Pulitzer-Prize winning author, Steve Coll is the keynote speaker at this year’s Global Investment Conference at the Banff Springs Hotel in Banff, Alberta, (March 29 to 31). Coll, who has written books on both the CIA and ExxonMobil, is also a staff writer at The New Yorker and during his talk, he’ll address the outlook for climate policy under the Trump administration.
In advance of the conference, we asked him a few questions about the economics of energy, the role of regulation and worldview of the new Secretary of State, Rex Tillerson, formerly CEO of ExxonMobil.
How much can the Trump administration affect the balance of energy sources?
I think the Trump administration will make a vigorous effort to revise executive policy. The Obama administration put through a number of regulations that can’t be undone overnight and then there’s the larger point: there are many more factors to energy investment than just the federal government.
The two most important factors that are beyond the Trump administration’s ability to control are the policies of states, especially large Western states that have made strong and politically durable commitments to renewables. Not all of these are what we call blue states – there’s a big wind industry building up in Texas, for example.
Then there’s economics. In the U.S., probably the biggest areas where economics is going to play a role are in transportation and power generation. The fuel economy standards that the Obama administration laid out are certainly going to come under scrutiny but automobile manufacturers have their own questions to answer. Driverless vehicles are coming into being as battery technology continues to improve. If you’re a car manufacturer with a heavy capital investment in manufacturing, you have to look out over the horizon at more than just what government requires.
The same thing is true in power generation and here the question is how much capital is going to chase coal power plant construction given that the regulatory environment is likely to be unstable. The Trump administration might be followed by an administration with a very different set of goals, so if you’re making a 20- or 30-year investment based on the attitudes of the Trump cabinet toward coal, I think you’re taking on a lot of risk.
Coal has suffered in recent years because of its relative cost. How likely is that to turn around?
I think that some of the expense of coal power generation is a function of regulatory requirements and the quixotic search for clean coal technologies. The Obama administration’s clean power plan, which is a complex plan that creates incentives and costs meant to force coal into clean coal investment frameworks, was already certain to be caught up in litigation. Now if the Trump administration pulls back from their standards and rewrites them that will take time — and as soon as they rewrite them they’re going to be sued again. So it goes to this larger point that it’s the uncertainty of the investment environment for coal that really imposes the greatest cost.
In Canada, it’s the economics that recently stalled oil sands development. How sensitive is climate policy to price?
There’s not much that the federal government can do about global oil prices. They will be tempted by tax incentives and other kinds of corporate tax reform designed to favour energy production corporations – that’s clear. Whether those tax incentives are really going to lower the price per barrel threshold for production in oil sands or other kinds of unconventional oil, I’m doubtful.
The history of commodity prices is cyclical and it’s cyclical because the effect of making certain kinds of production uneconomical when the price falls reduces supply — and when demand comes back the price goes up. So the previously uneconomical production comes back on line — absent regulation, absent a cost associated with carbon taxes.
Some senior Republicans have recently come out for a carbon tax. How likely is a carbon tax to be on the agenda?
I don’t think this Congress is likely to move a carbon tax and I don’t expect the Trump administration to adopt this suggestion by Republican luminaries as administration policy. I think the suggestion has the advantage of giving some political cover to the administration around climate policy internationally. I think the administration probably will want to stay engaged with the Paris process. Even if talking about carbon taxation is just a way to stay at the table, from a climate policy perspective it’s certainly better if the Trump administration stays engaged than if it just tries to blow Paris up.
In Rex Tillerson, as Secretary of State, you’ve got a man who is used to running what you’ve characterized as a private empire. What role will he play in climate discussions?
ExxonMobil’s history in this area is a little bit complicated. If you go way back to the 1980s, ExxonMobil was run more as a conglomerate energy company; it even had a solar power division and it had a nuclear division. In the 1990s, it shed all of these businesses and doubled down on oil and gas under Tillerson’s predecessor, Lee Raymond. Raymond was the chief executive who really led Exxon into a public position of heavy skepticism about climate science and, indeed, under his leadership the company funded communications campaigns led by non-scientists to cast doubt on the reliability of climate science after the Kyoto Accords were signed.
When Tillerson came out for a carbon tax in 2009, ExxonMobil’s support was dismissed because events made it politically irrelevant if not outright cynical — the only bill that had a chance to become law at the time was a very different cap and trade bill. But this at least gave him something to say, a way to participate more constructively in climate policy and it was accompanied by statements that at least acknowledged that there was risk from climate change.
I would see in Secretary of State Tillerson continuity with that position, a rhetorical interest in carbon tax if a price needs to be imposed and some skepticism about how quickly policy really needs to change. The other thing that he’s said over the years that’s notable is, well even if climate change is serious, we’ll find a way to adapt. Technology will help us to figure out how to carry on, whether that means some silver-bullet solution to prevent climate change from occurring by means other than reducing carbon dioxide emissions or whether it means just adapting the way we live – I guess we all move to Canada … or something like that.
To learn more about the Global Investment Conference, please visit the conferences section of the CIR website. If you are interested in attending this event, please email Alison Webb to be considered, as limited space available.