6 ways President Trump can make American energy great again

The Trump administration has had a busy few weeks since the inauguration, but the action is just getting started on the energy side. In the White House’s America First Energy Plan, President Trump pledged to make our country energy independent, create millions of new jobs, and unleash new U.S. wealth through an energy revolution. As energy policy is further shaped and implemented, here are some ideas for President Trump and his team to consider.

Address energy demand

The most urgent problem facing U.S. energy producers is lack of demand, more so than increasing supply or decreasing the regulatory compliance burden. U.S. energy producers are plagued by low prices, which may be good for the U.S. economy as a whole, but not for energy industry participants just trying to generate a profit.

Over the past two years, more than 100 companies engaged in U.S. oil and natural gas production have gone bankrupt, as investments in the sector have plunged hundreds of billions of dollars in value. Record U.S. natural gas production lowered wholesale prices, both for natural gas and for coal, causing a price war that has only recently begun to abate. Dramatic increases in supply under the Trump administration plan are likely to reverse a recent positive pricing trend. For the Trump administration to achieve its goal of increasing U.S. energy production, demand has to increase as well.

One place to look at is exports. The administration should focus on streamlining bureaucratic red tape and negotiating trade deals to increase coal and natural gas exports. Over 160 million tonnes per annum (MMtpa) of liquid natural gas export capacity is in the Federal Energy Regulatory Commission (FERC) approval cue, or in the pre-filing stage. Only a portion of the liquid natural gas terminals in the approval cue should be built, but once on line, new markets for domestic natural gas will cause prices to rise, both for natural gas, as well as coal.

Natural gas prices in the $4 million to $6 million British Thermal Units (MMBtu) range would bring marginal natural gas producers back into production, and would help coal and renewable energy producers generate sufficient profits to encourage increased investment. With energy policy tuned into markets, energy prices could be kept in check, ensuring the U.S. remains a magnet for manufacturers attracted by the country’s competitive power prices.

Don’t rock the boat

Looming corporate tax reform, coupled with downward marginal tax rate adjustments, may chill the environment for tax based investing. We don’t need to depress the environment any further. Just over one year ago, a compromise was brokered in Congress, in which the oil import ban was lifted in exchange for extensions of the investment tax credit and production tax credit for renewable energy.

Following that compromise, the solar industry set records, both for new installations and employment growth. Under the compromise legislation, the wind and solar industries have accepted that tax credits will gradually step down and disappear over the next several years. The administration should couple an “all of the above” energy strategy with a “steady as she goes” approach, supporting the status quo on energy tax breaks across the board.

Avoid a border adjustment tax

A border adjustment tax, under active discussion by House Republicans, would hit imported products with a 20 percent tax while exempting U.S. exports from the same tax. Prices on imported oil as well as imported equipment used in the petroleum and natural gas industry would all rise (assuming the incidence of tax would be passed on to the consumer), resulting in an increase in core inflation. The border adjustment tax would be best kept away from goods that affect core inflation, including energy.

Clean up the trade war mess

The United States has already lost the trade war with China on clean energy. Today, China has 110 gigawatts (GW) of solar photovoltaic (PV) manufacturing capacity, 30 percent more than current global demand, while the United States only has 1.5 GW of solar PV manufacturing capacity. Since the trade war started in 2011, China’s manufacturing capacity nearly quadrupled, while U.S. manufacturing barely moved.

The U.S. should acknowledge that it lost the trade war and clean up unnecessary tariffs littering the landscape. Negotiating an increase in Chinese investment in U.S. manufacturing would be a good bargaining chip in bilateral trade negotiations.

Show leadership in energy technology

The U.S. should maintain its leadership position in energy technology innovation and not cede it to China or any other country. Through renewed investment in the National Labs of the Department of Energy, the federal government can and should play a key role in supporting both clean energy technology innovation (i.e. solar, wind, bio, geo, nuclear) and fossil fuel innovation (i.e. natural gas fracking, oil shale, clean coal).

Try a revenue neutral carbon tax

Former U.S. Secretaries of State James Baker III and George Shultz outlined an idea for a carbon tax in a recent opinion piece in the Wall Street Journal, making a case for garnering bipartisan support. Many conservatives have warmed to the idea. Making the tax revenue neutral should soften opposition from Republican lawmakers. Their proposal to pay a carbon dividend back to taxpayers largely addresses the core inflation problem discussed above in relation to the border adjustment tax.

A revenue neutral carbon tax that would discourage carbon dioxide emissions without involving the Environmental Protection Agency (EPA) is worthy of serious consideration. Proposing a carbon tax while swinging the axe at the EPA would demonstrate a commitment to environmental stewardship, not through the heavy hand of government regulation, but by the clever hand of tax policy.

Neil Auerbach is chief executive officer of Hudson Clean Energy Partners and executive chairman of Sunlight Financial. He is an advocate for clean energy policy and has testified before the U.S. Senate Committee on Energy and Natural Resources.

The views expressed by contributors are their own and are not the views of The Hill.