Early Impacts of Trump 2.0 on Domestic Climate Policy

In my podcast series, “Environmental Insights: Conversations on Policy and Practice from the Harvard Environmental Economics Program,” I’ve had the pleasure of engaging in conversations with environmental economics scholars who have also had significant experience in the policy world.  My guest in the most recent episode is a great example of this, because I was joined by Joseph Aldy, my colleague at the Harvard Kennedy School, where he is the Teresa and John Heinz Professor of the Practice of Environmental Policy.  Joe’s research focuses on climate change policy, energy policy, and regulatory policy, and, importantly, from 2009 to 2010, Joe served as Special Assistant to President Barack Obama for Energy and Environment, which game him significant experience both in the economics and the politics of climate change policy.  You can listen to our complete conversation here.

This was Joe’s second visit to the podcast, the first having been in November of 2019, in what was the 7^th of 66 episodes we’ve now produced.  I believe he was the first guest to come back for a return visit, and the reason why I double-dipped was that when I decided to ask someone to assess what has happened and will happen in the second Trump administration’s first 100 days, particularly in regard to domestic environmental, energy, and climate policy, Joe Aldy was my first choice.  (I emphasize domestic policy, because I’ve already written in two recent blog essays about what to expect in the international domain, but not in the domestic domain:  The Evolving China-USA Climate Policy Relationship; and What Trump’s Exit from the Paris Agreement Will Really Mean.)

We’re about half-way through the first 100 days of this new administration (although it feels like it’s already been several years).  So, before we discussed Joe Aldy’s expectations for the next two to four years, we focused on what has already happened. 

Aldy begins by describing how the Trump administration has moved quickly on many fronts using numerous executive orders, rolling back regulatory policies, and creating a National Energy Dominance Council to confront what it has termed a “national energy emergency.” 

“It’s a little bit of a challenge to say we’re actually dealing with a kind of energy emergency that was described by the President because we’re producing more energy now than we ever have.  When we look at the fact that we’re at record highs in oil production, gas production, and renewable power production on the supply side, we’re not necessarily facing what one might think of as an emergency when it comes to energy.”

Aldy goes on to note that he is alarmed, however, by some of the brazen early moves the administration is making in the energy and climate space.

“We see efforts going on now that I think are potentially more fundamental in undermining the ability of the federal government to regulate greenhouse gas emissions. Tasked on day one to EPA was to assess the prospect of undoing the Endangerment Finding under the Clean Air Act. That’s the necessary foundation [for] the EPA [to exercise its] authority to regulate greenhouse gas emissions,” he says. “They’re moving in that direction, and a lot of this is going to end up in the courts.”

But Joe contends that the courts may not be so sympathetic toward the administration. 

“Part of the response from those who want to slow this kind of retrenchment when it comes to clean energy and climate policy is to litigate, and some of what is happening is happening so fast. I mean, we saw this in Trump 1.0 where some things they try to do very quickly. What they did was not consistent with the process that is established under law that you’re supposed to follow, or you will be found to have been in the language of the Administrative Procedure Act that governs how we implement the administrative state, ‘arbitrary and capricious.’ You lose in the courts on process grounds, not even on the merits.”

Aldy also argues that the administration seems to be pursuing a number of countervailing objectives using a variety of tools that will cause unintended consequences.

“The prospect of tariffs generally really interact with an agenda focused on trying to advance oil and gas development in the United States. If we are going to put tariffs on imported steel [the price of oil extraction will go up],” he remarks. “So, [when] importing crude oil, natural gas, or electricity from Canada… with tariffs, [it will] make [those] more expensive domestically and affect… both the business case for using energy as well as the domestic politics about energy.”

The clean energy tax credits contained in the Inflation Reduction Act may also be in jeopardy, Aldy observes, although he admits there may be pushback from some Republicans representing areas where the tax credits have positive economic impact. And those may be key votes, Aldy says, when the president’s proposed tax cuts come before Congress.

“I think there were more than a dozen Republicans who voted against the tax bill, the Trump tax cuts of 2017, in the House of Representatives. They can’t lose a dozen votes this time. It’s a much tighter margin. And so, there’s a question about, is there sufficient support for sustaining at least some clean energy tax credits going forward?”

Importantly, Joe notes that even if the administration is successful in efforts to slow down the clean energy transition, it won’t be able to stop it altogether.

“The clean energy economy in the U.S. is so much more advanced now that signing executive orders doesn’t affect the 30-plus gigawatts of solar that was installed last year. It doesn’t affect the fact that we have been installing more wind power every year for the past decade than we have natural gas in terms of incremental capacity investment. All… the people who recently bought EVs, they’re still going to drive their EVs. We’re still going to produce power from these renewable power facilities,” he argues.

“I think that we’re going to see more and more business investment, because the business case for clean energy is getting better and better, even if the policy environment is getting more uncertain,” he says. “It means that the worst-case scenario, at least in terms of what happens to our emissions and our energy economy, is basically like stasis. We need to accelerate if we’re going to be up to the challenge of the problem, but I think we will just find ourselves treading water for a while. The challenge is whether or not there’s really bad spillovers to other countries.”

