The recent re-election of Donald Trump as the next president of the United States has dented clean energy prospects in the country. A climate sceptic, Trump has promised to turbo-charge America’s fossil fuel sector and to end offshore wind projects on “day one” of his presidency.
On the campaign trail, he repeatedly criticised President Joe Biden’s flagship climate bill – the Inflation Reduction Act (IRA). He called the $370bn federal programme a “green new scam”, and pledged to “terminate” it.
Some clean energy projects – both planned and ongoing – have been halted, including Canadian solar manufacturer Heliene, which paused a $150m plan to manufacture solar cells in Minneapolis, Minnesota.
The election sent renewable stocks tumbling. NextEra, America’s largest clean energy company, fell by 5 percent. Plug Power – a hydrogen fuel cell developer – shed a fifth of its value, while solar company Sunrun dipped by almost 30 percent.
“Stock prices fell because the market expects less policy support for clean energy,” says Derrick Flakoll, North America policy associate at Bloomberg New Energy Finance (BNEF).
Where Biden made the energy transition a key part of his agenda, Flakoll believes that “Trump will focus more on energy security and resilience … which do not necessarily coincide with renewables”.
Trump has suggested he will introduce considerable cuts to climate-focused government agencies, like the Environmental Protection Agency and the Department of the Interior.
On December 10, he also said he would expedite federal regulatory approvals, including all environmental permits, for any individual or company proposing to invest $1bn or more. The move is widely seen as a boon for the oil and gas industry.
Biden’s green push
President Biden signed the IRA into law in August 2022. Together with provisions to lower drug prices, the bipartisan bill allocated $369bn to reduce greenhouse gas emissions. To date, it represents the largest piece of climate legislation in US federal history.
Most IRA funding has been directed at low-carbon energy projects like wind, solar and nuclear power. It also includes tax rebates for households and businesses to buy electric vehicles (EVs), heat pumps and electric stoves.
The bill successfully unleashed a boom in green energy activity, spurring nearly $450bn in private investments. In 2023, low-carbon technology spending rose by 38 percent (or $239bn) from 2022 levels.
Clean energy jobs grew by 4.2 percent last year – twice the national employment rate.
According to a Carbon Brief study, the IRA was expected to slash US emissions by almost 40 percent by 2035, from 2005 levels. Trump’s re-election looks set to impact that course of change.
Green energy transition ‘already under way’
Though President-elect Trump has publicly called the IRA a “waste”, he has yet to specify which parts of it he will cut. Some analysts view that as encouraging. They also point to the growth in renewables during his first presidency.
From 2017-2020, Trump renewed Obama-era tax credits for green energy projects. Solar and wind installations grew by 32 percent and 69 percent, and EV sales more than doubled during that period.
“Trump isn’t opposed to anything that actually makes money,” says Edward Hirs, energy fellow at the University of Houston.
Hirs also pointed out that a disproportionate amount of IRA funding – roughly three-quarters – has so far gone to Republican-led states.
“Now that presidential elections are over, all eyes are on the 2026 midterms,” said Hirs. “Given the IRA’s concentration in Republican districts, it may prove impossible for Trump to kill the bill.”
In August, 18 congressional Republicans asked House Speaker Mike Johnson to spare efforts to repeal the IRA. They warned that such moves could upend ongoing investments in their states.
Owing to the Republican’s slim majority in the legislature, these votes may be sufficient to save key parts of the bill.
Elsewhere, many US-based companies forged ahead with their own climate plans during the first Trump presidency. That is likely to persist, as changes to accounting systems (especially in Europe and California) now require firms to report their emissions.
Hirs told Al Jazeera, “The trouble for Trump is that the green energy transition is already under way.”
Unwinding incentives
For David Brown, director of the energy transition practice at energy consultancy Wood Mackenzie, said “it is very unlikely that the IRA is repealed full-stop”.
But if all of Trump’s touted IRA modifications – like lowering tax credits and tightening requirements for clean power production – are made, Wood Mackenzie anticipates that one-third less green energy will be generated in the US over the next decade.
Indeed, Brown thinks that “there will be amendments to multiple parts of the IRA”, which would undo “the full chain of incentives that have underpinned [green energy] market growth in recent years”.
Away from the IRA, offshore wind projects are at risk from federal permitting requirements, which Trump has said he’ll deny. Meanwhile, the US’s nascent solar and battery sectors are exposed to risks from trade tariffs on China – a key supplier of parts.
Though Brown remains optimistic about the future of low-carbon technology in the US, he conceded that there is “concern” the sector will be hobbled just as it’s got going. “The focus on achieving net zero won’t be there in the second Trump term,” he said.
Forfeiting global influence
The IRA was designed, in part, to help US companies compete with China in clean energy markets. Looking ahead, Trump’s climate denialism could cement Beijing’s leadership in the sector.
“China already has a head-start,” says Flakoll, the analyst at BNEF. Thanks to state support, it is home to 80 percent of the world’s solar panel supply chain and is expected to make $675bn in clean energy investments this year – roughly the same as Europe and the US combined.
Flakoll also expects Trump’s election to “expand China’s global order book”. According to Johns Hopkins University, binning the IRA will cost the US up to $50bn in lost exports and drive $80bn of green energy investments abroad.
China is well placed to fill the gap. Over the past decade, Xi Jinping’s Belt and Road Initiative has deployed more than $1 trillion in modern infrastructure investment in exchange for natural resources and business access, particularly in the developing world.
Trump takes a more isolationist approach, says Flakoll. As much as possible, “he wants to onshore supply chains”.
Flakoll also thinks that Trump will “retreat from global climate finance and diplomacy”.
The president-elect is planning to re-withdraw from the UN Paris Agreement. He may even pull out of the United Nations Framework Convention on Climate Change (UNFCCC).
Compared with the US, “China has a more certain and comprehensive set of climate policies”, says Flakoll. On top of losing billions of dollars in green energy exports, Trump is at risk of forfeiting geopolitical influence to China if he renounces the fight against climate change.
https://www.aljazeera.com/economy/2024/12/11/trump-will-throw-us-clean-power-into-question?traffic_source=rss
