Biden, Trump and the U.S. Energy Transition

who is a policy analyst. Here. We discussed some of the significant things that have happened over the past four years and what's hanging in the balance for the next what's the status of the Paris Climate Accord, the Clean Power Plan or the Green New Deal. What's happening with coal, natural gas, renewables and electric vehicles, and how about that two trillion in climate spending that was promised as a part of Biden's platform. Where do executive orders and the

filibuster rule play into this. Well, we've got a lot to cover today, but it's also worth pointing out that one of the things that we did not cover was the Supreme Court and what the replacement for the late Great Ruth Bader Ginsburg will mean as we had recorded this just prior to her passing. A quick reminder, b ANF does not provide investment or strategy advice. We have a full disclaimer at the end of the show. Now, let's talk about the United States. Ethan Stephen, thank you

for joining us today on switched On. Glad to be here, Great to be here. Today. We're going to talk about the upcoming US elections, and we're going to get into some of the stuff that be ENF specifically knows around power and transport and natural gas, and then some policies. But let's let's first start and talk about the scenarios that could potentially exist. So looking forward to November, what

are the potential outcomes of the election? Well, I guess I'll kick it off, and you know, obviously the thing that gets the most headlines here and internationally is the presidential race. And so stating the obvious, we will in theory have a winner the day after the election. It might frankly take longer, but uh hopefully we will have an undisputed winner of that election, will either be President Trump winning re election for four more years or former

Vice President Joe Biden taking the office. So that's the first thing. And then, of course there are a lot of important races taking place so called down the ballot in terms of the Congress, and in those cases, the real key area that we're watching, and many others are is the US Senate. The Democrats can control the House of Representatives at the moment, that does not look like it's under much threat at the moment. The Republicans, however,

control the Senate, and only by a small margin. And so one of the things that we'll be watching very carefully is to see if Democrats win the relatively small number of seats they need to take control of the Senate. They could take control by picking up as little as three additional seats if Biden wins the White House. So let's dig in to what this election means for some of the things that we specifically covered. Be enough, So let's first start, I think and talk about power sector emissions.

So there are where I'm recording from, So in London we talk a lot about net zero. What is kind of the future of emissions in the United States, and kind of what's the dialogue like going on over there? Well, I'll start um and Steph please fill in any holes here. Uh you long story short is the arrival of President Trump, talking about CEO two emissions at the federal level has

largely gone out of style. And that is you know, one of the first actions that the President took was to set in motion or to start turning the wheels towards getting the US out of the planet Paris Climate accord. Uh. And while that process isn't is actually not officially done yet. For all intents and purposes, there have not been any real efforts from the federal government to try to meet

the Paris targets. Interestingly, and somewhat ironically, the US has been using our CEO two emissions even quite quickly during the last three years, and that is really largely due to the major dynamics that we were seeing in the power sector before the arrival of Trump and so so, actually our emissions are down substantially from power, although they've

been rising a bit from the transportation sector. But the bottom line is that the US really is not in any great position now to meet the obligations of the Paris Agreement. You know, based on what we've seen over the last couple of years, I'm guessing some of these power sector emissions reducing has a lot to do with coal, So can you elaborate on that a bit, because I think that's been one of the topics that's come up over and over again during this current president's tenure in office.

Is kind of a move to try and see if they could rescue the coal industry. But what has that actually been like and what does the future of the coal industry look like? Agnostic of whose president, Well, I think what can be said of interestry is that the US and Europe have basically been tracking each other in terms of the elimination or removal of coal from the power mix, but they've been doing so with entirely different objectives.

And what I mean by that is that in Europe, the withdrawal of coal from the market has been largely policy driven and has broad public support. In the US, the removal of coal from the power mix has actually gone against the policy intentions of the Trump administration, which has taken every step that it could can take without seeking legislative approval to retain coal in the power mix.

