EDITORIAL: Trump's anti-climate rhetoric continues unabated, with US states, IMO the latest targets

Quantum Commodity Intelligence - I would rather not focus on the administration of US President Donald Trump, as plenty has been said already, but the events of the last couple of weeks have made it difficult not to.

From an executive order targeting US state-based climate policies, to threats against countries that might follow through with greenhouse gas (GHG) restrictions in the shipping sector, the anti-climate rhetoric has continued to flow out of the White House. And that's not to mention what impact the blanket trade tariffs policies could have on carbon markets.

Prices for carbon allowances traded under the Regional Greenhouse Gas Initiative and the California-Quebec linked cap-and-trade scheme fell in the wake of an executive order signed by Trump on April 8 aimed at reducing state influence on energy markets.

The order called for an end to "all illegitimate impediments" imposed by states that limit domestic energy production. "California, for example, punishes carbon use by adopting impossible caps on the amount of carbon businesses may use, all but forcing businesses to pay large sums to 'trade' carbon credits to meet California's radical requirements," it said.

Other states have sued energy companies "for supposed 'climate change' harm", the order stated, which could lead to "crippling damages" for energy majors. "These State laws and policies weaken our national security and devastate Americans by driving up energy costs for families coast-to-coast, despite some of these families not living or voting in States with these crippling policies," the executive order said.

As is often the case with statements from the Trump administration, facts do not seem to matter. For instance, California's cap-and-trade scheme kicked off officially in 2013 and in the period since the state's GDP per capita has grown faster than any other in the US, according to the US Bureau of Economic Analysis.

California Governor Gavin Newsom hit back on the executive order in a statement in response on April 9.  "California's efforts to cut harmful pollution won't be derailed by a glorified press release masquerading as an executive order," he said. What this executive order is likely to mean over the longer term are long drawn-out legal battles and discussions on that age-old issue in the US of states' rights versus the federal government.

Trump also withdrew the US from negotiations earlier this month on climate policy on global shipping under the auspices of the International Maritime Organization (IMO), the UN body overseeing the sector. Negotiators at meetings in London voted in favour of an agreement that would place reduction targets on the carbon intensity of marine fuels and charge a carbon levy of at least $100 per tonne CO2 equivalent (tCO2e) to ships emitting above those targets.

The agreement still needs to be 'rubber stamped' by IMO members at a meeting later this year, but the threats from the US regime have already been made. The Trump administration said it would consider "reciprocal measures so as to offset any fees charged to US ships".

Again a case of watch this space, but given the 'flip flopping' of the administration on trade tariffs, who knows what the shipping industry is going to be facing if the GHG proposals are signed off in October. The impact of the tariffs themselves is another unknown, with market source suggesting that they could introduce economic uncertainties and increased operational costs, potentially leading companies to scale back voluntary carbon market activities.

Although one analyst pointed to the Paris Agreement's Article 6 markets as something that should not be impacted by US actions. "Despite geopolitical tensions, international cooperation on Article 6 (of the Paris Agreement) is likely to remain unaffected, given that the US was not heavily involved in memorandums of understanding or bilateral agreements even before Trump's administration," said Abhishek Das, an analyst at carbon markets services provider ClearBlue Markets.

The second Trump administration is only a couple of months old, yet so much has happened. The US mid-term elections, which could help to rein in some of the proposals if majorities change in Congress, are still a very long way off. In the meantime, it's a case of what will happen next.