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This week, during a scorching and record-breaking election day, Americans cast their votes, bringing former President Donald Trump back to the forefront of power.
The potential for a second term under Trump is monumental not only for American democracy but also for global climate change initiatives. Trump’s history of climate science denial raises concerns that he will once again undermine U.S. climate policies both domestically and internationally. It seems unlikely that ambitious global efforts to adhere to the Paris Agreement, which aims to limit global warming to well below 2°C, will gain traction anytime soon. However, despite the ominous implications of a second Trump presidency for climate action, it does not signify the end of the decarbonization movement. Economic and political dynamics across the globe will likely ensure the continuation of climate initiatives.
The pressing question now is how to navigate this new landscape. Corporations and investors must look beyond the immediate actions of the incoming Trump Administration to grasp long-term trends and strategize accordingly. While focusing on the long-term outlook is challenging, it is essential for both climate impact and financial success. Political leaders should engage with local and state governments to advance climate initiatives, and climate activists will need to explore innovative ways to connect with a wider audience.
The initial climate challenge of a second Trump administration is likely to surface early on. Many of the tax cuts implemented during his previous term are set to expire next year, and the debt ceiling will be revisited in January. This scenario means fiscal policy will take the spotlight, with President Joe Biden’s Inflation Reduction Act (IRA) becoming a central topic of discussion.
Some Republican leaders may seek to dismantle the IRA entirely to reallocate funds for tax cuts. Others may adopt a more selective approach, targeting specific incentives while preserving others. Notably, many Republican regions have benefited from manufacturing incentives within the IRA, making a complete repeal appear unrealistic. Regardless, we can anticipate that the Trump Administration will adjust the implementation of the law to favor its preferred companies and sectors.
A simpler task for Trump will involve attacking the regulatory measures established by Biden. The Environmental Protection Agency has introduced rules on various fronts, including power generation and vehicle emissions, aimed at fostering the energy transition. While reversing these policies is a time-consuming process, a deregulatory agenda is undoubtedly on the horizon. Similarly, the influence of Elon Musk remains uncertain; the Tesla CEO stands to gain from many IRA incentives, and it will be interesting to see how he navigates this new political environment.
On the international front, a U.S. withdrawal from climate leadership is also expected. Trump previously exited the Paris Agreement, the 2015 framework designed to coordinate global action on climate change, and he could easily do so again. According to an analysis from Carbon Brief, Trump’s rollbacks could result in an additional 4 billion metric tons of carbon dioxide emissions by 2030 compared to a continuation of Biden’s policies—a figure comparable to the annual emissions produced by Japan and the European Union combined.
Given this context, it would be easy to assume that the U.S. climate movement is on the verge of a major setback. Nevertheless, while Trump may hinder decarbonization efforts, he is unlikely to halt them completely. Data from the Rhodium Group and MIT reveals $493 billion in clean technology investments made in the two years following the IRA’s passage, marking a 71% increase compared to the previous two years. While some companies may reconsider their investments due to the political landscape, many clean manufacturing projects are already underway.
The climate regulatory framework has become critical for global corporations—not only in the U.S. but also within the European Union and various Asian markets. California, for instance, which would rank as the fifth-largest economy globally if it were a nation, has implemented its own climate regulations. As a result, major companies must adhere to these standards, and eventually, smaller firms in their supply chains will have to comply as well.
Businesses and investors now face the challenge of balancing these dynamics, and finding straightforward solutions will be complex. Some may feel tempted to adopt a Trump-friendly stance and abandon decarbonization goals. However, such a strategy presents significant risks for global operations and long-term growth.
At a recent private dinner focused on climate issues, the host posed a thought-provoking question: had the public reached “peak climate concern”? This question resonated with me. It’s undeniable that, in the short term, climate change has faded from mainstream discourse. However, to assume that public concern will remain stagnant in the coming years would be shortsighted and potentially irresponsible. Insurance markets, for instance, are beginning to buckle under the weight of recurrent natural disasters. Sooner or later, voters—and consumers—will experience these costs firsthand, which will inevitably influence political outcomes.
What does this mean for us? The last time Trump was elected, many leading companies publicly committed to maintaining their climate strategies. In fact, numerous businesses intensified their efforts despite the Trump administration. However, the atmosphere has shifted since then, with scrutiny on ESG (environmental, social, and governance) issues becoming contentious. Companies may hesitate to alienate pro-Trump consumers—or Trump himself, who is notorious for using social media to criticize businesses.
As I mentioned last week, companies should focus less on the moral arguments surrounding climate change and instead emphasize the financial benefits for their organizations. Decarbonization initiatives can lead to cost savings. Sustainable products appeal to a significant consumer base. Moreover, taking proactive measures to adapt to extreme weather can fortify companies against future challenges. To sustain momentum in climate action, it’s essential to remind corporate stakeholders that addressing climate change is a means to achieving broader objectives, not just an isolated goal.
For climate advocates, this moment presents both a challenge and an opportunity. While some voters remain motivated by the messages climate advocates have promoted, others appear unconvinced. Finding strategies to engage a wider audience will be crucial for ensuring the longevity of climate policy.
