US President Donald Trump issued a host of executive orders in his very first day in office, a number of which could “significantly reshape” the US energy sector, says BMI, a unit of Fitch Solutions.
On Jan 20, Trump issued the National Energy Emergency executive order, which aims to address what the administration describes as inadequate energy supply and infrastructure, attributed to previous policies.
It directs federal agencies to use emergency authorities to expedite the development, transportation and refining of domestic energy resources, including on federal lands, to ensure a reliable and affordable energy supply.
The orders enable fast-tracking of permits for fossil fuel infrastructure, expanding oil and gas drilling, particularly in Alaska, and lifting restrictions on liquefied natural gas (LNG) exports.
According to BMI, the order emphasises the need for swift action to improve energy infrastructure, particularly in the Northeast and West Coast, and includes provisions for emergency regulations and nationwide permits to facilitate energy projects.
Furthermore, it suspends offshore wind leasing pending environmental and economic review.
Trump also issued an executive order to withdraw the US from international agreements, particularly those related to climate change, to avoid what he calls unfair economic burdens.
It mandates the immediate withdrawal from the Paris Agreement and any related commitments under the United Nations Framework Convention on Climate Change (UNFCCC), ceasing financial contributions associated with these agreements.
In addition, Trump revoked the US International Climate Finance Plan and instructed various departments to report on actions taken to rescind policies tied to this plan.
See also: Trump to order US exit from Paris Accord, hobbling climate fight
According to BMI Trump directs future international energy agreements to focus on economic efficiency, US prosperity and fiscal restraint.
What are the implications?
Trump’s executive orders are poised to have “profound implications” for both the US and global energy landscapes, says BMI, which was acquired in 2014 and integrated into Fitch Solutions in 2018.
“Domestically, the emphasis on increasing fossil fuel production will boost US oil and gas production output, providing immediate economic benefits to the oil and gas sector by reducing regulatory barriers and streamlining permits,” says the London-based research firm in a Jan 21 note.
These orders are expected to increase oil and gas consumption in the US as domestic production becomes more readily available and potentially more cost competitive.
However, the intensified focus on fossil fuels poses a risk to the US's long-term climate objectives, says BMI. “By prioritising fossil fuel infrastructure and rolling back restrictions, the orders may slow down the US's energy transition to renewable energy sources.”
See also: Could the West’s flagging interest help China take the lead in sustainability?
In addition, suspending offshore wind leasing represents a “critical setback” for the US renewable energy sector, says BMI. “Offshore wind projects, which have been gaining momentum as a cornerstone of clean energy strategies, could face significant delays or cancellations. Such interruptions could impede progress towards diversifying the energy mix and meeting emissions targets, affecting both environmental outcomes and the competitiveness of the US renewable energy industry.”
The uncertainty surrounding regulatory support for renewables could also deter investors and developers, leading to delays or cancellations of planned projects. “As a major carbon emitter and influential global player, the US's stance may discourage other markets from pursuing or enhancing their climate goals,” says BMI. “This could stall international climate negotiations and collaboration, undermining collective efforts to curb global warming and meet the United Nations’ climate targets.”
Overall, an increase in US fossil fuel exports, facilitated by expanded production capacity, could reduce fuel costs, shifting the global energy mix towards higher emissions. This could counteract the progress made by other nations in reducing their carbon footprints and transitioning to cleaner energy sources.
The outlook is grim. The US’s dominant position in global energy markets, driven by increased exports, may influence energy prices and supply dynamics, increasing the availability of cheap fossil fuels, thereby increasing the attractiveness and consumption of oil and gas.
This would lock in fossil fuels for many years and slow the transition to cleaner alternatives. Furthermore, the US's withdrawal from the Paris Agreement weakens international cooperation on climate action and also weakens climate investments through slower US climate funding.
Can the executive orders be stopped?
The impact of the executive orders will largely depend on their implementation and potential legal challenges, says BMI.
The orders could face legal challenges, particularly if they are perceived to exceed the President’s authority or conflict with existing environmental laws and regulations.
“Despite this, we do not expect that these orders will be overturned by the US courts, as such we expect increased oil and gas consumption and emissions in the US over the near term,” says BMI.
The research firm expects a slowdown in wind power growth in the US as the order will lead to delays and cancellations of planned projects.
BMI has already amended its forecasts. “A future administration could overturn these orders through new executive actions. For now, the orders signal a shift in US energy policy towards fossil fuels, with implications for both domestic energy markets and international climate commitments.”
