The Strategist

Donald Trump discards Obama's Clean Power Plan

03/29/2017 - 13:32

Yesterday late in the evening, Donald Trump signed a decree to abolish Barack Obama’s policy in the field of combating climate change. Among other things, this means a significant softening of environmental requirements for industrial corporations. Consequently, shares of coal corporations have soared in price by 15%.

Gage Skidmore via flickr
Gage Skidmore via flickr
Abolition of measures to combat climate change was one of Donald Trump's main pre-election promises. He said that the so-called "Clean Power Plan" and its excessive environmental requirements, adopted under Barack Obama in 2014-2015, are hindering development of American industry. In his opinion, this leads to high costs for coal, automotive and oil and gas corporations. The initial plan was to cut greenhouse gas emissions in the US by 25% (carbon dioxide, methane, nitrous oxide, etc.). Proponents of the global warming theory believe that excessive emissions lead to climate change on Earth. The federal government used tax breaks and subsidies to encourage development of clean energy in the regions, including solar and wind power. This was supposed to at least partially replace energy derived from coal or petroleum products. Defenders of the plan also said that gas emissions result in a larger number of asthma sufferers in the areas of traditional thermal power plants.

In turn, opponents of this plan, including Donald Trump, said that this initiative deprived US business of about $ 49 billion a year and led to higher electricity prices in most states. In addition, they reckon that the Clean Power Plan would have decreased coal production by 242 million tons. Decree of new US President says that cancellation of the "Clean Energy Plan" is supposed to strengthen "America’s energy independence". It is noted that representatives of 27 states, 24 trade associations and 3 trade unions have previously challenged the plan in court. As part of his pre-election promises, Donald Trump ordered federal agencies to develop a new action plan that would abolish the Clean Power Plan programme within 180 days.

Once Donald Trump published the new decree, papers of coal companies skyrocketed. Thus, shares of the world's largest private coal corporation Peabody Energy Corporation jumped in price by 15%, shares of Cloud Peak Energy coal company climbed up by 5%, and shares of metallurgical coal producer New Wei Inc . rose by 29%. Quotations of the auto industry companies also increased (General Motors - 2.5%, Ford - 1.7%, Fiat Chrysler - 2.2%).

On Tuesday, it became known that Exxon Mobil Corp., the world's largest oil company by capitalization, sent a letter to administration of President of the United States Donald Trump. The corporation called to maintain US membership in the Paris agreement on climate, writes the Financial Times.

Exxon's appeal notes that the Paris Agreement is "an effective structure to deal with risks of climate change", which will "ensure equal conditions and preserve maximum freedom and competitiveness of the world energy markets". At the same time, the company lists advantages of the agreement for the US, including wider use of natural gas.  

Previously, major oil companies in Europe and the Middle East, including BP, Eni, Saudi Aramco, Repsol, Statoil, Shell and others, also spoke in support of combating climate change from the perspective of growing demand for gas.

Last weekend, Head of the US Environmental Protection Agency (EPA) Scott Pruitt described the Paris agreement as "an unsuccessful deal".

However, a number of officials, including US Secretary of State and former Head of Exxon Rex Tillerson are in favor of further US participation in this initiative.