Drill. Drill. Drilling into our future prospects

For anyone interested in environmental protection, let alone restoration, the ‘Drill. Drill. Drill.’ message from Donald Trump, ironically a candidate to be the second recycled US President*, will just see a deep, dark hole at which US renewable, clean energy investments will at first teeter and ultimately tumble into for at least the short term.

This three word commitment shows exactly where Republican strategists believe votes and money will flow from in the lead-up to this November’s US Presidential election.

The Republicans have made the point that the election will be fought on the price of groceries. Well not quite. It’s a broader basket of goods and gripes, but you get the drift. This narrative is being replicated by right wing movements across the western world, but results in the UK and France are evidence that voters are not totally subscribed to the notion that we need to halt clean energy and environmental protection to pay less for the household shop.

As is typical for Trump, the ‘Drill. drill. drill.’ catchline is nationalist and isolationist, targeting the votes from those who feel and, in many cases have been disenfranchised by the neoliberal push of the past 40 years. They would do well to remember that this blind faith in the power of markets to deliver for the common good was adopted and implemented by the conservative regimes of the Republican’s Reagan and the UK’s Thatcher.

But shifting away from the renewable energy transition, boosted by President Biden’s Inflation Reduction Action incentive, to a focus on fossil fuel extraction, is about as plausible a solution to the malaise felt by the masses as the likelihood of Trump ending the wars in the Ukraine and the Middle East with single phone calls.

The ‘drill. drill. drill’ proposition is straight from the populist handbook. If you drill down into it, there is no evidence that any of its undertakings are feasible, realistic or likely to succeed. We fool ourselves if we seek to fine any sophistication beyond election strategy in this talk. Trump’s drill narrative is not about broader energy strategy, self-sufficiency or national security. He is really on about squeezing prices at the petrol bowser to satisfy the American thirst for mega-utes and RVs.

Middle America’s love affair with obscenely dimensioned motor vehicles is real. If in doubt, just take a look at Ford’s recent announcements on the insatiable demand and profitability for F-150 pickups and its reduced commitment to electric vehicle manufacture, reportedly costing the company between US$65,000 and US$100,000 per vehicle. Even progressive Apple has yielded to this national passion and shelved plans to enter the electric vehicle market.

The Trump drilling commitment also plays into another major campaign theme that resonates with much of his base - xenophobia. Whether on trade or immigration, easier to blame them over there for our malaise rather than look in the mirror. If the US car makers cannot make money on electric vehicles, he’s also going to make damn sure there’s no room for lower cost Chinese versions. One to two hundred percent tariffs will do that.

Wherever you look, the fabric of the various election movements - MAGA, America First and others - is stitched together by a single thread, which is to fill the moat and pull up the drawbridge around the USA. But climate does not recognised borders.

Assuming Trump II would observe the two-term convention for office, for which there is no guarantee, the world’s climate and biodiversity would only have to overcome four years of reckless disregard for the planet’s future. But the repercussion from this negligence will last for decades.

A wholesale shift by the world’s second-biggest consumer of fossil fuels away from clean energy generation will hurl the Paris Agreement 2050 target to the canvas, an outcome perhaps personified by the presence of Hulk Hogan ripping of his clothes at the Republican Convention.

This is because increases in carbon dioxide levels in the atmosphere have been exponential and loss of important ecosystems through unfettered human development and obsession with GDP growth runs unabated. A second Trump presidency will double-down on both.

From a climate and environment perspective, this brings us back to thinking about what levers the rest of the world can pull to offset the potential American push to release more carbon and open up protected land to fossil fuel exploration and extraction.

The answer to that will largely land in the lap of governments, investors and insurers. They are desperate for consistency and substance in energy policy. The American contest is just one of many playing out around the world, where a swathe of elections on most continents will reshape world leadership by 2025. So if you are concerned about climate change and the environment, your vote is a big deal.

Governments dictate the terms of trade and the environmental standards with which companies must comply. The combined membership of the European Union is one of the world’s most powerful economic blocs and has largely taken the lead on this, but China is also showing signs of tightening up regulation and expectations on environmental practices. US companies operating and trading internationally will need to comply with the highest regulatory standards, regardless of whether the US regresses to lower benchmarks , or none at all.

This will affect investor considerations of the risks associated with regulatory compliance. European investment managers in particular will be influential. They have been making the most rapid progress, driven by pro-renewable and environmental governments, in ESG investing, despite some of the the flaws and inconsistency inherent in delivering it.

There are numerous direct and indirect investment risks associated with climate change and environmental degradation. The headline risk is the direct effect of catastrophic climatic impacts on business operations, trade and communities. These can be short term, for example wildfires and floods, or long term, like temporary or permanent cessation of operations due to sea level rise and inundation.

Other risks include penalties or bans due to non-compliance, the impact of activist campaigns on operations and valuations and occupational health and safety risks attributable to climatic conditions.

Investment management companies themselves are not immune from climate and environmental risks. Investment portfolio disclosure requirements make access and scrutiny by clients more transparent, exposing them to government, activist and community intervention.

For communities, evidence of climatic risk is made real and present by escalated insurance premiums on property, health and goods. Those increases are shared globally via reinsurance - insurers sharing their risks across multiple underwriters. No one, nowhere is immune from the impacts of the hurricane in the US, the flooding in Asia, or the bushfire in Australia. Not matter what its policies or leadership, the US cannot insulate or isolate itself from the shared risks of climate change and environmental degradation.

So what can ordinary folk do in this complex context? Here’s a few ideas:

• Hold governments to account - vote for leadership committed to renewable energy, and natural carbon sequestration strategies through broad environmental protection and restoration;

• Invest in your beliefs - choose and place your investments - direct shares, retirement funds, savings accounts - with institutions and products committed to responsible investment;

• Use the power of your purse - consume consciously. To the best of your ability and budget, buy products that are produced sustainably and which can be recycled. Avoid buying from companies with poor reputations on environment, corporate citizenship and social exploitation.

A reckless policy to ‘drill. drill. drill.’ must and can be counterbalanced by international action at government, investment and community levels.

Photo: Zbynek Burival on Unsplash

* Stephen Grover Cleveland (March 18, 1837 – June 24, 1908) was an American politician who served as the 22nd and 24th president of the United States from 1885 to 1889 and from 1893 to 1897. He is the only U.S. president to serve non-consecutive presidential terms. Source: Wikipedia.