And specifically, what I'm referring to is that in early in his term, President Trump canceled the Clean Power Plan, which was a signature power initiative of the Obama administration that would have effectively eliminated coal over a period of time. But despite eliminating the Clean Power Plan and replacing it with a much more lenient regulatory package, as far as coal is concerned, the US has continued to see withdrawals

and retirements of coal plants. So, in summary, what we have in Europe, which is largely policy driven and to a lesser extent economically driven in the US is the result of almost exclusively economically determined factors. Yeah, I would totally agree with that. And just to put one specific around it, I mean, when Trump came into office, coal accounted for about of all US power. You know, it's now down to about in twenty nineteen and very well could be lower this year as well. You know, you

look at the run numbers. There hasn't been a lot to move the needle. That hasn't been lacked for lack of trying on the part of the Trump administration. But Steph mentions, uh, and I would I would agree. I think there's only so much that an administration can get done unilaterally. You do need to really move the needle.

For coal, you would need some kind of legislation through Congress, and the Democrats control the House, and even when Republicans controlled the House, there was no major action towards that. So we've gone from thirty down to the mix. What is made up that seven percent gap? And what does

the power mix look like now? Well, just maybe to round it out, I mean, we went from gas being about thirty four percent of generation to about thirty eight percent, and renewables have jumped as well, despite again clear aversion to them from the President, still under you know, you know, about ten percent in that neighborhood for non hydro renewables at the moment, but it has been growing on a generation basis, so it's really been a combination of gas

and renewables. Nuclear has been slowly declining as we've seen, you know, each year several nuclear reactors announced their retirement and come offline. But we still have about a hundred giga wats of nuclear, which is about of the total power and is about of this zero carbon power that the United States has online. It needs to be pointed out that the decarbonization of the US power sector still remains a bit of a distant objective, even though coal

is retreating rapidly from the market. As Ethan points out, gas is taking a large share of the market being abandoned by coal and gas while it certainly is burned with much less carbon emissions than coal, nevertheless is an emitting resource, and it is one that the Trump administration has gone to great lengths to support. On a separate track,

then it's relatively unsuccessful supporting measures for coal. Well, soon, let's talk about some of the potential outcomes, because one of the things that came up, I think, on the campaign trail was that Biden's got this two trillion dollar

potential green focus, energy and climate plan. What does it look like in the future for renewables and I guess the power sector altogether depending upon these two outcomes, Are these going to be massively virgent or is it still sort of separate from whether or not who is president and what matters much more who's in the Senate. Well, if we want to look at Biden's platform, and I certainly think it's appropriate to do so, you are correct.

He has committed to make a two trillion dollar accelerated investment during his first term that all of which would be directed broadly towards meeting ambitious climate goals that, according to Biden, is demanded by the science. Spreading that to trillion out much of it would go to infrastructure and specifically the power sector. He also would like to devote segment of it to R and D technologies, or R and D into technologies that such as battery storage, and

he would negotiate He wants to negotiate fuel standards. He wants to renegotiate fuel economy standards that have been deluded in the Trump administration, and in doing so that would have the effect of raising demand rather rapidly for electric vehicles, which, as I mentioned, would be a significant receipt recipient of some of this financial largest So, if I could just add a little on the politics on it, two trillion dollars may sound like a lot of money, and that

is because it's a lot of money, a lot of money, and um, we're these normal political times. I think I would probably say there's just no way that we'll ever see that kind of money allocated in this area just because of fiscal conservatism. However, you know, these are very unusual times, and we have already seen well over a trillion dollars in stimulus that's been passed by Congress, and several trillion more that's been passed by the U. S.

House of Representatives but not by the Senate. So there does seem to be a recognition that these are extremely unusual and challenging times in the U. S. Economy. I don't know where where will end the year in terms of GDP, but it will be a very sharp contraction. So you know, that does make a lot more possible. But there's definitely going to have to be quite a result in the our into election. I think for us to see a number like two trillion even anywhere near consideration,

and namely, Biden will have to win the election. Democrats will have to win the Senate, and then one other fairly technical but important thing will have to happen, most likely, which is that the Democrats will have to agree to essentially abolish something known as the filibuster rule in the Senate. In other words, they will have to change the rules so that all you need is fifty plus one vote

to make something happen in the Senate. Right now, without getting into too many technical details, basically, it's very hard to do a lot of things in the Senate without having sixty votes, but if you drop that to fifty one, a lot more becomes possible. Yes, and I agree with Ethan's observation that two trillion dollars is a lot of money, and it certainly is the eye catching part of Biden's platform.

