The Trump Transition — Let the Unwinding Begin


Originally Published in The Jacobsen on December 19, 2016
California Biodiesel Industry Commentary

Happy Holidays! It appears that President-elect Trump is handling his transition much like he handled his campaign – unpredictably.

Directly after the election there was a fair amount of optimism that he would follow through on campaign promises of creating domestic jobs, especially in the manufacturing sector, and that his energy policy, as stated on his website, would “make America energy-independent” and “protect clean air and clean water.” He also said he would re-think his position on climate change. And on top of these hopeful signs the RFS RVOs came out and are ratcheting up.

But that optimism has been tempered by some of Trump’s cabinet nominees such as Scott Pruitt for EPA, Rick Perry for DOE, and Rex Tillerson for Secretary of State. It’s somewhat of an understatement to point out that the emerging Trump agenda and cabinet picks are in direct denial of climate science, which does not bode well for the future of climate policies which ultimately help drive market demand for biodiesel and other renewables.

As Oklahoma’s attorney general, Pruitt has repeatedly sued EPA over environmental regulations, at times in direct cooperation with fossil fuel companies.

Former Texas governor Rick Perry has strong ties with the petroleum industry and in the 2012 presidential race he famously campaigned to dismantle the DOE, whose name he could not even remember in the debates. But now is being tasked with running that agency. Oops!

And ExxonMobil CEO Rex Tillerson as secretary of state seems almost surrealistic when considering the implications for the climate and specifically for biodiesel and other renewables.

Given these mixed messages, we really don’t know what to expect from a Trump administration when it comes to the future of biodiesel. There had been some hope that the dollar-per-gallon blenders tax credit might be renewed as a domestic producers tax credit before the end of this year, but that did not happen.

It would also seem reasonable to hope that some of the RFS fuel pathways for foreign producers in places like Argentina, Korea, China and India might be pulled in a Trump administration. Along with a domestic producers tax credit this would effectively bring about $3 billion dollars in US tax dollars back into domestic circulation supporting US manufacturing jobs rather than subsidizing foreign production and foreign jobs. This would be directly in line with Trump’s campaign promises. But this now seems unlikely, given his cabinet picks.

It appears that a massive unwinding is in store, which seems to be what Trump voters had in mind. We just don’t quite know what will be unwound. And that is how Trump likes it. The problem is, historically markets don’t like uncertainty. But maybe Trump is changing history. We will all just have to wait and see.