Trump’s climate policies Insight series: Part 2
This insight forms Part 2 of a four-part insight series on Trump’s move to reshape climate policies and the energy transition in the US and the impact this could have on the green tech sector. This insight discusses the environmental and climate policies Trump has rolled back on since taking office, as well as his commitment to promoting fossil fuels.
Part 1 focuses on the early policy actions the Trump administration has taken since coming into office. Part 3 will discuss how these policies could impact decarbonisation efforts in the USA and globally, while Part 4 will explore the impact these policies will have on the US’s clean technology sector.
Note: Only CRU clients will have access to parts 3 and 4. If interested, please email sales@crugroup.com.
US leaves international climate agreements, cutting funding to climate mitigation efforts
Reversing international climate commitments has been a top priority in Trump’s early climate policy. Trump withdrew the USA from the Paris Agreement for the second time shortly after taking office. This move signals a retreat from global climate leadership, which could undermine US credibility in international negotiations and cast doubt on future climate finance contributions. The US’ first withdrawal from the Paris Agreement in 2020 had minimal impact on global decarbonisation trends – however, this second exit provides an opportunity for other major economies, like China and the EU, to spearhead climate initiatives.
As well as withdrawing from the Paris Agreement, Trump has halted financial contributions to several climate mitigation and adaptation efforts, revoking the US international climate finance plan. While he did not withdraw the US from the UN Framework Convention on Climate Change (UNFCCC), the administration has repealed the $4 bn pledged to the Green Climate Fund, severely affecting funding for developing countries that rely on US contributions for climate resilience. In 2024, the USA provided 12% of total climate finance from developed nations, but this support is now at risk of being removed.
Clean energy investments at risk as Trump halts IRA funding
The Trump administration have suspended new funding under the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA). The IRA and the IIJA have driven over $300 bn in clean energy investments since their creation, representing the largest federal commitment to renewable energy projects in US history, with record levels of investment being directed towards battery production, electric vehicles (EV), hydrogen and carbon capture projects. Many of these investments have been in Republican-led states where they have benefited job creation, infrastructure investment and improved economic activity. However, despite these benefits, the IRA faces criticism from Trump and his administration, suggesting it is wasteful government spending.
The disbursement of IRA funds has been paused under Trump’s new ‘Unleashing American Energy’ executive order, putting grants, loans and tax incentives for clean technologies at risk. Approximately 60% of funding for the IRA comes from tax credits. However, Trump would require legislation to be passed through Congress to completely eliminate or change the tax credits. That being said, he will likely be able to narrow the credits, with the new tariffs also potentially raising project costs, adding uncertainty to the market with the potential to slow the pace of US decarbonisation.
Trump’s administration is also expected to make regulatory changes and legislative amendments to the IRA, including potentially:
- Tightening eligibility for clean energy tax credits, making it harder for projects to qualify.
- Introducing stricter domestic sourcing rules for EV tax credits, which could disrupt supply chains.
- Accelerate expiration dates for key tax incentives, reducing long-term investment certainty.
- Redirecting unspent IRA funds (n.b. currently estimated at $105 bn) toward fossil fuel projects or other priorities.
- Weakening Treasury rules that govern tax credit implementation, making them less effective.
These changes could hinder the rapid expansion of renewables and emerging technologies, making it more difficult for the USA to meet its emissions reduction targets.
Trump weakens renewable expansion beyond the IRA, suspending offshore wind leases
Trump’s aim to stop the development of renewable technologies has gone beyond defunding the IRA, particularly in the wind sector. One of the first actions he took when coming back into office was to sign an executive order, freezing approvals for leasing federal land for offshore wind projects and stopping the renewal of permits for existing projects. The presidential memorandum withdraws all areas within the Outer Continental Shelf (OCS) from wind energy leasing until further notice and also outlines that a comprehensive review of wind energy permitting will take place. The review will evaluate the ecological, environmental and economic impact of existing wind energy leases to identify any legal basis for termination or removal.
The administration has justified the memorandum by suggesting that wind energy could have negative impacts on navigational safety interests, national security, commercial interests, transportation interests and marine mammals. However, it outlines that oil, gas, minerals and environmental conservation are not impacted by the memorandum.
These policies present significant setbacks for offshore wind, including:
- Freezing all new offshore wind leases, stalling projects that were expected to drive significant growth in US renewable capacity.
- Creating uncertainty for developers and investors, as existing wind leases may be reviewed or terminated
Onshore wind is less directly affected, as most projects are on private land, but IRA funding freezes and increased federal scrutiny could still slow development.
Industry leaders have expressed concerns that these measures could increase electricity costs for consumers and hinder infrastructure development, particularly in sectors such as artificial intelligence that are expected to drive a significant increase in electricity demand.
Domestic fossil fuel production boosted through the ‘unleashing American energy’ order
Expanding fossil fuel production to “drill, baby, drill” has been the centre of Trump’s energy policy from the start. He sees this as essential for economic growth, job creation and energy security. By declaring a ‘National Energy Emergency’, Trump seeks to accelerate fossil fuel production while rolling back environmental regulations that could hinder oil, gas and coal extraction, through the ‘Unleashing American Energy’ executive order.
Some of the key actions he has already taken include:
- Lifting restrictions on drilling in federal lands and waters, including the Alaska National Wildlife Refuge.
- Restarting approvals for liquefied natural gas (LNG) exports and prioritising Alaskan LNG for domestic and international markets.
- Rolling back methane regulations on oil and gas operations, reversing recent efforts to curb emissions from fossil fuel production.
- Accelerating permits for new fossil fuel infrastructure, including pipelines, refineries, and export terminals.
The Trump administration has justified these policies by saying they will reduce the US’ reliance on foreign energy sources and drive down overall energy costs. However, they have faced some criticism, with some suggesting that this approach will undermine the transition to a cleaner energy system, expose the US economy to long-term risks and even push up energy prices, particularly with the suspension of offshore wind leases.
Opening the Alaska National Wildlife Refuge for oil and gas drilling has faced a lot of controversy over concerns from environmental groups and indigenous people of habitat destruction and environmental impacts. Additionally, Trump’s reduction of methane regulations also raises concerns about increased greenhouse gas emissions, as methane is a potent contributor to climate change.
While the Trump administration’s policies prioritise fossil fuel extraction with the aim to boost domestic output, they create regulatory uncertainty. Many companies have started to shift towards renewable technologies, with many Republican-led states benefitting from improved economic activity from initiatives resulting from the IRA. State-led initiatives and market forces have the potential to continue to drive the transition towards clean technologies. However, these federal rollbacks will slow overall progress.
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