I would suggest, however, that perhaps one of the more significant, perhaps the most significant part of the platform, is his call to completely decarbonize the power sector, or I should say, make the carbon sector carbon pollution free by which is less than fifteen years away. That's a tremendously ambitious undertaking if Biden were to be elected president, and even if he were to secure a democratic majority in both the House and the Senate, in other words, even if he

had a full wind at his back. Nevertheless, remains a very ambitious undertaking man. There really isn't any precedent in an energy transition of that speed anywhere in history. Well, so, staying on that theme of that money, what we discussed just earlier is regarding the coal industry and what will

likely be its phase out for economic reasons. But when we're talking about the coal industry and why there's been so much emphasis on it in recent past, it really comes down to jobs, and it comes down to people's livelihoods. And within that two trillion dollars, is that considered to be a particular stimulus package. Is it considered to be a massive job creator or is it more focused on

climate and CEO two emissions. Well, jobs has been the basis for Trump's state of support for coal, but the reality is that jobs in the coal sector began falling long before President Trump took office, and they today account for a very small sector of the economy. Interestingly, Joe Biden's platform is also very jobs oriented, and so to a certain extent, you have both the president and the challenger basing their policies, their climate and energy policies on

job creation. But the Trump basis of jobs creation certainly would have to be expanded beyond coal to have much validity because of the fact that the coal industry is a declining sector in the economy. I think an answer to your question, and you know, is this about jobs? Is this about climate? The answer is us to everything.

I think that that's the intention here. Um. I do think one thing that's intriguing in the Biden plan that I do hope well, I think frankly, ultimately we'll have to get addressed is that, you know, Biden's conception of a job is a unionized job with union worker protections and wages, And if we're honest that is that is not the case for many jobs in the clean energy

sector today. And so how you square that circle? I think it's going to be one of the more interesting challenges for a Biden administration if there is one yes, absolutely true, I would point out that jobs is by far the most frequently used word in the Biden campaign, but the second most frequently used words union. Jobs gets fifty three mentions in the In the Biden platform, union gets thirty two mentions, and both of those words get

more mentions than clean energy, carbon or power. Okay, so let's go into emissions, which isn't mentioned as often in his platform, and let's talk about transportation related emissions, which are the largest source of emissions in the United States right now. So what does the future hold in the

transportation space? In the Trump era? We've seen a division grow between the US and Europe certainly, and between the between the US and China in the level of electric vehicle penetration, and the US is going to continue to lose ground to those two regions on the adoption should Trump be reelected, because none of his policy initiatives are intentionally aimed at promoting that particular sector. We have been expect that China and Europe together are going to account

for a combined of global EV sales. So you can see that the US as a minischool part of the remain Even if the US were to have the majority of the remainder, we still will be talking about a less share. So really this is the current trajectory and likely to stay to stay on pace. So the economics aren't there yet for there to be wide range EV adoption.

How about charging stations? Are those rolling out charging stations as a recipient of policy support have received zero support in the Trump years and Biden would pivot to a great deal support both by leveraging federal R and D but also by leveraging federal procurement of electric vehicles and funding the deployment of charging stations to support them. So there's a pretty clear difference between the two candidates in their view of the e V of the e V

role in the marketplace. The interesting wild card, as I see it, is that US is on the verge of introducing to the market electrically powered light trucks, which that's a big part of our of our fleet vehicle fleet over here in the US, and it remains a very

popular part of the market. So to the extent that the US introduces electrically powered like pick up trucks and SUVs, there does exist an opportunity for the US to do a relatively rapid catch up or at least trying to close the gap between the EV share of the fleets

here and in the rest of the world. If I could add a small note of optimism if I can about US and and evs, which is that you know, we we are home to Tesla obviously UM, and we're home to a number of other startups that are now raising gobs of money to be electric carmakers and and and certainly the Chinese as a staff notes, you know, there's more more evs on the road over there, and

