A potential victory for former President Donald Trump in the November 2024 election, coupled with ongoing tensions with China and mounting US government deficits, could significantly slow the pace of the country’s energy transition, according to a new report from Wood Mackenzie.
The Hitting the brakes: how the energy transition could decelerate in the US report suggests that investments in low-carbon technologies and infrastructure could decelerate under a second Trump presidency, while fossil fuel investments might see a resurgence, pushing out peak fossil fuel demand.
“This election cycle will really influence the pace of energy investment, both in the next five years and through 2050.
“US carbon emissions could grow, putting net zero out of reach in our delayed transition scenario,” said David Brown, director of Wood Mackenzie’s Energy Transition Research.
According to the report, a delayed transition scenario could result in $1 trillion less investment in the US energy sector from 2023 to 2050 compared to Wood Mackenzie’s base case.
This could lead to a slower adoption of technologies like carbon capture, utilisation, and storage (CCUS) and low-carbon hydrogen.
While a full repeal of the Inflation Reduction Act (IRA) is unlikely, Brown suggests that a second Trump presidency could issue executive orders abandoning the 2035 net zero target for the power sector, establishing softer emissions goals from the Environmental Protection Agency (EPA), and issuing tax credit regulations favouring blue hydrogen.
Additionally, the report notes that the fiscal environment may prove challenging, as US government spending could be limited to address the country’s debt burden, which the Congressional Budget Office expects to reach 109 per cent of GDP by 2030 and 155 per cent by 2050.
Sector Impacts
The report outlines potential impacts across various sectors:
- Electric Vehicles (EVs): EV sales could stumble, with the total stock of EVs by 2050 being 50 per cent lower than in the base case scenario.
- Zero-Carbon Power Supply: With less financial support and continued trade tensions with China, wind, solar, and energy storage capacity could be 25 per cent lower than the base case by 2050.
- Coal: Coal generation capacity could be four times higher than the base case by 2040, as the pace of electrification eases and policy support for renewables wanes.
- Low-Carbon Hydrogen: Lack of federal demand-side targets and reduced funding could challenge the investment case for low-carbon hydrogen, potentially shifting near-term growth to export markets.
Despite potential federal policy changes, the report notes that state-level policies could continue to drive momentum for low-carbon investment.
States like California have expanded utility-scale battery capacity and implemented renewable portfolio standards and low-carbon fuel standards, supporting investments in emerging technologies.
“A slower transition scenario for emerging technologies does not mean the story is over.
“The US has a track record of innovation – the US went from a net LNG importer to the world’s largest LNG exporter over the last decade,” said Brown.
As the 2024 election approaches, the future of the US energy transition hangs in the balance, with potential policy shifts and investment implications that could reverberate across the energy sector and the country’s efforts to combat climate change.
