The unexpected President-elect Donald Trump will be sworn in on January 20, 2017. His energy policies are still obscure, and it is unsure the degree to which he will focus on his campaign commitment to achieve U.S. energy independence, whether through increasing the economic impact of fossil fuels, reducing dependence on OPEC or fine-tuning Obama’s green energy policy. As a result, conflict may arise between the U.S. and China, depending on whether China pursues a strong confrontation with the United States on the energy issue or avoids confrontation, and achieves a joint Sino-U.S. energy supply and output policy, together confronting the challenges of global warming. In fact, confrontation is one aspect of the development of bilateral relations, whether thre is fierce confrontation or eased confrontation, but it is nonetheless an inevitability with regard to the energy issue for these two countries. The ''antagonistic game'' related to energy issues will be a process. At the beginning, let us recall Trump’s speech on economic policy in Detroit on August 8, 2016, which addressed the five main points of his energy policy reform: first, to save the coal industry; second, to encourage the re-submission of the Keystone XL pipeline application; third, to allow oil and gas development on the outer continental shelf; fourth, to cancel the Paris climate agreement signed by Obama; fifth, to revoke various restrictions on the U.S. energy industry. In the next seven years, the United States will create more than 100 billion U.S. dollars of GDP per-year, through policies that emphasize defense of the coal industry, increase fossil fuel drilling, reduce environmental regulation, abolish the Obama administration’s restrictions on the energy industry’s right to export U.S. oil, and support hydrofracturing technology to lead the U.S. energy independence.
The Iran moment and the return of coal
A re-launch of sanctions against Iran would obviously cause tensions between the United States and Iran. Oil prices would rise, which would frustrate the determination of the United States to confront Russia. If the U.S. leaves the Gulf, it could mean higher oil insurance costs and higher consumer fees on energy. At the same time, if the Gulf countries, China and Russia compete to control the Strait of Hormuz, the U.S. super-hegemonic status will be hit hard. All in all, this would be a complete negation of President Obama’s energy policy, and give priority to the development of traditional fossil fuels, which would mean less money for the development of renewable energy and nuclear energy. Although Donald Trump has talked about building more nuclear power plants, it will be more difficult for nuclear and renewable energy to challenge natural gas in terms of the carbon economy. Trump’s New Deal proposes an investment of $500 billion for infrastructure construction. On the one hand, the United States will increase demand for coal at the same time that it increases demand for steel and electricity in the infrastructure sector; on the other hand, by substantially reducing environmental restrictions on the coal industry, it will thereby encourage the development of coal-fired power plants. Encouraging the use of clean coal will stimulate U.S. coal demand and revive the coal industry. However, Trump’s energy policy is expected to be the subject of many complicating factors, which will make it difficult to implement in the short-term. One such factor is the revitalization of the coal industry because since 2008, due to the lower cost of natural gas power generation, coal-fired power generation of U.S. electricity has fallen to less than one-third its earlier level. Prior to the U.S. shale gas boom, the United States depended on coal-fired power generation for more than 50 percent of its production, and natural gas power generation accounted for less than 20 percent. By 2017, EIA predicted that coal-fired power generation and gas accounted for 31 percent and 33 percent. Thus, the decline in U.S. coal consumption is highly correlated with the U.S. shale gas revolution. In the current global economy which is the source of the current situation, Trump’s policy can at best prevent the sharp decline in the coal industry, rather than revive it, which is very difficult.
The process of developing renewables cannot stop
Thanks to low #oil prices, #China has developed its own economy, and will follow the #ParisAgreement commitments
Trump has always had a contemptuous attitude toward clean energy. In his view, the return cycle of investing in the PV industry is too long and the benefits are too low, with solar panels requiring a 32-year return on investment, and wind power generation, although more economical, undermining coastline ecology and landscape. Trump has said that he believes that global climate change is a conspiracy theory promoted by developing countries. Because of this, the U.S. renewable energy companies and electric car companies face a serious sell-off in the stock market. However, the election and the ruling government are two different things For example, the Bush 43 administration promoted an oil-friendly policy, but oil production declined during Bush’s eight year term; shale gas development should be attributed to George W. Bush, but the shale revolution occurred during Obama’s term. So, if Trump’s new government decides to reduce subsidies for new energy, it may not be so bad. The short-term will be bad for new energy, but in the long term, lower subsidies will stimulate wind power while photovoltaic and other technological progress will reduce their costs. Whether abolishing NAFTA or committing to the approval of the Keystone XL Pipeline, whether abolishing the Iranian nuclear deal or stopping government spending on renewable energy, all of these would increase oil dependency, which would undoubtedly push up oil prices. In recent years, with the benefit of low oil prices, China has vigorously developed its own industrial economy, and clearly China will follow the commitments of the Paris Agreement, and the main plan on energy will not change as Trump wishes.
China's market demand will attract U.S. energy companies to export oil and natural gas, and this highly energy-dependent model will hinder trade fights from both sides
China's countermeasures: phenomena and fantasies
But the large trade surplus between China and the United States will cause the two countries to start a trade war, and who will win and who will lose can not be predicted. But this contradiction between China and the United States will be the main battlefield of international trade disputes. The Great Power relations between China and the United States, which the U.S wil ultimately reject, will not cause the two countries to immediately enter a smoke-filled trade war. On December 11, 2016, China’s accession to the WTO after the 15-year period of protection will have passed. China will achieve market economy status and be in a position to make concessions, such as opening up the retail market. This is also the chance for U.S. new-energy companies to enter the Chinese market, shifting their emphasis from the U.S. market. As is well known, the Republican bigwigs are heavily invested in China’s energy market, which will soon enter the earnings period, so the two sides will try to avoid the ''confrontational game''. Opening up professional services in China for the U.S. and reducing China’s trade surplus will have a positive effect. China’s market demand will attract U.S. energy companies to export oil and natural gas, and this highly energy-dependent model will hinder trade fights from both sides. If the United States tries to re-launch a confrontation with Iran and other energy powers, this would strengthen the triad of China, Iran, India and Russia to create a large Eurasian energy consortium that might be called ''CIIR + OPEC'', pushing a new confrontation with the United States in the traditional energy industry. If Trump is unwilling to see this, at least he will want to win over Russia against China. China should be well prepared, considering the possibility of an overall confrontation between the United States and China. In the energy industry, China should propose a ''natural gas RMB (renminbi)'' concept as opposed to ''oil dollars''. ''Natural Gas RMB'' promotes the use of natural gas trading in the RMB as the settlement currency, thus promoting the RMB as the natural gas trader with pricing power. As the consumption commodities in future world energy, ''natural gas RMB'' may lead the RMB internationalization as the important, regular carriers of commodities, for the development of OBOR, the internationalization of the RMB, will slow down oil dollars, and undoubtedly will be a new start for the major gas-importing countries, one which encourages China, Russia, Venezuela, Saudi Arabia and other countries to use the RMB settlement. China should make full use of the Shanghai Futures Exchange Trading Center to promote natural gas futures trading, with a issuance of natural gas bonds, and then using a variety of financial instruments to promote natural gas trading using RMB settlement in the international financial center. If China reaches a large enough proportion of energy consumption worldwide, natural gas RMB will normally challenge the Oil dollar in the financial market which will result in confrontation. That will really be an energy trade war, ''China vs the United States''. From energy war to financial trade war, and finally to full confrontation of course, Trump is not willing to face up to this development.