there's more manufacturing what over there. But we we do have the one and only truly global brand for electric vehicles in Tesla, and it is UM and is proving popular really where almost any part of the world where you can get your hands on one. So you know, I do think there's an opportunity for the US to to be a leader on the manufacturing of electric vehicles. It won't be easy by any means, and it would definitely help if would have policies in place that could

make this a reliable demand market here domestically. But I do think there is that that potential opportunity because as you guys both know, you know, buying a car, yes, you do think about whether it's got a good does it make sense economically, but there is a completely non rational part of the sales process as well. They can drive that. You can drive people to want to buy things, um just as they're cool or because they're really fun

to drive. And it remains key in the US in terms of the adoption of evs that fuel economy standards for internal combustion vehicles be strict and to be additive over the course of years, and the Trump administration UM has taken steps to in effect freeze the progress of rising fuel economy standards in the States, and it also has moved to take away the ability of California to

set its own requirements. So regardless of individual sectors of the eating marketplace, what is at present lacking and would continue to be absent in in the event of a Trump reelection. Are fuel economy standards that that push the market, if you will, towards the acceptance of more fuel efficient vehicles and zero emission vehicles such as these. So it seems like there's a pretty stark difference depending upon the outcome of the next election regarding what happens in the

transportation sector. Let's talk about US emissions mix and started part of the power sector actually, which has to do with gas and oil. So oil and gas, what does that look like in the future, because the US has sort of had a I think renaissance was the word that in our discussions of leading up to today, Ethan you were saying regarding natural gas and is now a net exporter? Yeah, I mean so basically, you know, the US had just reached the point where we were effectively

almost a net energy exporter, uh. And we're you know, a net oil exporter. Uh. And we're ramping up gas exports. And then of course a long came this year, which is completely disrupted demand for petroleum products. But it is just kind of amazing the level of the surge that we saw a so called unconventional production of oil and gas. I think there are very big questions obviously about where

we go from here. First, of course, there's the industry itself, which is now suddenly a lot of pain and had been burning through cash, let's be clear, for quite some time, even before COVID nineteen arrived, but now all of a sudden, with a lower oil price environment UM, oil and gas producers are definitely suffering from that. So that's the that's

the backdrop that we have here. The look forward, and the piece that I'm sort of interested to see how it gets resolved is, as Steph mentioned earlier, at least on the power side, Biden is pledging to get us to zero percent CEO two emissions from our power sector by well, you know, if about of our power last year came from gas, that's a lot of gas demand that would in theory disappear. Uh. And then the question is can let gas be used in some other way?

Is there enough of an export market on l n G to make up for that, or there are other segments of the economy UM where gas can be used. And we still we certainly have a number of homes, particularly in New England for instance, that are using oil to heat their homes. Could gas be used there? But practically speaking, if you were to basically evaporate what is something I'm guessing about thirty or forty percent of total

gas demand in the US. By going to zero percent carbon in the power sector, that would have major implications. And so then the question is what is the Biden position on fracking? What is its position on what does the campaign edition on doing fracking on federal lands doing it on private lands? I would say I don't have a complete clarity on that question at the moment. The

campaign has set a couple of different things. The other day, there was an effort when he was in Pittsburgh to make it make a point that that he's not against all fracking. And it's very worth noting that Pennsylvania is a state that has benefited enormously for fracking, specifically for gas. Uh. And so I think the politics on this one are are tricky and uh, you know, I don't think it's it's it's not at least entirely clear to me how we get to zero percent in our power sector without

it affecting the gas sector. And I think there's some open questions very much on that at this point, Yeah, I would add that I think it's Biden has done himself himself no favors with his shifting positions on tracking, and when he first declared his candidacy, he was in favor of a blanket ban on the on the technology, then moved to call for a ban on fracking on

federally least land only. As Ethan said, he recently told the Pennsylvania television interviewer that quote fracking is not going to be on the shopping block to remove support for tracking, which would directly hit the economies of states like Pennsylvania, Ohio, and West Virginia, which may not be important in the overall scheme of things, but do have quite a number of electoral votes among them. And which of those states would be considered swing states at this point, Well, Pennsylvania

is certainly a swing state. West Virginia would not be considered a swing state. Now, how's a strange animal in that Historically speaking, no Republican has ever been elected president in the modern era without carrying Ohio. So what that means from a from a political standpoint is that, assuming history is to repeat itself, as the Trump must win Ohio in order to win the presidency. But it's not necessary for Biden to win Ohio to win the presidency.

