The re-election of Donald Trump as president of the United States starting January 20 has cast a dark shadow over the querulous COP29 United Nations climate conference in Baku. Will Trump, who has dismissed global warming as a hoax during his campaign, reverse the sustainability initiatives of his predecessor, Joe Biden, and sap momentum from global efforts to curb greenhouse emissions? Or is the decarbonisation transition irreversible even without the support of the US government?
For many of the participants gathering in Baku, Azerbaijan, for the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change, Donald Trump’s stunning presidential election victory in the United States days earlier represents a threat that might not only hobble the global movement toward decarbonisation of the global economy but send it screeching into reverse.
The COP29 conference already appeared ill-starred before it ended in recriminations about the insufficiency of rich countries’ proposed $300bn a year contribution by 2035 to emission reductions and climate resilience in developing countries. Many participants already were appalled that an event focused on the effects of carbon emissions should be hosted by a petrostate that bills itself as the “historical homeland of oil in the world”, where extraction wells are believed to have been dug as early as 1494, and whose president, Ilham Aliyev, opened the conference by declaring that fossil fuels were a “gift from god”.
But an even greater damper on the mood of delegates was the unexpectedly comfortable election victory of Trump, who during his campaign enthusiastically promised to lift restrictions on fossil fuel exploration, extraction and infrastructure by the US oil and gas industry – “Drill, baby, drill!” – especially in Alaska. He has also described climate change as a “hoax” and “one of the great scams of all time” and promised to slash government spending on renewable energy, abolish incentives for the purchase of electric cars and rescind environmental protection rules.
Thus, in the world’s largest economy, progress toward the phase-out of hydrocarbon energy appears set to be placed on hold for at least the next four years, if not longer. Trump has also promised to withdraw the US – for the second time – from the 2015 Paris Agreement under which signatories undertook to pursue measures designed to keep the increase in the global average temperature to well below 2°C above pre-industrial levels, and if possible to less than 1.5ºC – an aspiration that many climate scientists say anyway is now out of reach.
Legislative harassment
He has also made it a priority to repeal outgoing president Joe Biden’s Inflation Reduction Act, which offers a generous range of tax breaks and subsidies for the development of sustainable technology businesses and renewable energy in the US – even though in many cases investment is concentrated in Republican-dominated states, such as Texas.
Meanwhile, Republican allies who now control both houses of Congress, if narrowly in the House of Representatives, are expected to step up legislative harassment of financial institutions, from asset managers and banks to insurers and pension funds, that incorporate environmental and social impact factors into their investment and lending decisions, on top of blacklisting measures already in place in Republican-dominated states.
Trump’s election could not come at a worse time for global efforts to curb climate change, which are already beset by a range of headwinds. They range from huge budget deficits facing rich country governments that constrained their willingness in Baku to make commitments to help developing nations fund sustainability and climate protection measures to a slump in electric car sales, threatening to delay a wider phase-out of combustion-engined vehicles.
The drive to decarbonise the economy has also been hampered by the financial problems facing manufacturers and operators of offshore wind turbines, as well as the insolvency of Sweden’s giant battery manufacturer Northvolt. The surge of private investment in sustainability-focused investment funds seen since the start of this decade has lost momentum.
Scaling back investment
A wider concern is whether Trump’s rejection of the Paris Agreement framework and his wholehearted embrace of fossil fuel expansion will prompt other defections from the global consensus. An alarming indicator was the summoning home of Argentina’s COP29 delegation during the first week of discussions by the country’s libertarian president, Javier Milei, following a telephone discussion with Trump, who has lavishly praised his Argentine counterpart.
Milei, who demoted Argentina’s environment ministry to a junior department after his election last year and has described human-caused climate change as “a socialist lie”, Now there is concern that, encouraged by Trump, he could withdraw his country from the Paris Agreement too, although – for now – few other countries are expected to follow.
Another ominous sign came a week after Trump’s election, when German energy utility RWE announced it would scale back its planned investment in renewables projects to €7bn in the 2025-26 period, down from €10bn this year. It said: “Given the results of the US elections, the risks for offshore wind projects have increased.” The decision may also have cause RWE’s announced ambition to invest €55bn in renewables by 2030 to slip.
Reports indicate that at least half a dozen developers have placed renewable energy industry projects on hold while they await clarity on the new administration’s intentions. They include Canadian solar panel and cell producer Heliene, which is pausing progress on its $150m joint venture manufacturing plant with India’s Premier Energies in Minnesota announced in July, and battery recycling start-up Princeton NuEnergy, which is reconsidering its timeline for a $300m factory due for completion in 2028.
Hostile rhetoric
The US abandoning its adherence to the decade-old global consensus on curbing global warming might be more symbolic than damaging in itself. Despite Trump renouncing the Paris Agreement soon after his first election as president in 2016, it made little difference to the country’s ongoing adoption of renewable energy.
However, the president’s hostile rhetoric towards environmental protection measures and appointment of climate sceptics to key bodies are blamed for a brain-drain of experts in many US government scientific departments and agencies, including the Environmental Protection Agency and the National Oceanic and Atmospheric Administration.
The new administration is set to contain several leading backers of Trump’s ambition to seek global “energy dominance” for a country that is already the world’s biggest fossil fuel producer. He has nominated North Dakota governor Doug Burgum as both interior secretary and so-called ‘energy tsar”, with a brief to open federal land to the extracting of oil and gas through hydraulic fracturing (‘fracking’) and deregulate agencies to boost US oil and gas output.
