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Writer's pictureJonathan Rincon Lopez

Can a second Trump presidency upend climate action progress in the USA?

Updated: Jul 8

As the United States gears up for another high-stakes election year, the political landscape is more tumultuous than ever. The spotlight is currently on the legal drama surrounding former President Donald Trump, who is vying for a return to the Oval Office but has recently become America’s first ever ex-President to be convicted as a felon. Trump faces 34 charges of falsifying business records—as the 12 person jury ruled on May 30th in Manhattan. However, in true Trump fashion, this has barely deterred his campaign ambitions or his loyal baseas he still holds an 0.8 point lead over Biden according to the latest polls; setting the stage for an election season marked by intense scrutiny and unparalleled controversy. As the nation braces for the unfolding political theatre, the implications of Trump's legal battles on his presidential bid remain a focal point of discussion. But today, we are diving into how a second Trump presidency would affect the progress on decarbonization and climate action the second most polluting nation in the world has made during Biden’s term. 


Last time Trump took office, he created various types of headaches for us tree-huggers, including rolling back more than 100 environmental regulations that had been set up to protect clean air, clean waterways, and wildlife; but today we are focusing on the Inflation Reduction Act (IRA). The IRA is the most significant piece of climate-related legislation to date. Enacted in August 2022, the Act mobilizes an unprecedented US$369 billion in climate-related funding, marking the largest federal investment in clean energy and climate resilience in US history. This sweeping initiative directs substantial resources towards renewable energy projects, electric vehicle infrastructure, and the reduction of greenhouse gas emissions. Additionally, it bolsters energy efficiency programs and climate-smart agricultural practices, with targeted investments aimed at transitioning the economy towards greener technologies. All of this is mostly done through a mix of subsidies, grants, and tax breaks for all types of clean technology. Trump advisors, political analysts, and he himself have made it abundantly clear that if the ex-president were to regain office, this landmark legislation would be in his crosshairs, with Trump calling it “the biggest tax hike in history.”


As of March earlier this year (around 21 months after the act had been enacted), approximately US$34 billion in federal climate funding (or nearly 10% of the total funding earmarked for climate) from the IRA had been rolled out; mostly in the form of tax credits. Importantly, analysis shows that for every dollar that the government disbursed into climate funding these past few years, the private sector invested US$5.50. Meaning that in total, by around September 2023, a total of US$240 billion of new climate finance had been injected into the US economy since October 2022. If you have been reading the Decarb Digest for some time, you will know that I like to put figures like this into perspective rather than leaving them as statements. This US$240 billion is over three times the amount of climate finance that was mobilized in the country back in 2021. And back then, it had taken seven years for the total climate finance to more than triple. All in all, this means that climate finance has grown at a cumulative rate of 48% per year since 2021, primarily due to the IRA, while it was growing at a rate of around 16.8% before 2021. What’s more, the US$240 billion in 2023, represents 96% of the estimated target annual investment that the country requires to reach net-zero by 2050, pointing to the massive success of the IRA in helping the United States reach its decarbonization goals.  



     Total Climate Finance Investment (Public and Private) in the United States


With that important background out of the way, now we can turn to the question of “how much of the IRA is at risk of being rolled back by a new Trump administration?” Firstly, repealing the entire IRA would take an act in Congress and significant effort from an adversarial administration. It is more likely that some pieces of it would be specifically targeted for weakening, while others would be left alone solely because of the complexity of changing them. 


On the side of the more Trump-resistant aspects of the IRA, we have: 

  1. Tax credits: Many of the Act's clean energy investments are embedded in the form of tax credits and incentives for renewable energy projects and electric vehicles. Once enacted, these tax provisions are typically more difficult to repeal because they directly impact financial planning and investments already underway. The exceptions to this are sections which have clauses that are open to interpretation, such as 30D - the consumer EV tax credit. Luckily the tax credits funding represents approximately US$232 billion of the total US$369 billion (or 63% of the total funding), meaning the majority of the Act’s funding should be relatively insulated once these credits are passed into the tax code. 

  2. Long-term Contracts and Grants: Funding allocated through long-term contracts and grants which have already been entered into may be legally binding and thus harder to cancel without facing significant legal and financial repercussions.

  3. State-Level Implementation: Some provisions of the Act are implemented at the state level, where states have autonomy to continue pursuing their clean energy goals regardless of federal policy shifts. States like California and New York, for instance, have robust clean energy and climate policies that align with the Act's objectives. An example of this is the US$7 billion in funding that is being provided directly to states through the Greenhouse Gas Reduction Fund.  

  4. Bipartisan-backed investments: Some incentives and funding will be going to technology and improvements that are likely to be backed by both sides of the aisle, which will likely mean Trump will stay away from these. An example could be programs and funding aimed at improving grid infrastructure. 


And on the side of the aspects of the IRA that are more at risk of being targeted by a new Trump administration, we have: 

  1. Regulatory Programs and Standards: It is easier for an administration to roll back or weaken associated regulations and standards aimed at reducing greenhouse gas emissions and promoting clean energy. This includes: Power Plant Emission Standards—the Clean Power Plan's successor regulations, which limit carbon emissions from power plants; and Vehicle Fuel Efficiency Standards.

  2. Discretionary funding and grants: these refer to grants and loans where the awardees are chosen from a pool of candidates based on a review process. A new Trump administration is likely to target federal research and development programs and energy efficiency grants in this category. 

  3. Tax credit details with geopolitical implications: Section 30D of the IRA is the consumer tax credit for purchases of new EVs. But the section also bars vehicles from being applicable for the US$7,500 credit, if EV battery components are sourced from “foreign entities of concern.” Clauses like these can be open to interpretation, which a new administration could target for their own agenda.


But in addition to these less insulated parts of the IRA, a new Trump administration could also try to hinder the IRA through executive actions, complicating administrative processes to enact implementation delays, and initiating strategic legal challenges. 

All in all, we can only ascertain as to what Donald Trump’s plans might be when it comes to the IRA if he were to come back to office. However, we can have a high-level of confidence that Trump will not try to, and would not be successful, in repealing the entire thing. He would likely go after parts of the Act but will face ever-growing difficulties in this task. Much of the tax credits have already been rolled out and are difficult to change back. At the same time, significant private investments have been made, and jobs have been created, tied to the current or expected funding from the IRA—an estimated 170,000 new jobs have been created as of Q1 2024. This will make it politically difficult for a new administration to attack those parts of the Act. I’m personally confident that most of the IRA, and related funding, will stand up to scrutiny since there is only so much that can be done when trying to push back the waves of inevitable change.

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