So we're thinking ahead to November when the election takes place, in January when there's the inauguration. But how about other significant dates and things that are going to exist beyond that the next president either will inherit or have the

ability to continue and take forward. Well, the answer to your question has to do with this rather distinctive function that the president enjoys in the American system, which is the ability to issue executive orders and to make very important, very broad, very high impact decisions without the consent of Congress.

And as a result of that, we're facing now as a situation in which President Trump, during his term has taken a number of actions that affect the energy economy that have been done with consultation with Congress, and therefore can continue to Can you to live on even should Trump be turned out of office? Let me give you some examples, all done by executive fiat. Trump withdrew the US from the Paris Climate Agreement. He vacated the Obama at Euro Clean Power Plan and replaced it with a

rule that is much more diluted with regard to its requirements. UH. He rapped off offshore oil and gas leasing. He approved some major oil pipeline projects bringing imports from Canada into the US. UH he reversed the requirement that oil and gas companies monitor methane releases from their wells. He imposed tariffs on solar cells and modules and inverters, all of which are essential ingredients to solar project development, and all of which and as a result raised he raised the

price of those projects. All of these things would stay in force should Trump be turned out, but because this is a double edged sword, they could be reversed quite easily should Biden decide to do so. So, really, what we have is a situation here where the election, because of the power of executive orders and because of the differences in policy between these two candidates, really is an important undertaking and commerce is more or less relive two

second tier status. It's like, could just add on to that. I really agree with Steph in the sense that there are and it's a really good question data that there are a lot of initiatives that basically the administration can

pursue unilaterally. I'm literally looking right now at a news story that's just run on the Associated Press of sixty projects that the US Department of Interior has sent the note to the White House about and saying we need to fast track permitting of these, and it includes things like a five thousand well gas field of development in Wyoming, the Jordan Cove Liqui fied natural gas terminal in Oregon, uh,

and a natural gas pipeline that's planned for Virginia. So those are things that the administration can move quickly on. I will know caveat that everything we've just said slightly and saying that, um, there are a lot of teas that need to be crossed and eyes that need to be dotted when you give permission to have a project go forward under what's called the Environmental Protection Act of the United States. And what that means is if you don't do all the right steps, if you if you

cut corners, then you're open to lawsuits. UH. And then a number of cases the Trump administration sort of had their hands slapped by courts and had various initiatives essentially stopped because they did not follow all the rules of procedure. So while you can do a lot to try and move a lot of things quickly, if you move too fast and you don't take the right steps, then ultimately

your decisions may not get implemented. And then, of course, as as Steph does note um, if by wins um you know a number of these things, he can revisit himself unilaterally. Um, though some will be harder to undo than others. To be clear, once you've made a regulatory decision from an agency on something, it becomes that much

harder to pull it back. Well, because in specific reference to the power sector, you know, these are pretty big infrastructure projects and they take wild to get off the ground, and then they're with us for a very long time. And what I'm hearing from you is you know that the there's only so much that someone can do in a four year period because it may all be unwound by the next president, which I think is not all. I guess maybe that's a bit extreme, but things can

be unwound by the next president. Things are done by executive order, which to my understanding is not dissimilar from the transition from Obama to Trump as well, where there were a number of things that were able to be sort of be crossed off and refreshed for a four year period. So My question really is to both of you, regardless of who wins, how dramatic do you think the impact is going to be, given that you're somewhat bound

by a four year period. You're exactly correct that President Obama and his term took a number of executive actions that, of course succeeded his presidency and some of which remain in force. The difference between that transition and the transition that we're going to experience in the US here next year is that the US is now laboring under a budget deficit that has never been higher in peacetime and has not been as high as it is now since

