As Donald Trump enters the White House as the 45th President of the United States, renewable energy companies might remember the new president has made clear several times that he is not a strong supporter of renewable technologies or climate change action. The new tenant of the White House has in fact labeled climate change as a “hoax” invented by the Chinese and has recently stated he is considering withdrawing the US from the global climate change deal reached in COP21 and removing subsidies on renewables. Additionally, he has made several statements about supporting his country´s coal, oil and gas industries as a strategy to boost local employment and ensure the country’s energy independence.
Following the inauguration, Trump’s team published its energy strategy titled “An America First Energy Plan”, which is in line with the president’s vision and commitment toward the local oil and gas industry and his attitude toward climate change. The document (available at the White House official website) states that his administration will focus on eliminating regulations that are holding back oil and gas extraction activities and will revive America’s coal industry. Renewables are found nowhere in the document but it states that protecting air and clean water will remain a high priority.
Although many analysts – and former President Barack Obama – have said renewable energy’s momentum will outlast Trump, it is highly likely that the newly inaugurated administration will not be a golden era for US renewable companies. Luckily, there is a familiar place that American “green” businesses and investors might look at to continue expanding: Mexico.
“Both countries have deeply interconnected markets and decisions on one side of the Bravo River might have a huge impact on the other. The new US administration has, for instance, demonstrated low support in terms of renewable energies, preferring to empower the local oil and gas industries. This might lead US renewable energy companies to look at its neighbor, trying to enter this market more aggressively,” said José Prado, a partner at Holland & Knight, in an interview with Mexico Energy Review 2017.
No. 9 RENEWABLES INVESTMENT DESTINATION
From 2014 to 2015 Mexico’s renewable energy investments increased by 151 percent, reaching US$4 billion and making it the world’s ninth renewable energy investment destination (and Latin America’s second), according to Bloomberg Energy Finance and IRENA reports. The implementation of the Energy Reform, which included two power auctions in 2016 and more to come this year, are expected to continue pushing Mexico to the top of clean energy investments as the auctions’ winners alone represent US$6 billion investment in new clean energy capacity, mostly solar and wind.
In addition to its geography, growing energy demand and a recently liberalized market, renewable energy companies have found in Mexico’s energy policy a source of stability and support that increases the market’s attractiveness. In the past two years, the Mexican government has made public its intentions to transit to a low-carbon economy, setting measurable clean energy generation, efficiency and vehicle electrification goals before the UN.
Mexico’s recent renewables-friendly policies are, however, not a new paradigm. The US’ neighbor has long shown strong climate mitigation leadership among developed and developing countries, being one of the first nations in creating climate regulations and pushing toward ambitious targets at the UN Climate Change Summits. Mexico’s position is not a surprise in Latin America – the region where most people worry about climate change and which doubles the global average of renewable power production – but it is highly relevant given the scale of the country’s economy and the fact that it is the 10th largest oil producer in the world and the ninth biggest GHG emitter (the US is the second).
“Mexico’s main motivation to promote these regulations was not only to become a global leader in this matter. Of course, we want to contribute to the solution for a problem that affects the whole world but could also have strong repercussions domestically. Signing global agreements helps but it means nothing without a domestic agenda. We have understood that going sustainable is, in fact, an opportunity and not an obligation so we are moving fast in transitioning to a cleaner economy,” said Leonardo Beltrán, Mexico’s Deputy Minister of Planning and Energy Transition to Mexico Energy Review 2017.
Mexico also made a huge regional breakthrough by establishing a North American climate change pledge with the US and Canada. The agreement included trilateral actions to decrease the region’s GHG emissions by 40-45 percent from a 2012 baseline and produce 50 percent of electricity from clean sources by 2025. Part of the strategy to diminish North America’s GHG emissions was to introduce the SmartWay program to Mexico, which would help the country reduce its shipping-related emissions.
But is the agreement still in place?
Most probably not, at least not as ambitiously as initially planned.
According to The Guardian, an important bloc within Trump’s cabinet has publicly expressed doubts about the influence of human activity in climate. Trump’s choice as head of the US Environmental Protection Agency (EPA), Scott Pruitt, was part of a lawsuit against the agency’s Clean Power Plan – launched during Obama’s administration – that looked into reducing coal-powered plants emissions. In fact, the elimination of the Clean Power Plan is now part of the president’s energy agenda, claiming that lifting this and restrictions imposed by the Waters of the US rule will increase American workers’ wages by over US$30 billion in the next seven years. The document, however, does not elaborate on how.
Pruitt has also written that the debate over human impact on climate change is “far from settled.” Statements like these plus Trump’s rhetoric against Mexico might signal that the Three Amigos’ (including Canada) climate cooperation might be put on the backburner.
Although Trump’s policies might have a negative impact on energy demand, its neighbor’s new position does not put Mexico’s renewable growth at stake. Contrary to other sectors, renewable energy investments, and technological imports, come to Mexico from several sources and in fact, most of the winning companies in 2016’s power auctions were Asian or European, with Italy-based Enel Green Power becoming the major player. Moreover, Trump’s protectionist views might also be an extra incentive for Mexico to reduce its dependency on US fossil resources.
In a recent article for Science, Obama wrote that the “trend toward clean energy is irreversible” and for companies and investors believing the same, Mexico can be an attractive destination while the US gets its act back together.
Update: This blog post was updated to include the president’s Energy Plan released just after the inauguration ceremony.