not necessarily mean lower CO2 emissions in the short term.

Under Biden, the US has already bet heavily on the green transition through a huge green energy subsidy package. This package, sold to the public through the tactfully named Inflation Reduction Act, should ensure that the US can compete with China (and the EU) in this area as well. Since Trump is focused on China, this will be reason enough not to simply scrap Biden's package. On top of this, a substantial part of these benefits will end up in US states where Republicans have a majority. So this means jobs and money for Trump voters, and he will not want to disappoint these people.

The green transition continues

US competitiveness and his supporters will therefore force Trump to some extent to continue supporting renewable energy companies. Meanwhile, other parts of the world, such as the EU, may become even more committed to the green transition as increased geopolitical uncertainty forces them to become energy independent even faster. So the outcome could easily be that the green transition accelerates, while in the meantime more CO2 is emitted. The downward movement of renewable energy shares could then reverse sooner than thought.