Introduction.
In November 2024, Mr. Trump was again elected president of the United States. Much attention has been paid to the impact of the new administration’s environmental and energy policies both domestically and internationally. This article describes the characteristics of the Trump administration’s policies, how they differ from those of the Biden administration, their impact on Japan and the world, their advantages and disadvantages, and their effect on stock prices.
Characteristics of the Trump Administration’s Environmental Policies
Disengagement from International Initiatives
Trump plans to withdraw again from the “Paris Agreement”. This agreement was adopted in 2015 and is an international framework for reducing greenhouse gases. If the U.S. withdraws from it, international coordination on climate change measures will weaken and there are concerns that U.S. leadership will decline. In particular, assistance to developing countries may decrease and progress in combating climate change may be delayed.
Relaxation of environmental regulations
Environmental regulations are expected to be eased significantly, including a 25% relaxation of vehicle emission standards. This relaxation is expected to reduce costs for manufacturers and improve competitiveness, especially among small and medium-sized enterprises. In addition, new oil drilling projects are expected to increase by 15% over the previous year as fossil fuel production expands, which is expected to stimulate the local economy and create 100,000 new jobs. At the same time, however, greenhouse gas emissions may increase by 20% per year, and there are concerns about negative environmental impacts, such as air pollution and increased health risks. Thus, the challenge is to balance short-term economic benefits with long-term environmental risks.
Reducing support for clean energy
Support for renewable energy sources such as electric vehicles and solar power is scheduled to decrease. While some support will remain, there are concerns that the clean energy market will become less competitive and innovation will stagnate.
Differences between the Trump and Biden Administrations
Approach to environmental measures
The Biden administration promoted investment in renewable energy and aimed for carbon neutrality by 2050. The Trump administration, on the other hand, prioritizes the use of oil and gas and focuses on short-term economic growth. This difference will have a major impact on the U.S. position in the international community and the structure of domestic industry.
Energy Policy
The Biden administration promoted solar and wind energy, while the Trump administration prioritizes the expansion of fossil fuel production. While this will lower energy prices in the short term, it will also increase the risk of higher greenhouse gas emissions and global warming.
Global Impacts
Slow progress in combating climate change
As the U.S. rolls back its environmental policies, other countries may follow suit. For example, in countries with high emissions, such as China and India, a weakening of U.S. reduction targets could provide an excuse to forego tighter regulations in their own countries. European countries are also disappointed by U.S. actions and increasingly concerned about the impact on international cooperation. This increases the risk that global greenhouse gas reduction targets will not be met and that extreme weather events and natural disasters will increase.
Rising oil prices
The Trump administration’s fossil fuel policies may cause oil prices to rise temporarily. This may have an impact on countries that depend on energy imports, but in the long term, prices may stabilize due to oversupply.
Impact on Japan
Review of Japan’s decarbonization strategy
Japanese companies that are highly dependent on the US market may be affected. While there are concerns about declining demand for electric vehicle components and storage batteries, there are signs that the transition to renewable energy is accelerating in Japan.
The government has set a goal of reducing greenhouse gas emissions by 46% by 2030, and new wind and solar power projects are underway. For example, a wind power project in Hokkaido aims to supply enough electricity to power 500,000 households annually, and plans are underway for a solar power facility in the Kyushu region to achieve an output of 1 GW. In addition, fluctuating import prices of liquefied natural gas (LNG) may affect Japan’s energy policy, and there is a need to secure diverse energy sources.
Change in Investment Strategy
Increased demand related to fossil fuels may create new business opportunities for Japanese companies. On the other hand, tough conditions are expected in the renewable energy sector, requiring a flexible response.
Advantages and Disadvantages
Advantages
・Reduced energy costs: Lower electricity prices due to increased oil and natural gas production
・Job creation: 100,000 jobs from new drilling projects
・Lower product prices: Lower production costs for automobiles and industrial products
・Stimulation of local economies: Ripple effect from growth of fossil fuel industry
Disadvantages
・Environmental degradation: 20% increase in greenhouse gas emissions
・International isolation: Criticism due to backward environmental policies
・Sluggish renewable energy market: Stagnant technological innovation
・Increased risk of climate change: Frequent extreme weather events
・Decreased economic competitiveness: Difference from progress in clean energy sector in other countries
Impact on Stock Prices
Oil and gas stocks
Deregulation and increased production are expected to boost stock prices. Reduced operating costs will lead to higher earnings.
Environmental technology-related stocks
Although there are concerns about a slowdown in growth related to renewable energy, some companies are expected to grow in the future due to cost reductions and new technology development.
Conclusion
While the Trump administration’s environmental and energy policies will promote short-term economic growth, they carry long-term environmental risks. For example, while increased fossil fuel production is expected to temporarily increase GDP by 2%, a 20% annual increase in greenhouse gas emissions could result in $50 billion in annual economic losses due to climate change-related disasters. Japan and the world need to closely monitor these impacts and promote flexible responses. To build a sustainable future, governments and businesses must work together to establish a new framework and take a long-term perspective.
References
4.JETRO, “Monthly Report on U.S. Environmental and Energy Policy Trends
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