The outlook for the green transition remains bright, with or without the US's participation under the Trump administration, says DBS Bank.
Under US President Donald Trump, the US will push for a surge in energy production, particularly oil and gas, while neglecting renewables. But this does not mark a major setback for the green transition, because the US is not the key player in renewables; that role is taken up by China and Europe, write chief economist Taimur Baig and senior economist Ma Tieying in a May 5 note.
Indeed, the world's move toward the green transition is "not US-centric at all", add Baig and Ma. "Lack of US leadership during Trump 1.0, followed by renewed vigour toward [the] green transition under Biden, and now reverting to even greater pushback under Trump 2.0, have left the US as a non-reliable partner in [the] green transition. The developments in China and the European Union (EU) are far more consequential in this context."
Today, the renewable sector in China and Europe combines for more than 15% of global electricity generation, with the share projected to rise to 27% by the end of this decade, according to the International Energy Agency. The US share is less than 5% and is not expected to rise materially, say Baig and Ma.
Instead, China is the global leader in renewable electricity capacity addition, with over 700 gigawatts (GW) added in 2023-2024, or two-thirds of all global deployment.
China's 14th Five-Year Plan for Renewable Energy, released in 2022, provides ambitious targets for renewable energy use, with more than US$80 billion in annual investments, note the economists.
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Meanwhile, the EU is accelerating solar and wind deployment, with almost 150GW added during 2023 and 2024.
"This reflects a doubling of pace since the Russian invasion of Ukraine, which underscored Europe's over-reliance on imported fossil fuels," they add. "Policies and targets proposed in the REPowerEU Plan and The Green Deal Industrial Plan are expected to be important drivers of renewable energy investments in the coming years."
Launched in May 2022, the REPowerEU plan is the European Commission's initiative to reduce the bloc's reliance on Russian fossil fuels and accelerate the transition to a clean energy economy.
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Meanwhile, the Green Deal Industrial Plan, launched in March 2023, aims to ensure that EU manufacturing capacity is sufficient to meet 40% of its needs for clean technologies, such as batteries and solar and wind power, by 2030.
The DBS economists say they are "sure" that there will be "no change in China and the EU's strategy toward [the] green transition". "These two large economic powerhouses will provide ample leadership to the global community, helping with setting rules and standards, financing and technological innovation."
The world has made good progress toward decarbonisation in the past decade, say Baig and Ma. "Already, about 30% of global electricity generation is by renewable energy technology. According to [the] IEA, this share will be heading toward 50% by the end of this decade."
The components of renewables that are contributing to this development are solar and wind. Just a decade ago, they did not add up to even half of global hydroelectricity production. Today, they add up to more than hydro power, and by the end of 2030, each is on track to generate more electricity than hydro power, add the DBS economists.
"If these trends were largely underwritten by the US, we would worry about the path ahead," they write.
Instead, the US has made a decisive shift toward expanding drilling, mining and logging. Substantial pushback is underway against nationwide clean energy mandates and pollution standards, while a wide range of green finance initiatives, especially those put in place under Biden's Inflation Reduction Act, has been cancelled.
As soon as Trump 2.0 began, the US once again moved for the withdrawal process from Paris Climate Agreement, along with suspending contribution to numerous climate initiatives.
"[The] green transition's outlook remains bright, with or without the US," say Baig and Ma.