World War Two. And the absence of financial or physical flexibility is a burden that regardless of who is elected, the president is going to have to deal with. The spending ability and the willingness to legislate funding for any number of programs is going to be impinged as a result of the extraordinary spending that the US has had

to undertake as a result of the COVID virus. And I would just agree with Steph and with your question data, which is, you know, four years actually isn't that longer period of time, but eight years kind of is and so you know, on a number of these issues around writing regulations or permitting projects or things like that. Let's suppose, you know, the Trump administration gets it wrong the first time in writing a regulation that is weaker than than

the one the Obama administration wrote. And let's suppose they then the environmental groups taken to court and and essentially pinning their ears back a little bit. And that's happened a number of times. What can then happen is that Trump can their administration can come back and rewrite the regulation again and make it slightly less weak, but have

a pass muster with the courts. So I frankly, I frankly think that the second four years of Trump could be very, very harmful from an environmental perspective, because the one thing that I think those who are worried about the environment could take some stock in in the first four years of the Trump administration was to be really candid, they were pretty bad at doing certain parts of government.

They just to my point earlier about dotting the eyes and crossing the teas, they often just didn't do things the right way in terms of writing the regulations. In a number of cases, they put people in some of these agencies who didn't really know what they were doing, but they're getting smarter. And the guys who had been like number two or three at some of the agencies and were lobbyists and really understand how things work moved up in the world, and they're getting better at writing

regulations that will basically withstand court challenges. Uh. And so I do think that, you know, if you get four more years of Trump, a lot of the things that they've they've sort of have gotten halfway towards putting in place over the last four years, they'll they'll they'll get the rest of the way they are. So there's one thing that we haven't addressed, and I think there's been plenty of buzz over the past year on Capitol Hill

about the Green New Deal. Did Biden's Energy and Climate plan address that or has that been something that he has not made a forward statement about? Biden pointed, Lee did not reference the Green New Deal in his Energy and Climate platform, and to the rest of my knowledge, he is avoided referring to it, and he'st by its formal name in any of his public appearances so far. That's right. I would say he's sort of for lack

of a better term, finessed it. The one thing I would say is that he has certainly, I think, incorporated

some of the ambitious ideas that in the Green New Deal. However, as part of the process of coming up with his current official climate and energy policy, there was a task force that was put together that was basically Biden people and people from the Bernie Sanders campaign, and as part of the Bernie Sanders campaign were some of the biggest champions of the Green New Deal, including Alexandria Occasio Cortez,

the freshman Congress congresswoman from from Queens, New York. And so that process did solicit a lot of their ideas um and I definitely think a bunch of those are in the Biden plan. But but Staff's exactly right, it is not labeled as a Green New Deal, and we

had that. Part of the problem with the Green New Deal, or He's saying its name for Biden is that he has alligned himself so closely with organized labor, and significant share of organized organized labor has concerns about the Green New Deal because of its tremendously disruptive force over existing energy industries and jobs. Some of which are unionized, but many of which are relatively high paying and for some

some long time security. So Biden is is being honest to his constituency in the sense that he is avoiding directly referring to the Green New Deal as a sort of uh negative dog whistle, if you will, to his union supporters that he is aware of their concerns. Well, so, I think I speak for all of us when I say that, I think we're all going to be watching the outcome in November, and it will be very interesting to see what happens across these different sectors January and beyond.

Ethan Stephen, thank you very much for joining us today. Thanks it's fun. Thanks a lot. Today's episode of Switched On was edited by Rex Warner of Great Stolk Media. BLOOMBERGINIAF is a service provided by Bloomberg Finance LP and its affiliates. This recording does not constitute, nor it should it be construed, as investment advice, investment recommendations, or a recommendation as to an investment or other strategy. Bloombergin e F should not be considered as information sufficient on which

to base an investment decision. Neither Bloomberg Finance LP, nor any of its affiliates, makes any representation or warranty as to the accuracy or completeness of the information contained in this recording, and any liability as a result of this recording is expressly disclosed