The new administration’s energy secretary is to be Chris Wright, CEO of Liberty Energy, North America’s second largest fracking business, who said last year: “There is no climate crisis, and we’re not in the midst of an energy transition, either.” Lee Zeldin, a former New York congressman, has been named as the next head of the Environmental Protection Agency, which under Biden has sought to curb methane emissions, a potent cause of global warming, but which is now expected to reverse its previous green policies, including rules on vehicle emissions and promotion of electric cars.
Catalyst for private sector funding
The most immediate threat is to his predecessor Joe Biden’s flagship climate legislation, the 2022 Inflation Reduction Act, which earmarked $369bn in subsidies and tax credits for green investment and technology, including production of electric vehicles, solar panels and batteries. The law has provided evidence of how public financial support can act as a catalyst for private sector funding, even if it has irritated Washington’s allies by luring European companies to invest on the other side of the Atlantic.
The Republicans’ clean sweep of the White House, the House of Representatives and Senate increases the likelihood that Trump might be able to assemble a legislative majority to repeal the law, even though that might spark opposition from some Republican governors of beneficiary states – typically those suffering from deprivation and/or the decline of traditional industries.
Biden administration officials are reported to be trying to allocate as much of the Inflation Reduction Act funding as possible to green projects before Trump takes office. Otherwise, political observers say, the Republicans could divert unspent money to the tax cuts they promised during the election campaign.
The incoming administration is expected to take quick action to roll back climate-related regulations applicable to both financial institutions and other companies. These include the Securities and Exchange Commission’s climate risk disclosure rule, published in March but subsequently stalled by legal actions, including several from Republican-led states questioning the SEC’s authority to promulgate the rule.
Additional carbon emissions
With the departure of chairman Gary Gensler, the measure is now widely expected to be dropped altogether, along with other sustainability-related requirements currently in the rulemaking process or pending finalisation, including rules focused on greenwashing, human capital management and corporate diversity.
Also in the firing line is a Department of Labor rule, entitled Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, that took effect since 2023 and allows pension fund managers to consider sustainability factors when making investment decisions in cases where different investment options “equally serve the financial interests” of the scheme and its beneficiaries. A group of Republican attorneys-general has brought a lawsuit arguing that the rule’s standard is contrary to the 1974 Employment Retirement Income Security Act. The new administration also is expected to place limits on sustainability-related shareholder motions filed at companies’ annual general meetings.
A study published earlier this year by San Francisco-based energy and climate policy think-tank Energy Innovation, argues that implementation in full of the ‘Project 2025’ policy blueprint drawn up by veterans of the first Trump administration and leading members of conservative research institutes would result in 2.7 billion tonnes of additional carbon emissions by 2030 (equal to the entire annual emissions of India) and 26 billion by 2050, extinguishing the receding hopes of achieving US and global emission reduction targets, as well as wiping out clean energy investments – along with more than a million jobs. A previous analysis by specialist publication Carbon Brief estimated that the impact of the new administration would be even greater, adding an extra four billion tonnes of greenhouse gases by 2030.
But other analysts are less pessimistic, arguing that even without the SEC disclosure requirements, asset and pension fund managers and institutional investors will continue to pursue sustainability goals, albeit probably with a lower profile. Says Jeff Glitterman, CEO and partner at ESG-focused firm Glitterman Wealth Management: “You are going to see ESG managers backing off more on how they market and publicly speak about what they are doing. But most managers we talk to will continue to use the process for diligence in the background, but not have it in the foreground.”
China’s emerging climate leadership
Meanwhile sustainable investment – especially in infrastructure – may be slowed by the government’s about-turn but is unlikely to be derailed. For, while the election may have been cause for alarm, things are just the same as they were yesterday. “I have been telling clients that no matter who wins, 2025 will be a year of even more investment into the sector”, says Rob Day, co-founder and partner at Spring Lane Capital. “There is a lot of dry powder in the infrastructure sector, for example, and everybody still agrees that climate and sustainability is still a megatrend.”
Other analysts argue that while the policy shift is likely to affect progress toward decarbonisation and green investment within the US, elsewhere its impact may be more complex. For example, the Trump administration’s biggest adverse impact on green investment outside the US might well be collateral damage from a high interest rate environment, but losing the US as a buyer and producer of electric vehicles would not kill the global market, in which the US has been a slow adopter – they made up only 10% of the US automobile market in 2023, compared with nearly 40% in China.
China already dominates global markets in sectors such as solar and wind power generation and batteries, despite policies pursued under Biden to push it out of the US. European policymakers may express anguish about the threat to domestic producers from cheap Chinese imports, but they are more likely to accelerate than hinder countries’ sustainability transition.
Arguably, Beijing is now more a global leader than Washington in the shift to decarbonisation and sustainability. At the COP29 conference, China’s climate envoy Liu Zhenmin called for constructive dialogue with the US and expressed hope for enhanced co-operation between the two countries on global climate action, emphasising the country’s commitment to improving measures to curb methane and other non-carbon dioxide greenhouse gas emissions. Beijing’s message: the Trump administration may withdraw from global efforts to curb global warming, but those efforts will continue without it.
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