The first 100 days of the Trump administration’s second term have brought a swift and sweeping overhaul of US federal climate and energy policy. From executive orders to federal lawsuits against state-level climate policies, the administration has acted with urgency to reverse the low-carbon momentum built under President Biden. While legal challenges are underway, the policy shift has already sent shockwaves through US clean technology manufacturing and global climate cooperation. How much of a setback this represents for the US and global energy transition will depend on market conditions for low-carbon technologies and policy action in the rest of the world.
Climate Backtracking by Executive Orders
Within days of taking office, President Trump issued a flurry of executive orders to dismantle key components of Biden-era climate policy. These included:
- Withdrawal from the Paris Agreement (again), halting US participation in the global climate accord and any associated financial commitment;
- Halt and recovery of funds previously allocated to green banks established under the Inflation Reduction Act (IRA), in some instances using criminal law as the legal basis;
- Suspension of renewable energy project authorizations on federal lands for 60 days. While solar and geothermal reviews have resumed, wind projects remain in limbo;
- Declaration of a National Energy Emergency, aimed at expanding fossil fuel extraction and deeming federal and state clean energy policies ‘threats’ to energy security.
These moves, largely driven by executive action rather than new legislation, are reshaping the policy landscape—one in which the federal government is no longer a driver of decarbonization but a barrier to it.
Global Efforts Undermined
The US exit from the Paris Agreement and related international platforms—such as the Coalition of Finance Ministers for Climate Action and the Network for Greening the Financial System—represents a substantial blow to global climate diplomacy. The vacuum left by the US will require coordinated leadership from the EU and China to keep the energy transition on track.
Leadership by large emitters and major markets plays a crucial role in the global energy transition. Many multinational firms make investment and product development decisions based on the policy landscape across all the markets they serve—not just the United States. When firms face stringent environmental standards in one jurisdiction, they may choose to develop products that comply with those higher standards and sell them globally—a phenomenon known as ‘trading up’. Consequently, the policy stance of jurisdictions such as California, the European Union, or China—each representing sizable markets—can significantly influence global practices and technological developments.
Encouragingly, both the EU and China are stepping up. The EU has reaffirmed its commitment to net-zero by 2050 and is preparing its 2040 emissions target. China’s President Xi Jinping recently announced that China’s next Nationally Determined Contribution (NDC) will include all greenhouse gases, not just CO₂—a significant policy expansion. But such commitments will need to be confirmed and translated into action, especially as the September 2025 NDC update deadline approaches.
What This Means for US Emissions
While models suggest that US emissions will continue to decline through 2040 even with a full repeal of the IRA, the pace of reduction will be markedly slower. The IRA had positioned the US to reach approximately 3.6 Gt CO₂ emissions by 2030. Without it, emissions are expected to settle around 4.2 Gt.
Can state policies fill the gap? Not entirely. States like California (with its Cap-and-Trade program) and the Northeast/New England states (through the Regional Greenhouse Gas Initiative) have historically led on climate. But federal backing offers scale, credibility, and fiscal heft that no state can match. And with the federal government now suing states over their climate policies, even these efforts face headwinds, creating uncertainty detrimental low carbon investments.
A Sudden Reversal for Clean Tech Investments
The IRA had incentivised unprecedented investment in US clean technology manufacturing. In Q4 2024 alone, over $16 billion was invested in new manufacturing capacity. Now, that momentum is reversing. The first quarter of 2025 saw a drop in investment and $6.9 billion worth of clean tech manufacturing projects cancelled—the highest quarterly cancellation value on record. These cancellations reflect investor uncertainty, and a weakened demand outlook shaped by rapidly changing federal policy.
The Inflation Reduction Act on the Chopping Block
The centerpiece of US climate policy under Biden—the Inflation Reduction Act—has been under direct attack and specific provisions have already been repealed. For instance, the House and Senate voted to repeal the methane fee, a signature provision penalizing excessive methane emissions. Now, a Republican-controlled Congress is seeking to pass a budget bill whose proposed provisions would all but rescind the key tax credits of the IRA. These changes are sought in part to fund an extension of the provisions from the Trump 1.0 2017 Tax Cuts and Jobs Act, which are otherwise set to expire in 2025, at an estimated cost of $4 trillion over ten years.
Long-Term Consequences
As Oxford Economics analysis has shown, repealing the IRA would have modest macroeconomic effects in the short term but could have long-lasting consequences for US productivity. In addition, analysis by Rhodium suggests that (i) household energy costs could rise in 2030 and 2035 due to delayed deployment of energy-efficient technologies; (ii) sector-specific impacts will be significant, especially in batteries, electric vehicles, solar, and carbon capture; and (iii) that grid-scale battery storage installation may fall 30% short of forecast levels without IRA incentives.
There is also the broader question of US competitiveness in clean technology. China and the EU are staying the course with steady support for clean technology, including through industrial policy. If the US continues to retreat, it risks losing not only market share but also technical knowledge, manufacturing capacity, and clean energy jobs—many of which were just beginning to take root.
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