Investors in environmental markets are, understandably, expecting strong headwinds from a Trump presidency.
Donald Trump campaigned as a pro-coal, climate-change sceptic. His cabinet is packed with nominees who are strong foes of environmental regulation and the Republican Congress is unlikely to come out in favour of aggressive environmental protection. But against these political headwinds, powerful economic forces are at work.
The past few years have seen dramatic falls in the costs of many environmental technologies, especially in renewable power and energy storage. Renewable technologies are increasingly able to compete, unsubsidised, against natural gas and coal-fired capacity. Take-up will accelerate as the price of battery storage continues to fall, allowing renewables to supply power when the wind is not blowing and the sun is not shining.
At the same time, many environmentally focused firms have built business models that do not rely on subsidies or regulatory support, rather they help their customers reduce resource use and therefore cut costs. Industrial energy efficiency, for example, offers some of the highest returns on investment that companies can make with their capital expenditure.
There are also seismic changes under way in public perceptions of sustainability. Consumer survey business Nielsen found more than three-quarters of millennials are prepared to pay a premium for sustainable products and services, up from 50 per cent in 2014.
Some of the world’s most successful companies are responding: 84 firms have recently announced they will source all their power from renewable sources from 2017. Individuals and companies are driving demand for environmental technologies that will continue regardless of policy signals from the new administration in the US.
Moreover, policy changes by the White House will be harder to implement than many assume. President Trump will have to work through Congress, where there is support on both sides of the aisle for renewable energy and environmental technology. Congress extended crucial tax credits for wind and solar technologies at the end of 2015, and there is little appetite for their repeal. Efforts to roll back existing regulations are likely to face stiff legal challenges.
Meanwhile, individual states control powerful policy levers to support environmental regulation and technologies. They have the power to set renewable energy targets – Ohio’s Republican governor, John Kaisich, recently vetoed a bill to freeze the state’s rising renewables goals. California retains the right to set vehicle emission standards that, given the size of the state’s car market, will strongly influence this entire industry.
Many presume that the Trump administration is an implacable foe of the environmental markets. This is unlikely to be the case. Mr Trump has called for a focus on clean air and clean water. There are substantial majorities – including among Republican voters – in favour of clean energy and reductions in carbon emissions. States such as Texas, Oklahoma and Kansas are leading the country in wind energy investment and North Carolina is second only to California in new solar farms.