There is limited risk to the Inflation Reduction Act (IRA) and the CHIPS Act under a new Trump presidency, with a greater ‘green transition’ status quo under a Trump presidency than one may currently think.
The Biden administration stance vis-à-vis fossil fuels, however, is not the rosy narrative some would have you believe. Under the Biden administration, the US achieved ‘peak oil’ in September 2023 – hitting 13.25 mbd (million barrels per day), its highest ever. The US today, not Saudi Arabia, is the world’s largest producer of hydrocarbons (the world produces about 100 mbd).
At COP28, John Kerry was plumping for “the phase-out of ‘unabated’ fossil fuels”. The use of the word ‘unabated’ is a deliberate trojan designed to create allowances for fossil fuel companies investing in hydrocarbons, so long as they also invest in Carbon Capture and Storage (CCS). Crucially, all US fossil fuel companies invest in CCS, so this impacts none of them. It’s a warm blanket, not a wet one. Moreover, CCS is rapidly becoming more and more cost-competitive thanks to all this investment.
Kerry’s language also obscures the following truth: being pro-renewables (which the Biden administration is) is not synonymous with being anti-fossil fuels (which the Biden administration isn’t). US fossil fuels subsidies still exist, and since the 2020 election, Biden’s ‘climate constellation’, comprised of Kamala Harris, John Podesta and John Kerry have green lit every single proposed new liquified natural gas facility in the US. In other words, Biden is definitely not anti-hydrocarbons.
By contrast, Trump is pro-fossil fuels. During his last presidency, he pulled the US out of the Paris Agreement, replaced the Clean Power Plan with weaker regulation and relaxed fuel economy standards for cars and light trucks. He also imposed big tariffs on Chinese solar manufacturing and the Biden administration has not repealed a single one of these tariffs – in fact, the IRA has accentuated them. So, with regards to fossil fuels, the best case is that Trump simply continues with BAU; the worst is a four-year hiatus in the ‘reigning in’ of fossil fuel investments.
I have yet to see any recent comments from Trump bashing renewables. He has, however, stated multiple times that, in his view, the climate change agenda is a big tax on Americans. It’s worth distinguishing between ‘renewables’ and ‘climate change’ here, because one could in theory be pro-renewables investment (because the technologies are cost-competitive with incumbents) but not believe that the heating of the earth’s atmosphere is due to man-made emissions. If this is Trump’s stance then he may be pragmatic with regards the investment side and US energy security.
This also evokes a critical point, which is that the IRA and the CHIPS Act are first and foremost about industrial policy ahead of climate policy. These acts are about bringing back jobs, factories and three decades of lost manufacturing to America. Crucially, they also have bipartisan support from Democrats and Republicans. In fact, 80% of IRA investments are being made in Republican states!
So, the US is undergoing a bipartisan shift, reshoring to America the industries where China is dominant, which is essentially all of them, but crucially also ‘clean’ ones including solar, wind and batteries, hydrogen and energy efficiency. For this reason, it’s difficult to imagine how Trump, or any new Republican president, will just be able to pull off the band-aid and instantly repeal the IRA, because it is part and parcel of the America first’ agenda espoused by the Republicans.
Moreover, coming back to the example above about Obama’s Clean Power Plan: Trump was never actually able to repeal it – the best he managed was to replace it with a more relaxed version of his own, and this is likely to be the same for Biden’s IRA.
Data even shows that despite Trump’s hostility toward the climate, during his tenure as president between 2016 and 2020 there was:
- 110% growth in US solar panel production;
- A doubling in US installed wind capacity from 2016 to 2020, from 4.6% to 9%;
- A rapid decline (-89%) in the cost of battery pack production accelerating the solar and wind expansion.
So, these clean energy ‘gains’ occurred not because of Trump’s presidency, but despite his presidency. And this underscores an important point which is that the complex interplay of market forces and technological advances were simply too strong to stop the expansion of renewable energy. The market has accepted that the energy transition will happen and that fossil fuels are going to be history.
In other words, the green transition will plough ahead from November 2024, whether there is the IRA or not, and whether Trump is in the oval office or not.
