Trump Delays Decision on Climate Change
Trump advisors postponed a meeting to discuss whether or not the United States should continue participation in the Paris Climate agreement due to a schedule conflict. The delay comes after members of both the administration and the oil industry have spoken out in favor of keeping the status quo. As alliances shift within the White House, climate change activists are watching to see if Steve Bannon still has the President’s ear on sensitive topics such as carbon emissions, or if the internal friction between the alt-right figurehead and the President’s more moderate son-in-law Jared Kushner will carry over into public policy.
Energy Industry Switches from Oil to Natural Gas
It what may seem at first to be a self-defeating stance, several oil companies have addressed the White House expressing support for the voluntary Paris agreement which called for the United States to reduce emissions by approximately 27 percent within 10 years. However, the oil industry and its representatives are the most qualified to know how close the world is to exhausting global oil supplies. This includes Secretary of State Rex Tillerson, who until assuming his Cabinet position was the CEO of Exxon Mobil.
In preparation for this period, the oil companies have been switching to natural gas, which offers a lower carbon emissions profile, and for which the U.S. has a more competitive production model. Exxon, BP, and Shell all rely on natural gas to make up as much as 42 percent of their annual production goals. The Paris agreement also encourages competitors in other countries to play according to the same rules, which eventually will lead to higher costs to recover barrels of oil, again shifting usage to natural gas.
Corporate America Hopes Trump Stays the Course on Climate Change
Outside of the energy sector, corporate support for the Paris treaty is even stronger, with several major businesses having signed on to a letter asking that Trump step away from his campaign promise to back out of the agreement. The cancelled meeting was expected to signal Trump’s strategy prior to his first G7 meeting which is set to take place in May. This agreement is just one of the topics that will affect the complicated trade talks expected in the aftermath of the newly approved Brexit process, and elections in France which will take place just a couple of weeks before the summit.
Trump Remains Skeptical of Climate Change Science
Prior to his election, President Trump was critical of climate change science. In September 2016, his campaign manager Kellyanne Conway confirmed that Trump considered the current warming of the planet to be emblematic of natural cycles, as opposed to being the result of human actions. Additionally, Trump was quoted on several occasions as saying that climate change was a hoax, specifically blaming the Chinese for attempting to limit U.S. manufacturing capacity. At the end of March, Trump shifted away from America’s established environmental policy and signed an Executive Order directing the Environmental Protection Agency (EPA) to focus on protecting the quality of the country’s air and water supply.
Can the Pro-Paris Energy Sector Convince Trump?
However, the new guidelines have an economic foundation. Trump said that the changes were a first step towards protecting the country’s coal industry. Therefore, it stands to reason that if the energy sector can show a clear financial benefit in cooperating with the Paris accord, then Trump may reverse his campaign promises. He has already done this recently with his stand on China being a currency manipulator. In fact, the new détente between Trump and Chinese President Xi Jinping could lead to a less competitive method of reducing carbon emissions in both the U.S. and China through shared technology.
How Will Trump’s Decision on the Paris Treaty Affect Trading?
If President Trump continues along his path to cancel the U.S. participation in the Paris treaty, oil production in the U.S. should increase. This will lead to lower prices per barrel. This would actually hurt oil company shares in the long run, so look for lower stock prices, which would also drag down the DOW and the S & P 500. However consumer prices should go down, as transportation costs and manufacturing costs drop, leading to a stronger dollar.