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Citi

2020 US Elections’ Implications for Energy Policies

As the US Presidential Election season heats up, climate change and energy policy have leapfrogged to forefront of the debates. The policies of the current Administration or the Democratic Presidential candidates, if fully realized, could have significant implications for the US and global economies, energy and related sectors, plus financial markets. Based on the candidates stated policies to-date, Citi analysts anticipate three possible scenarios following the US election.

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1. The Status Quo of the Trump Administration: Energy Dominance:

A second Trump term suggests the continuation of the current “Unleashing American Energy Dominance” policy, which may see the least Federal government-led disruptions to energy production, consumption or trade. Global CO2 emissions are likely to continue to rise, and US subnational governments may still pursue anti-climate change policies.

 

2. The Future is Green: Keep it in the Ground:

This scenario calls for the elimination of US fossil fuels use and production and is most extreme scenario relative to the status quo. This may include policies that are highly disruptive to the economy and individual sectors over the short- and long-run. Even a 15-year adoption period points to a stint of negative GDP growth and a challenging transition.

 

3. Middle Ground: A Spectrum of Policies:

Should a Democrat win the election, Citi analysts anticipate a mix of carbon and drilling taxation changes. Increased regulation of methane/flaring/hydrocarbon infrastructure; adoption of new efficiency standards, and greater support for renewables and low-carbon technologies, with potentially less acute short-term economic disruptions and a smoother energy transition, helped by US state and local level policies.

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