There is something on the minds of the International Monetary Fund (IMF), prime ministers (PMs) of most countries, Nobel Prize-winning economists, and the stock markets — the 2024 presidential elections of the United States (US), due early November. Not only will it influence geopolitics in an already turbulent world but also significantly impact India’s energy security. This comes at a time when there is already uncertainty about supply chains and energy independence due to the ongoing Russia-Ukraine conflict and the continuing war in West Asia. New Delhi has managed fluctuations in energy markets in recent years but must prepare for new scenarios.
India’s government, under PM Narendra Modi, has engaged with both the presidencies of the Republican Donald Trump and Democrat Joe Biden. It is also seeing rising trade barriers in the developed world, including the US and the European Union (EU). Trump said recently that tariff was the best word in the dictionary and promised to levy a 20% hike on all imports into the US. The IMF has warned that the “world economy could contract by the size of the combined French and German economies” if the major economies have a broad-based trade war. Democrat candidate Kamala Harris would also keep tariffs, but to what extent remains to be seen. And while 23 Nobel Prize-winning economists call Harris’s economic plan “vastly superior” to Trump’s, would it be a win for India’s energy markets, security, or transition?
India is planning to do what no country has at this scale — develop as fast as possible and simultaneously decarbonise the economy in a warming world. This makes New Delhi a global energy player in its own right, with a unique development trajectory and potential impact on energy markets.
India and the US have deepened their partnership on many issues over the last decade, but the two countries are yet to take a calibrated stand on trade and energy. There has been some progress through multilateral platforms — they have settled seven cases at the World Trade Organization — and via alternative plurilateral initiatives — such as Quad and the Indo-Pacific Economic Framework for Prosperity — or the recent decision to use bilateral ties to expand clean energy supply chains.
The election results may greatly influence future developments. If Trump comes to power, New Delhi faces the threat of a potential India-US trade war and must also prepare to shield itself from the US-China trade war. At the same time, New Delhi should remain alert with a Harris administration, considering that Democrat policies on clean energy and industrial policy have so far been largely inward-looking.
Three crucial developments in the last decade will drive India-US energy relations, no matter who wins.
One, Americans are now net energy exporters. The Russian invasion of Ukraine made Biden, a proponent of clean energy, follow the path of Trump and expand domestic oil and gas production. Meanwhile, India’s energy demand is expected to grow at 2.7% by 2050, compared to the world’s 0.6%. There is an increasing reliance on the US to fill this need — between 2017 and 2024, America became the fifth-largest LNG and crude oil supplier to India.
A Trump presidency will likely allowcontinued domestic drilling for oil andgas and easing regulations. Under Biden,oil and gas production reached its peak, reducing domestic energy prices and increasing exports. So, a Harris administration might maintain the production levels, ensuring supply to India, but could also create higher emission standards for oil and gas companies.
Two, increasing trade barriers imposed by developed countries. Attractive opportunities, subsidies, and over 20 tax incentives for clean energy under Biden’s 2022 Inflation Reduction Act (IRA) have led to a notable shift in investments away from emerging markets and developing economies. Further, several features of the IRA are protectionist such as a local content requirement, which mandates a percentage of the inputs used in manufacturing to come from local sources. Harris sees the IRA as a tool to help the American middle class get jobs and save on energy costs. But parts of the Act are concerning New Delhi. For example, India views the US as a key export market for domestically manufactured solar modules for the next decade.
Trump might not pull back entirely from the IRA since Republican states benefit significantly from it. There is, however, a possibility that his administration might set a cap on tax incentives. Similar inward-looking policies in Australia and the EU could create a supply-demand imbalance, creating a barrier to the international trade of clean energy products. The Indian government needs to increase its domestic deployment targets (to create demand for our manufacturing capacity) while also searching for alternative underdeveloped markets in Africa and South America. Moreover, India and the US can support each other through a green trade pivot: Lowering barriers to procuring inputs into clean tech supply chains; mutually strengthening the competitiveness of low-carbon goods in trade-exposed industries; and harmonising regulations and standards for recyclable materials or sustainable fuels.
And third, both Trump and Harris converge on de-risking US’ supply chains from China and anti-China policies. Increasing regulations against China, both by the US and the EU, could benefit India as an alternative supplier of clean energy goods. Under a Harris administration, India and the US could together strengthen clean energy supply chains in the world, especially in sub-Saharan countries, which hold significant reserves of critical minerals required for cleantech. India and the US could also ensure fair play by leading a rules-based architecture for fuels of the future such as green hydrogen. What all of these would need now is collaboration on technologies of the future such as carbon capture and storage and carbon removal, critical for net zero emissions.
Whether a pro-fossil fuel Trump or clean-energy focussed Harris wins the US elections, India has the opportunity to gain from either scenario. Trump would mean a steady supply of oil and gas needed for near- to mid-term development, and Harris would mean strategic partnerships for cleantech innovation, investment, and green industries. But New Delhi must also deepen ties with the rest of the world — charting its own pathway. It must build ties with other countries and companies to become a critical node in clean energy supply chains and services to ensure its own energy security and become a reliable partner for others.
With inputs from Aarathi Srinivasan, research analyst. Arunabha Ghosh is CEO, Council on Energy, Environment and Water (CEEW).The views expressed are personal
