By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends much of her time in Asia and is currently researching a book about textile artisans. She also writes regularly about legal, political economy, and regulatory topics for various consulting clients and publications, as well as scribbles occasional travel pieces for The National.
It will surprise virtually no one who’s been paying attention to hear that the Trump administration is ground zero for a certain brand of climate denialism and is especially close to the fossil fuels industry. Trump selected then-Exxon CEO Rex Tillerson to serve as Secretary of State and chose Scott Pruitt– who in his former role as attorney general for the state of Oklahoma, filed several lawsuits to block federal climate change initiatives– as administrator of the Environmental Protection Agency (EPA). The headline of a Saturday New York Times article minces no words on cui bono from Pruitt assuming that role: How Rollbacks at Scott Pruitt’s E.P.A. Are a Boon to Oil and Gas.
Right out of the box, the administration and its congressional allies have worked to roll back existing initiatives to constrain the fossil fuel industry. As just one minor, but fully-completed example, let’s look at measures the Securities and Exchange Commission had adopted that would have forced extractive industries to report their payments made to governments for the commercial development of oil, natural gas or minerals, and were due to come into effect in 2018. As I wrote in a January post, Republicans to Use CRA to Roll Back ‘Midnight’ Rules and Benefit Oil Companies:
The rules — mandated by the 2010 Dodd-Frank legislation– are just one policy intended to address the resource curse that blights countries with ample natural resources (the US position requiring disclosure on this issue was lauded in a Wall Street Journal op-ed by then-UK Prime Minister David Cameron, who called on Europe to do the same). Government officials and the wealthy siphon off and mineral wealth in these countries, at the expense of the majority of a country’s citizens; in general, countries well-endowed with natural resources boast lower rates of economic growth compared to those that lack such advantages. The rationale behind these rules is that by requiring issuers to disclose the payments– i.e., bribes– they’ve had to pay to develop national resources, internal and external campaigners will have necessary information to pressure governments to cease their corrupt practices.
These disclosure rules have long been a bugbear of energy companies– which earlier sued successfully to overturn a 2012 predecessor version overturned, resulting in a 2013 federal district court decision sending the rules back to the SEC to start again.
As I wrote at that time, Republicans pledged to use the Congressional Review Act (CRA), to invalidate those rules, and indeed did follow through on this promise. I refer interested readers to these two posts for further details, Republicans Deploy CRA Authority to Roll Back Regulations and Trump and Congress Use Congressional Review Act to Roll Back 14 ‘Midnight’ Rules; More to Follow?
So, that should leave extractive industries, such as oil and gas companies, sitting pretty and no longer obliged to observe extractive industry disclosure rules, right?
Well, not so fast. As the FCPA.com blog reports today, These 77 countries have extractive industries disclosure rules. On the consumption side, that includes France, Germany, Italy, Spain, and the UK. Fifty-one of these are members of the Extractive Industries Transparency Initiative and are subject to its requirements.
The bottom line here is that scuppering the new SEC extractive industries disclosure rule has no impact on the extensive framework that other countries are separately building to confront this problem. And I should further note, although the US has rejected the new rule, the existing Foreign Corrupt Practices Act imposes its own anti-bribery restrictions, which I discuss at further length on this post, The Obamamometer’s Toxic Legacy: The Rule of Lawlessness, and to which extractive industries are subject– as indeed are all other US public companies.
Climate Change Campaign Promise: Scuppering US Support for the Paris Climate Accord
Trump has clearly committed to pulling out of the Paris accord. Of course, his track record has been shall we say, somewhat erratic on following through on his numerous– admittedly contradictory– campaign pledges. Yet so far, Trump has not abandoned commitments concerning fossil fuels and climate change, as I report in this post, Trump Approves Keystone XL Pipeline, Making Good on Campaign Promise. So the wise betting line is that sometime soon, Trump will pull out of the Paris agreement. That course of action seems best to accord both with Trump’s personnel decisions, and the actions he– and they– have taken so far.
Yet in an article published today, US warned on dangers of abandoning Paris climate accord, the Financial Times reports on a recent interview it conducted with the CEO of Royal Dutch Shell, Ben van Beurden, an avowed supporter of the Paris climate deal, warning that Trump “will put American companies at a disadvantage and weaken the US’s global standing if he pulls out of the Paris climate deal.” The FT account notes further that Shell’s seeks to increase its investment in green technology, “as the world reduces its dependence on fossil fuels, the company’s longtime lifeblood.”
