Since starting his second term, US President Donald Trump has lived up to expectations when it comes to energy policy. He has wasted no time in seeking to unravel government support for the deployment of low carbon technology, or what he calls “the greatest scam in the history of any country”.
An executive order declaring a national energy emergency and seeking to promote energy security through development of domestic, traditional (oil and gas) energy supply has been executed.
Trump has also announced his intention to withdraw from the Paris Agreement (again) and payments under the Biden government’s Inflation Reduction Act (IRA) – a flagship programme put in place in 2022 to provide tax incentives of more than $700bn (£565bn) targeted at reducing emissions by up to 11 per cent – have been paused.
It does not stop there. Trump has promised to reduce “growth-stifling” environmental legislation, including revising carbon targets. US foreign assistance payments have also been stalled, including significant transfers to support the energy transition in developing countries. It’s a depressing list of developments for anyone who cares about the state of the planet we will be leaving for the next generation.
Could state support limit the impact?
It might not, however, be as bad as it seems. Trump’s stance today is no different to the one taken in his first term – a term in which clean energy investments first began to outpace that of oil and gas. In many locations state-level support for decarbonisation compensated for a lack of federal support.
That is happening again: New York has signed several climate bills into state law, California is preparing to challenge federal laws that conflict with its policies, and Vermont is restoring floodplains. “We Are Still In” (a joint declaration of support for climate action) mobilised almost 4,000 American leaders in response to Trump’s first withdrawal from the Paris Agreement. Under its new guise of “America is All In”, it is still going strong today with more than 5,000 leaders across 50 states.
The IRA, together with the bipartisan infrastructure law, are critical to supporting America’s decarbonisation and infrastructure development more broadly. The IRA is the largest federal investment in addressing climate change in US history, and so is also unlikely to be straightforward to unwind.
Several Republican states stand to significantly benefit from support under the IRA. They are therefore likely to oppose any unwinding of subsidies and be unwilling to risk the associated lost investment and jobs. In January, eight Republicans testified against reducing IRA credits and a recent analysis by Oxford University’s Smith School of Enterprise and the Environment concludes Republican support for the IRA could make it impossible to repeal.
What makes economic sense?
Investing in clean energy, in many cases, now simply makes economic sense. In the same way that energy companies have responded to Trump’s “drill baby drill” call by pointing to an oil price narrowly above the marginal production cost, and prospect of reducing oil demand from China creating little incentive to increase production, a shift to renewable electricity such as solar and wind is cost competitive when compared to traditional fossil fuel generation and provides domestic supply that supports energy security.
The US transition to clean energy is well underway and has significant momentum, bringing with it jobs and investment. Texas leads the way in installed wind capacity. In 2023, wind energy provided more than 28 per cent of the state’s generation across circa 240 projects and in preceding years was responsible for more than 25,000 jobs and an estimated contribution to state GDP of $1.7bn. In relation to energy policy at least, economics trumps Trump.
America first
Global efforts to address climate change will continue notwithstanding Trump. And let’s not forget it would be entirely consistent with his own “America first” policies elsewhere to ensure the US does not cede market share in clean energy industries to China or Europe, or risk diverting low carbon targeted investment to other geographies.
Extreme weather events are becoming more frequent and damaging. The wildfires that devastated Los Angeles in January are the most recent example. Hurricanes Helene and Milton contributed to insured losses from extreme weather events, surpassing $100bn for the fifth consecutive year, according to SwissRe.
Whilst any single event does not prove a trend, climate is a measure of long-term average weather, and this average has without doubt moved. There is, surely, a point where the ‘America first’ policies adopted by Trump are seen to fly in the face of the actual action needed to ensure the safety and stability of US citizens by mitigating and adapting to increased incidence of weather events that risk hurting them.
So there remains hope. As relevant as the theory was in 1965 when economist Ester Boserup first set it out in relation to agricultural growth, necessity will prove to be the mother of invention when it comes to addressing the ongoing issue of climate change. This will continue, and will involve the US.
As the world’s leading economy and innovator, the US will find a way of being part of, and will benefit from, this invention.
Phil Kent is chief executive of Gravis
