The political tides are shifting once again, and with them, the future of clean energy investments hangs precariously. With President Joe Biden's administration having ushered significant financial support for clean energy through the Inflation Reduction Act, record levels of investment have flowed toward renewable projects. Yet, as President-elect Donald J. Trump prepares to take office, questions loom about the direction these investments might take under his leadership.
According to data from the Rhodium Group and M.I.T., clean investment expenditures, which encompass renewable energy, electric vehicles, batteries, and solar panels, soared to $71 billion by the third quarter of 2024, following Biden's policies promoting the clean energy sector. This boom raises the pivotal issue: Will Trump, who previously labeled Biden's approach as a “green new scam,” dismantle the subsidies and regulations fostering this growth?
Market analysts had noticeable reactions right after the election. Clean energy stocks plummeted, alongside oil company shares which rebounded, reflecting investors' expectations of drastically altered economic landscapes under Trump. Analysts cite Trump’s compelling need to extend the tax cuts initiated during his presidency, which may force cuts elsewhere, potentially targeting clean energy tax credits projected to be worth approximately $350 billion over the next three years, as stated by the Congressional Joint Committee on Taxation. If these subsidies are repealed, many projects could transition from financially viable to burdensome costs.
Trump's plan seeks not only to reverse Biden's green policies but to aggressively pursue what he deems as “cheap, abundant energy.” Industry experts speculate on the challenges he might face, as undoing significant appropriations or signed contracts may involve complex Congressional negotiations. Travis Fisher, director of energy and environmental policy studies at the Cato Institute, pointed out, “Congress would have to repeal some of these plans.” He warned, “Many grants already dispensed would be difficult to claw back.”
Supporters of Trump posit optimism, citing the new administration's potential to realign energy policies effectively. Geoffrey Pohanka, chair of the National Automobile Dealers Association, remarked, “When Trump promises something he usually delivers, and I expect to see significant changes.”
Among the immediate targets for Trump would likely be the Biden administration's restrictions on federal drilling leases. The Biden administration aimed to minimize new exploration, particularly influencing Alaska's oil reserves, where Biden initially suspended leases instated during Trump’s term but recently announced new auction blocks for exploration.
While Trump contemplates substantial changes to EPA policies, his strategy also involves electric vehicle (EV) incentives and mandates which have begun to hit the public's acceptance. The government aimed for 33 million EVs on the roads by 2030, but mounting losses from automotive giants like Ford and GM, who face considerable financial challenges during their EV transitions, hint at faltering consumer enthusiasm.
Trump may tackle Biden's EV subsidies efficiently by dismantling tax credits which account for 85% of EVs registered on U.S. roads, as Pohanka detailed, noting the repercussions for the automotive industry’s commitment to new environmental mandates. Changes could fundamentally reshape how American consumers perceive and engage with electric vehicles.
Further along, Trump’s administration might stall Biden’s ambitious national electric vehicle infrastructure plan aimed at creating 500,000 EV charging stations across the country. Critics label this program over-optimistic, speculating about its stagnant funding and prospective reliance on private-sector measures to fulfill such goals.
The broader federal energy policy is set for significant scrutiny, particularly the operational integrity of agencies such as the EPA and its expanded budget under Biden’s leadership. While Biden’s initiatives established green operational funding, Republican insiders, including Mandy Gunasekara, who served under Trump, assert the necessity to scale back such expenditures. Gunasekara emphasized how “unobligated funds could be redirected.”
Trump's expected reforms would predominantly face litigation hurdles, stemming from alterations targeting already granted projects and appropriations. Bakst added, “While it will be difficult to eliminate subsidies, legislators must prioritize the everyday American above special interests.”
Beyond reversing the Biden administration, energy experts foresee the potential of the Trump administration to evaluate existing bureaus and their inflated budgets, like those seen at the Department of Energy and Environmental Protection Agency, which experienced budgetary increases exceeding 400% during Biden's term.
Echoing this sentiment, H. Sterling Burnett, from the Heartland Institute, identified potential savings by curbing federal spending, emphasizing how the current state of energy policy reflects significant government expansion. He noted, “Closing vast, unnecessary and unconstitutionally justified departments would save money.” This principle aligns with Trump’s broader political narrative targeting bureaucratic excess.
Currently, with the political winds shifting along with the clean energy industry’s fortunes, the onslaught of transformational energy policies looms. How the new administration charts its course could not only reshape America's energy strategies but also alter the financial stakes of industries reliant on clean energy funding.