For this and much more, please listen to my complete podcast conversation with Joe Aldy, the 66th episode over the past five years of the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

• Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency
• Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change
• Andrei Marcu, founder and executive director of the European Roundtable on Climate Change and Sustainable Transition
• Paul Watkinson, Chair of the Subsidiary Body for Scientific and Technological Advice (SBSTA) within the United Nations Framework Convention on Climate Change
• Jos Delbeke, professor at the European University Institute in Florence and at the KU Leuven in Belgium, and formerly Director-General of the European Commission’s DG Climate Action
• David Keith, professor at Harvard and a leading authority on geoengineering
• Joe Aldy, professor of the practice of public policy at Harvard Kennedy School, with considerable experience working on climate change policy issues in the U.S. government
• Scott Barrett,  professor of natural resource economics at Columbia University, and an authority on infectious disease policy
• Rebecca Henderson, John and Natty McArthur University Professor at Harvard University, and founding co-director of the Business and Environment Initiative at Harvard Business School.
• Sue Biniaz, who was the lead climate lawyer and a lead climate negotiator for the United States from 1989 until early 2017.
• Richard Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology.
• Kelley Kizier, Associate Vice President for International Climate at the Environmental Defense Fund.
• David Hone, Chief Climate Change Adviser, Shell International.
• Vicky Bailey, 30 years of experience in corporate and government positions in the energy sector. 
• David Victor, professor of international relations at the University of California, San Diego.
• Lisa Friedman, reporter on the climate desk at the The New York Times.
• Coral Davenport, who covers energy and environmental policy for The New York Times from Washington.
• Spencer Dale, BP Group Chief Economist.
• Richard Revesz, professor at the NYU School of Law.
• Daniel Esty, Hillhouse Professor of Environment and Law at Yale University. 
• William Hogan, Raymond Plank Research Professor of Global Energy Policy at Harvard.
• Jody Freeman, Archibald Cox Professor of Law at Harvard Law School.
• John Graham, Dean Emeritus, Paul O’Neill School of Public and Environmental Affairs, Indiana University.
• Gernot Wagner, Clinical Associate Professor at New York University.
• John Holdren, Research Professor, Harvard Kennedy School.
• Larry Goulder, Shuzo Nishihara Professor of Environmental and Resource Economics, Stanford University.
• Suzi Kerr, Chief Economist, Environmental Defense Fund.
• Sheila Olmstead, Professor of Public Affairs, LBJ School of Public Affairs, University of Texas, Austin.
• Robert Pindyck, Bank of Tokyo-Mitsubishi Professor of Economics and Finance, MIT Sloan School of Management.
• Gilbert Metcalf, Professor of Economics, Tufts University.
• Navroz Dubash, Professor, Centre for Policy Research, New Delhi.
• Paul Joskow, Elizabeth and James Killian Professor of Economics emeritus, MIT.
• Maureen Cropper, Distinguished University Professor, University of Maryland.
• Orley Ashenfelter, the Joseph Douglas Green 1895 Professor of Economics, Princeton University.
• Jonathan Wiener, the William and Thomas Perkins Professor of Law, Duke Law School.
• Lori Bennear, the Juli Plant Grainger Associate Professor of Energy Economics and Policy, Nicholas School of the Environment, Duke University.
• Daniel Yergin, founder of Cambridge Energy Research Associates, and now Vice Chair of S&P Global.
• Jeffrey Holmstead, who leads the Environmental Strategies Group at Bracewell in Washington, DC.
• Daniel Jacob, Vasco McCoy Family Professor of Atmospheric Chemistry & Environmental Engineering at Harvard.
• Michael Greenstone, Milton Friedman Distinguished Service Professor of Economics, University of Chicago.
• Billy Pizer, Vice President for Research & Policy Engagement, Resources for the Future. 
• Daniel Bodansky, Regents’ Professor, Sandra Day O’Connor College of Law, Arizona State University.
• Catherine Wolfram, Cora Jane Flood Professor of Business Administration, Haas School of Business, University of California, Berkeley, currently on leave at the Harvard Kennedy School.
• James Stock, Harold Hitchings Burbank Professor of Political Economy, Harvard University.
• Mary Nichols, long-time leader in California, U.S., and international climate change policy.
• Geoffrey Heal, Donald Waite III Professor of Social Enterprise, Columbia Business School.
• Kathleen Segerson, Board of Trustees Distinguished Professor of Economics, University of Connecticut.
• Meredith Fowlie, Professor of Agricultural and Resource Economics, U.C. Berkeley. 
• Karen Palmer, Senior Fellow, Resources for the Future.
• Severin Borenstein, Professor of the Graduate School, Haas School of Business, University of California, Berkeley.
• Michael Toffel, Senator John Heinz Professor of Environmental Management and Professor of Business Administration, Harvard Business School.
• Emma Rothschild, Jeremy and Jane Knowles Professor of History, Harvard University.
• Nathaniel Keohane, President, C2ES.
• Amy Harder, Executive Editor, Cypher News.
• Richard Zeckhauser, Frank Ramsey Professor of Political Economy, Harvard Kennedy School.
• Kimberly (Kim) Clausing, School of Law, University of California at Los Angeles
• Hunt Allcott, Professor of Global Environmental Policy, Stanford Doerr School of Sustainability.
• Meghan O’Sullivan, Jeane Kirkpatrick Professor of the Practice of International Affairs at Harvard Kennedy School.
• Robert Lawrence, Albert Williams Professor of International Trade and Investment, Harvard Kennedy School.
• Charles Taylor, Assistant Professor of Public Policy, Harvard Kennedy School.
• Wolfram Schlenker, Ray Goldberg Professor of the Global Food System, Harvard Kennedy School.
• Karen Fisher-Vanden, Professor of Environmental & Resource Economics, Pennsylvania State University
• Max Bearak, climate and energy reporter, New York Times
• Vijay Vaitheeswaran, global energy and climate innovation editor, The Economist

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.