President Trump’s recent executive order on climate sets the stage for his administration’s approach to energy and environmental issues by rolling back a significant amount of regulation targeting greenhouse gas (GHG) emissions. Presented as part of a broader initiative to put “America first,” the order essentially makes the statement that America’s climate policy should not undercut job creation or the economic viability of U.S. industry.
The order rescinds six Obama-era regulations, including the social cost of carbon and White House instruction that the federal government prepare for and consider climate change a national security threat. More granularly, the order starts rolling back the Clean Power Plan, reconsiders carbon standards for new coal plants and regulation of methane emissions from oil and gas production, lifts the moratorium on federal coal leasing and repeals guidance for factoring climate change into National Environmental Policy Act review.
Finally, and perhaps most fundamentally, the order tells agencies to review any and all rules that can be seen as inhibiting domestic production.
But here’s what it didn’t do: 1) withdraw the U.S. from the COP 21 Paris agreement, or 2) start repealing the EPA’s endangerment finding on GHG emissions, the pillar on which the U.S. Clean Power Plan was built.
So, what does this order mean?
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For the traditional energy industry: Overall, energy companies, associations and organizations have come out in favor of the order as it falls in line with the industry’s prevailing economic messages and market dynamics for the last decade.
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For D.C.: Most conservative policymakers and influencers have also come out in favor, but not all. That the order didn’t address the Paris Agreement (discussion of which is still underway) points to the influence of EPA Administrator Scott Pruitt and Secretary of State Rex Tillerson. Tillerson has stated on the record that it will be difficult for the U.S. to defend itself on the world stage if it backs out of the agreement, while Pruitt is taking a more targeted approach to the role of the EPA. This is likely more pragmatism and less ideology, as both offices navigate the broader landscapes in which they’re operating.
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For coal: Much of the rhetoric stemming from this order and the administration is the notion of “bringing back coal.” Research from the U.S. Energy Information Administration projects that with the Clean Power Plan, coal is projected to decline, and without it, it will remain mostly stagnant. Most experts and some members of the coal industry have acknowledged market pressure from natural gas has been the biggest damper on demand. The consensus is this move will do little to stem the industry’s continuing decline.
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For energy and environment agencies: As mentioned above, this rule is a good indication of how Pruitt is going to manage the EPA. Clean air and water will be the agency’s objectives, with an emphasis on regulatory efficiency. Taken together with the White House’s proposed funding cuts to all energy and environment regulating bodies, it seems this administration is saying climate change needs to come by legislation and not regulation – or, put another way, elected officials, not regulators, should be determining our country’s climate policy.
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For environmental activists: A number of organizations from the environmental activist community have banded together to file a lawsuit in response to lifting the Department of Interior’s moratorium on coal leasing. This is in keeping with similar legal action taken when the Department of State issued a presidential permit for Keystone XL, and it’s expected that further lawsuits will be filed in response to the new regulatory landscape. Notably, the Sierra Club reports having added 300,000 new supporters since President Trump’s election.
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For everyone else: This doesn’t mean the world has moved on from debating the existence of climate change or addressing it as a looming and immediate danger. Nor does it change the reality of the global energy market. Large power companies have already confirmed long-term investment strategies for natural gas, wind and solar, and many of them are under additional pressure from state rules and investors (pension funds and university endowments, among others) to use as many “clean” sources as possible.
The order presents many opportunities and challenges for companies and stakeholders operating in the energy and environment ecosystem, if for no other reason than it dramatically upends the status quo. The administration’s action illustrates the new strategic imperatives the broader industry should consider, which we outlined earlier this year before President Trump assumed office and include:
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Companies must continue to protect their license to operate. Despite a friendlier regulatory environment, companies should still be prepared to address climate concerns and understand their environmental footprint will continue to be monitored and questioned throughout their operations and supply chains.
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Partnerships should not be underestimated. Partnering with NGOs, government and other third parties is still an affective trust-building attribute. One way to navigate this complexity is to bring unique partnerships or “strange bedfellows” to the table in pursuit of mutually beneficial outcomes.
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Businesses should lead problem-solving. There is a growing expectation that companies work towards common good in society, often driven by employees, not just activists. Businesses should seek to underscore their environmental protection and benefit measures, as well as other advocacy efforts they bring to communities.
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Know your audience better than ever. Given people’s growing resistance to points of view that challenge their own, it’s increasingly important that companies know what their audiences’ beliefs and values are. Aligning on those points allows conversations to start off on the right foot, provided companies are genuine and authentic in their communications.
Rebecca Brown is a senior account executive, Energy sector, Edelman Washington, D.C.