In late August, we wrote that while the result of the Presidential election will have a significant impact on Federal energy policy, it will not materially affect energy prices. We now have a somewhat clearer understanding of Vice President Harris’ energy policy, and we continue to maintain that while several Biden climate initiatives are at risk, the election will not significantly impact near-term energy prices. In fact, as recently noted by The Economist, “Green subsidies will probably survive Mr. Trump’s re-election, and Big Oil will probably do just fine under Ms. Harris.”[1]
Below, we break down a few of these key energy policies and explain why most are not actually in play.
- Inflation Reduction Act (IRA): The IRA is the signature legislation of President Biden’s Green New Deal. Former President Trump has campaigned against the IRA, calling Biden’s Green New Deal a “Green New Scam”. Yet even if Trump is elected, we expect most of the IRA will survive:
- Trump would like to roll back tax credits provided to renewable energy. This will require congressional action. Even if the Republicans control Congress, many of the credits have been used to support projects in red states. At the same time, the Biden administration is working hard to commit all available IRA funds prior to the end of 2024, and once committed, it will be very difficult to reverse course.
- The Treasury Department is responsible for establishing the rules used to determine which projects qualify for IRA tax credits. Trump is likely to tighten the Treasury Department's rules. However, it will take 18 months or more to change these rules, delaying any impact.
- Environmental Protection Agency (EPA): Biden’s EPA set various new rules that limit methane emissions and impose stringent limits on fossil fuel emissions from power plants. These rules will be reversed by President Trump. However, even if Harris is elected, implementation of these rules will be held up for years by legal challenges.
- EV Incentives: If Trump is elected, the Federal government will end various subsidies for EV cars. Harris will keep these incentives in place. While these incentives will affect the pace of EV adoption, the change will not be significant enough to impact near-term electricity demand.
- Offshore Wind: Former President Trump is hostile to offshore wind, and a second Trump Administration will likely put a hold on all new offshore wind development – especially those projects that have not obtained Federal approvals. While offshore wind is clearly at risk if Trump wins the election, almost all projects already face challenges that push the start date of these projects well into the future.
- Liquefied Natural Gas (LNG) Permits: In January, the Biden Administration put a halt to new LNG export permits. Both Harris and Trump are likely to end the pause, although we expect President Trump will move more quickly – promising to approve LNG projects on his first day in office. Even if Trump accelerates LNG approvals, any newly permitted projects will not be built in time to affect near-term energy prices.
While presidential politics may not impact the energy market in the near-term, you can still count on material changes in the energy market in 2025. A great example of this is the sudden resurgence of nuclear power, driven by some of the nation’s largest companies, Amazon, Microsoft and Google. Just this month, Google announced plans to purchase the output from seven small nuclear reactors which are to provide base load power to its data centers. Factors such as the growth of AI demand, near shoring, political risk, electrification, changes in financial markets and interest rates, and a wide variety of other issues will have a more substantial impact on energy markets and prices than any policy changes introduced by President Trump or President Harris.
[1] “On energy and climate, Trump and Harris are different by degrees”, October 12, 2024, The Economist.