The US government’s recent decisions to withdraw from the Paris climate agreement and relax regulations on production and use of fossil fuels have added a new layer of complexity to the evolving global energy landscape as countries strive to strike a balance between energy security, economic growth and environmental sustainability. A significant player in the global energy landscape, the US accounted for approximately 14% of the world’s installed generation capacity as of 2023. Renewable energy sources made up 32% of the country’s generation capacity. Notably, the per capita energy consumption in the US is four times the global average of at 3.6 MWh. India weighs in at a much lower 1.2 MWh. In the context, the US government’s withdrawal from the Paris climate agreement marks a substantial departure from previous climate commitments and could potentially be seen as an opportunity for others to relax their efforts in reducing carbon emissions, thereby slowing down advancements in addressing climate change. The timing of the move is especially critical, coming after the UN COP29 conference where developing nations pushed for an increase in climate finance to $1.3 trillion per year but the final agreement settled at a much lower target of $300 billion per year until 2035. Given that the previous $100 billion annual target, set in 2009, was only met for the first time in 2022, the US withdrawal is expected to intensify the challenges in meeting the climate finance targets. Further, the Trump administration is prioritising energy security by easing regulations on oil and gas production, lifting restrictions on resource extraction and declaring a national energy emergency to expedite approvals for fossil fuel, biofuel, nuclear and critical mineral infrastructure projects. For India, the US focus on fossil fuels presents both opportunities and challenges. As a country heavily reliant on fossil fuels for its energy needs, India could see its dependence on US energy supplies increase. Between 2017 and 2024, the US was the fifth-largest supplier of liquefied natural gas (LNG) and crude oil to India. The US policy shift favouring fossil fuels could ensure stable supply to India, mitigating short-term energy security risks. As for opportunity, India could attract more climate-focused financing from global markets that are shifting away from fossil-fuel investments in response to the US policy changes. Figure: Renewable energy capacity addition in key international markets, GW Source: IRENANote: Figures include solar, wind, hydro, bioenergy and geothermal sources On the flipside, the US policy shift has a particularly negative impact on wind power. The new restrictions include halting new offshore leasing, suspending federal leasing and permissions, and an indefinite ban on new wind project approvals. While the global impact of this move might be limited, it will certainly slow the development of offshore wind projects, which are already facing challenges due to high costs and project delays. The likely impact on the solar sector is unclear. The Inflation Reduction Act (IRA) of 2022 had spurred significant growth in the manufacturing of solar equipment in the US, driving adoption. Currently, solar module production prices in the US range between $0.22 and $0.30 per Watt peak (Wp), nearly three times the price of Chinese modules and almost double that of Indian ones. However, with the administration putting the IRA incentives on hold, there is haze over the trajectory. The US is a key export market for Indian solar manufacturers, accounting for 97% of the solar module exports in fiscal 2024 and the first half of fiscal 2025. However, with the US government emphasising domestic manufacturing and increasing tariffs, India must diversify its exports. While Canada, South Africa, Nigeria and Turkey have emerged as significant export markets for India over the past two years, Indian manufacturers will have to enhance cost competitiveness and explore new trade partnerships to compete with China in the international markets. To sum up, the US energy policy shift creates significant uncertainty globally. Its withdrawal from the Paris Agreement weakens global climate action efforts and complicates climate finance commitments. The focus on fossil fuels, while potentially beneficial for some nations in the short term, is in conflict with the long-term need for a clean energy transition. In the milieu, India should leverage the global focus on clean energy to attract investments and accelerate its own transition to a more sustainable energy future. The post Navigating the US-led energy reset appeared first on BRIDGE TO INDIA.
The US government’s recent decisions to withdraw from the Paris climate agreement and relax regulations on production and use of fossil fuels have added a new layer of complexity to the evolving global energy landscape as countries strive to strike a balance between energy security, economic growth and environmental sustainability.
A significant player in the global energy landscape, the US accounted for approximately 14% of the world’s installed generation capacity as of 2023. Renewable energy sources made up 32% of the country’s generation capacity. Notably, the per capita energy consumption in the US is four times the global average of at 3.6 MWh. India weighs in at a much lower 1.2 MWh.
In the context, the US government’s withdrawal from the Paris climate agreement marks a substantial departure from previous climate commitments and could potentially be seen as an opportunity for others to relax their efforts in reducing carbon emissions, thereby slowing down advancements in addressing climate change.
The timing of the move is especially critical, coming after the UN COP29 conference where developing nations pushed for an increase in climate finance to $1.3 trillion per year but the final agreement settled at a much lower target of $300 billion per year until 2035. Given that the previous $100 billion annual target, set in 2009, was only met for the first time in 2022, the US withdrawal is expected to intensify the challenges in meeting the climate finance targets.
Further, the Trump administration is prioritising energy security by easing regulations on oil and gas production, lifting restrictions on resource extraction and declaring a national energy emergency to expedite approvals for fossil fuel, biofuel, nuclear and critical mineral infrastructure projects.
For India, the US focus on fossil fuels presents both opportunities and challenges. As a country heavily reliant on fossil fuels for its energy needs, India could see its dependence on US energy supplies increase. Between 2017 and 2024, the US was the fifth-largest supplier of liquefied natural gas (LNG) and crude oil to India. The US policy shift favouring fossil fuels could ensure stable supply to India, mitigating short-term energy security risks. As for opportunity, India could attract more climate-focused financing from global markets that are shifting away from fossil-fuel investments in response to the US policy changes.
Figure: Renewable energy capacity addition in key international markets, GW
Source: IRENA
Note: Figures include solar, wind, hydro, bioenergy and geothermal sources
On the flipside, the US policy shift has a particularly negative impact on wind power. The new restrictions include halting new offshore leasing, suspending federal leasing and permissions, and an indefinite ban on new wind project approvals. While the global impact of this move might be limited, it will certainly slow the development of offshore wind projects, which are already facing challenges due to high costs and project delays.
The likely impact on the solar sector is unclear. The Inflation Reduction Act (IRA) of 2022 had spurred significant growth in the manufacturing of solar equipment in the US, driving adoption. Currently, solar module production prices in the US range between $0.22 and $0.30 per Watt peak (Wp), nearly three times the price of Chinese modules and almost double that of Indian ones. However, with the administration putting the IRA incentives on hold, there is haze over the trajectory.
The US is a key export market for Indian solar manufacturers, accounting for 97% of the solar module exports in fiscal 2024 and the first half of fiscal 2025. However, with the US government emphasising domestic manufacturing and increasing tariffs, India must diversify its exports. While Canada, South Africa, Nigeria and Turkey have emerged as significant export markets for India over the past two years, Indian manufacturers will have to enhance cost competitiveness and explore new trade partnerships to compete with China in the international markets.
To sum up, the US energy policy shift creates significant uncertainty globally. Its withdrawal from the Paris Agreement weakens global climate action efforts and complicates climate finance commitments. The focus on fossil fuels, while potentially beneficial for some nations in the short term, is in conflict with the long-term need for a clean energy transition.
In the milieu, India should leverage the global focus on clean energy to attract investments and accelerate its own transition to a more sustainable energy future.
The post Navigating the US-led energy reset appeared first on BRIDGE TO INDIA.
