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Trump vs Biden: what does the election mean for US coal markets?

The outcome could set the pace of decarbonisation

1 minute read

By Matt Preston, Research Director, North America Coal Markets, Natalie Biggs, Thermal Coal Research Lead, Americas, and Adam Woods, Research Associate, North America Coal Markets.

US voters will go to the polls on 3 November to choose their next president. It’s fair to say that incumbent President Donald Trump and his Democratic rival Joe Biden have very different views on climate change and energy policy.

In 2016, Trump promised to stop the “war on coal” – a message well-received by US coal producers. But what policy changes has he made in office, and how have coal markets fared under his watch? And how might a Biden win change the picture?

We’ll be discussing this topic in detail in a webinar on Wednesday 14 October – sign up to join us here. Or read on for a complimentary extract from our recent insight, What is the future for US coal markets under Trump vs Biden?

Has Trump revitalised the US coal industry?

Trump came into office in 2016 with a promise to revive the coal industry. And he has taken steps towards this goal. The Clean Power Plan (CPP) – one of the Obama administration’s biggest measures to curtail greenhouse gas emissions – was replaced with the less stringent Affordable Clean Energy Rule (ACE). The Obama-era social cost of carbon calculations was also removed, while a freeze on new federal coal leases was lifted. Trump has also announced his intention to withdraw the US from the Paris Agreement.

In this, less restrictive, regulatory environment, have US coal markets thrived? Unfortunately for Trump and coal stakeholders, economics have not been on their side. Coal production in the US has fallen by 50% over the last decade, and 30% since Trump took office.

To find out more about Trump administration policy measures – and how carbon emissions have changed in the last four years – visit the store to read this insight in full.

Why haven’t policy measures halted the decline of US coal?

Competition from natural gas remains the root cause of coal’s woes in the US. The explosive growth of shale gas drilling has led to massive production increases over the past two decades. As a result, US coal markets have remained under severe pressure from low-price natural gas. Henry Hub natural gas prices averaged US$3.55/mmbtu over Obama’s term in office, compared to US$2.81/mmbtu over Trump’s to date.

Meanwhile, the global political environment for coal has worsened. Financial institutions and insurers face public pressure to halt support for coal projects, with many making environmental, social, and governance (ESG) commitments to move away from the coal sector in varying degrees.

What’s the current supply/demand balance for US coal? Read our latest North America coal short-term outlook.

What would a Biden win mean for the US coal industry?

Biden’s stance on climate and energy differs radically from that of the current administration. In July 2020, he released his “Build Back Better” clean energy plan – a potential game-changer for US energy. The most notable point for coal stakeholders is the call for a carbon-free US power sector by 2035 – and the promise of investment in coal and power plant communities impacted by the transformation.

Could Biden deliver this change? His time as vice president offers some indication as to what we might expect from him as president. The Obama administration took a pro-climate stance, particularly in the second term, enacting several environmental and energy measures, including the CPP. Obama’s tenure began more than a decade ago, and the energy transition has only gathered pace since then globally. The scene may be set for an ambitious new plan.

It wouldn’t be easy. A 15-year timetable for a carbon-free power industry would call for an estimated US$2.2 trillion of capital investments in renewable energy and storage. And monetary barriers are only part of the equation. A federal mandate to eliminate coal-fired power plants would require powerful political support. It would also face years of pushback and litigation from opponents. Biden would likely need two terms – and potentially control over the Senate – for his plan to gain momentum.

What outcomes should coal industry stakeholders be ready for?

There are multiple potential outcomes from the US elections this November. In our insight, we take a look at three basic scenarios:

  • Trump is re-elected and Congress is split
  • Biden wins but the Republicans retain a Senate majority
  • Biden wins and the Democrats control Congress.

What’s the potential impact of these scenarios? Visit the store to read this insight in full. And join our webinar to hear our experts discuss this topic as the US election draws nearer.