Significantly, according to the FT account:
Mr van Beurden broke ranks with chief executives who have been reluctant to challenge the US president publicly by declaring that Mr Trump’s pledge to abandon the Paris accord would be self-defeating.
“It would be unhelpful on a number of fronts,” ….
“With the US being the largest investment destination for a company like Shell, yes, I think I would regret having a lot of business here that potentially could be at a disadvantage because of [the] implications of that decision to pull out of Paris.”
I found van Beurden’s action to be interesting– so much so, that I want to note it in a post, even though I think it’s most likely that Trump will persevere and ultimately seek to withdraw the US from its Paris commitments. Yet I concur that any US climbdown on its support for renewable energy as expressed in the Paris accord would have consequences for US manufacturers of products such as solar panels, wind turbines, and other power equipment. Demand for these is increasing as the appetite for renewable power grows, according to the FT:
“The US has a major crop of companies that deliver technologies that are going to be relevant in the energy transition,” said Mr van Beurden, “and one way or another they will also find themselves probably more disadvantaged than advantaged by the US pulling out [of Paris]. So I cannot see where the upside is.”
What Happens Next?
So, does a possible future US withdrawal from Paris commitments spell the death knell of efforts to arrest or at minimum, slow climate change? Again, not so fast. Let me discuss just one area of seeming progress. I draw the attention of readers to a further editorial, in today’s New York Times, entitled China and India Make Big Strides on Climate Change. Permit me to quote from this at length:
Until recently, China and India have been cast as obstacles, at the very least reluctant conscripts, in the battle against climate change. That reputation looks very much out-of-date now that both countries have greatly accelerated their investments in cost-effective renewable energy sources — and reduced their reliance on fossil fuels. It’s America — Donald Trump’s America — that now looks like the laggard.
According to research released last week at a United Nations climate meeting in Germany, China and India should easily exceed the targets they set for themselves in the 2015 Paris Agreement signed by more than 190 countries. China’s emissions of carbon dioxide appear to have peaked more than 10 years sooner than its government had said they would. And India is now expected to obtain 40 percent of its electricity from non-fossil fuel sources by 2022, eight years ahead of schedule.
Every one of the Paris signatories will have to reduce emissions to ward off the worst consequences of global warming — devastating droughts, melting glaciers and unstoppable sea level rise. But the tangible progress by the world’s number one producer of greenhouse gases (China) and its number three (India) are astonishing nonetheless, and worth celebrating.
The editorial here takes a swipe at the Trump administration’s claims (which echo those of Dick Cheney and George W. Bush) that measures to combat global warming would impose unacceptable economic costs and cost jobs. Instead, according to the NYT:
China and India are finding that doing right by the planet need not carry a big economic cost and can actually be beneficial. By investing heavily in solar and wind, they and others like Germany have helped drive down the cost of those technologies to a point where, in many places, renewable sources can generate electricity more cheaply than dirtier sources of energy like coal. In a recent auction in India, developers of solar farms offered to sell electricity to the grid for 2.44 rupees per kilowatt-hour…. That is about 50 percent less than what solar farms bid a year earlier and about 24 percent less than the average price for energy generated by coal-fired power plants.
I should point out that although this may all be news to the NYT editorial board, these issues are kicked around in the robust and lively Indian (English-language) press (and the general scope of the story began to become apparent, in the last half dozen years or so, in specialty energy publications and elsewhere). Just yesterday, for example, The Times of India’s Swaminathan S. Anklesaria Aiyar, who writes the Swaminomics column, advocated g taking advantage of record low solar power tariffs — set at 2.44 INR per kilowatt hour (3.78 US cents– at an auction earlier this month– which are expected to continue to decline further, by as much as one-half– instead of expanding nuclear capacity, in this piece, Don’t go for pricey foreign N-power plants when solar’s going dirt-cheap. (I should note that this piece concedes “This price cloaks implicit subsidies like cheap land, accelerated depreciation, and hidden costs for transmission and the backing down of thermal plants. But nuclear power also gets cheap land, cheap insurance (a huge subsidy) and guaranteed offtake.”)
The point of this post is not to discuss in detail the economics of Chinese or Indian power generation (and the various hidden and explicit subsidies that make it difficult to assess the costs of various types of energy production). Nor do I wish to dwell on any scientific discussion of whether these non-US actions are all occurring too little, too late. Instead, I want to make readers aware that while Trump has apparently doubled down on a pro-fossil fuels policy and is likely to stay that course, there’s been a huge shift by the world’s two most populous countries away from fossil fuels. This can only promise at least some benefit for the future– although as many members of the commentariat will no doubt emphasize and with which I agree, much more needs to be done, and soon.