National Council of Applied Economic Research
Opinion: Souryabrata Mohapatra.
With the re-election of Donald Trump, the United States is poised to enter a critical peri-od of climate policy retrenchment. Trump’s policies promise increased fossil fuel production and the reversal of major clean energy investments, threatening global efforts to combat climate change.
Trump’s proposed energy policies suggest a substantial set-back for climate action. His administration aims to roll back the Inflation Reduction Act (IRA), which has allocated billions of dollars in tax credits for renewable energy projects and EV incentives, spurring substantial private sector investment. In 2024 alone, global clean energy spending hit $2 trillion, double the amount invested in fossil fuels. Yet, Trump’s proposed policies could throttle US participation in this growth, reinforcing dependency on fossil fuels rather than joining the global trend toward clean energy, where renewables now constitute the most economical choice in many regions.
The implications of a second US withdrawal from the Paris Agreement-a prospect Trump has not ruled out-are pro-found. When Trump first exit-ed the Agreement in 2017, it allowed other nations to delay action under the guise of US non-participation. If Trump follows through again, it could stymie global climate funding negotiations, particularly for developing countries. Although the US has commit-ted to contributing to a $100 billion global fund for climate adaptation and mitigation, the administration’s climate skepticism puts these financial obligations at risk. Without US leadership, experts fear slower progress on international agreements crucial to keeping global warming within the 1.5°C target.
Domestically, Trump’s policies would deepen the US dependency on fossil fuels. His administration’s strategy emphasises maximising domestic oil and gas production, particularly from reserves Trump calls “liquid gold.” However, the fossil fuel industry’s employment numbers tell a different story: the US green economy supports over 10 million jobs compared to 300,000 in fossil fuel industries. The economic case for green energy is clear, yet Trump’s vision includes reestablishing subsidies for oil, coal, and natural gas, effectively sidelining the renewable sector In 2023, electric vehicles comprised 18 per cent of global car sales, a significant jump from just 2 per cent five years prior. Yet, Trump has criticised electric vehicles and promised to impose tariffs on imported Chinese EVs, potentially raising prices and diminishing EV adoption in the US market. These policies might inhibit US competitiveness in EV manufacturing and battery technology, where other nations-especially China-have taken the lead. Another concerning proposal from Trump’s allies involves dismantling federal programs that support cli-mate research and environ-mental regulation. Plans under “Project 2025” advocate for defunding key agencies like the National Oceanic and Atmospheric Administration (NOAA) and scaling back the Environmental Protection Agency’s greenhouse gas monitoring. Without federal sup-port for climate research and mitigation, the US could lose critical insight into atmospheric changes. In a geopolitical context, Trump’s reelection could weaken the US influence in global climate governance.
Given the US role in controlling financial institutions that facilitate climate finance, its withdrawal or failure to meet commitments could reduce climate funding, a key agenda item at the COP29 summit in Baku. As the world’s largest historical emitter, the US has a responsibility to lead by example. Yet, with US emissions having only fallen 5 percent since 1990-compared to the EU’s 35 per cent reduction-the country’s role as a climate leader is increasingly tenuous under Trump’s leadership. Despite federal opposition, analysts believe that state governments, corporations, and financial markets will continue advancing climate action, albeit at a potentially slower pace.
Over the past decade, bipartisan support for renewable energy has increased, driven by job creation and energy independence rather than environmental motives alone. With or without federal backing, the economic engine for clean energy remains robust, with new manufacturing plants and energy storage facilities rapid example. Yet, with US emissions having only fallen 5 per cent since 1990 compared to the EU’s 35 per cent reduction-the country’s role as a climate leader is increasingly tenuous under Trump’s leadership. Despite federal opposition, analysts believe that state governments, corporations, and financial markets will continue advancing climate action, albeit at a potentially slower pace.
Over the past decade, bipartisan support for renewable energy has increased, driven by job creation and energy independence rather than environ-mental motives alone. With or without federal backing, the economic engine for clean energy remains robust, with new manufacturing plants and energy storage facilities rapidly coming online, particularly in states that benefit from IRA-funded projects. Given that federal policy directly influences emissions standards, environmental regulations, and international commitments, the pace of progress could indeed slow, with repercussions for both the US economy and global climate goals. If Trump’s policies take effect, is it likely that the US will fall even further behind on inter-national climate standards? What risks will US industries face if they resist the global shift to cleaner energy, only to find themselves competing in a marketplace that increasingly penalises high-emission practices?
The author is a faculty member at NCAER in New Delhi; Views are personal.