What does Trump mean for climate startups

This time around, the Trump Administration will better prepared to act on more promises including a roll back Biden era climate action. It’s likely Republicans will control the House and Senate as well. Trump also has new, focused allies like Musk and Ramaswamy. Beyond climate, immigration is also an issue that will impact founders, as we experienced in the first Trump admin.

We wrote What Trump Means For Climate/Urbantec in 2016 and updated it a few months later as some of the positions became clearer. We’re attempting to do the same thing here and will update again in Q1 as there is more detail, including the results of end of year efforts to distribute some program funds to states for everything from heat pump subsidies to the EPA’s Greenhouse Gas Reduction Fund for catalytic grants.?

We’ll start with the harder adjustments, then move on to where there may be opportunity and strategy.

Where There May Be Less

Federal programs are very much under threat. Vivek and Elon seem set to launch the Department of Government Efficiency. Vivek has talked about things like 75% headcount reduction .?

• DOE loan programs and grants. The current DOE actions underscore this as they rush to distribute funds in an effort to make it harder to roll back.?
• Emissions mitigation programs (especially if there is a green premium) are likely to have less support, especially as business see less urgency and can defer these kinds of investments.?
• International Cooperation on climate action had declined somewhat as the IRA forced the EU to respond to additional policies to avoid reduced investment in the EU. Explicitly exiting the Paris agreement again confirms that the US is an unreliable partner, though the energy transition will go on anyway.?
• Direct subsidies for things like heat pumps may be at risk as the programs relied on states to set up and it’s unclear how many are actually set up already. For example CA and NY are ready to go, but many states like TX are unlikely to ever roll out these programs.?
• Imports from China -? China remains a critical supplier, especially for batteries and solar. There has been some preparation here with Chinese firms building in the EU, MX, etc. Last year for example Foreign Direct Investments increased 48% in Mexico.? The main question is how large the tariffs will be.?
• Immigration challenges - from immigrant founders in the US, to talent wanting to work here.?
• FOAK funding - if loan guarantees or grants aren’t secured by year-end, many of these efforts need to pivot to the EU or Asia for government or corporate support. This presumes that the EU can remain on track to invest and subsidize. Trump likely also means reduced defense subsidies for NATO, which will force some budget reallocation to defense.?

Where There May Be More Or The Same

It’s largely back to the future or how things were before the IRA. We made the majority of our investments in this period and great companies will still be built in any environment. So lets take a look at what might be the same or better.?

• “Faster, better, cheaper” market winners. Winning cost curves for solar and batteries in particular will continue to drive change. This is also where generalist investors can most easily get excited.?
• Tax equity is a core part of the IRA and broadly popular, so this is unlikely to be touched. This means access to project finance for those who can clear the underwriting thresholds for “mature technologies”.?
• Already allocated funds to states - quite a lot of this was being rushed out the door in anticipation of this outcome. And so some states will be able to continue executing on these parts of the IRA like heat pump incentives.?
• Focus on adaptation will likely continue as it becomes less of a climate issue politically and more about carrying costs from insurance. There is likely some path to federal government support, given the link back to real estate values and stability of mortgages.?
• Corporate public commitments to climate action will become an important part of differentiation, especially for those doing business in the EU. But actual purchase behavior will likely prioritize climate action that promises “faster, better, cheaper” and resilience because of the direct impact on operations.?
• State and local subsidies - started locally and may accelerate since they’re cheap and effective ways to drive a lot of good outcomes. The biggest question is scale and in places like CA this is linked to other factors like capital gains, which is in turn linked to public markets and M&A.?
• M&A will go up. We’ve set records in abandoned M&A because of scrutiny by entities like the FTC. That will change and we’ll likely see a boom in M&A activity. M&A is still mostly about a strong economy, so that has to remain true as well.?
• IPOs likely will go up. Some of this is just cycle related. Some is related to expectations that there is less regulatory oversight.?
• Some reshoring will continue, but the case for it will likely have to touch defense and national security, especially in cases where China might gain some specific advantage. While EV incentives will likely disappear, adoption will still grow, but also there are direct dependencies on batteries for weapons systems now from drones soldier systems like optics and communications.?

Potential Sources of Noise

• Fall out of Federal Loan Guarantees & Grants from Biden Admin - Lots of funds were rushed out the door, for example at DOE. It’s likely there will be a review and failures will be used against the Democrats maybe in midterms (remember Solyndra from Cleantech 1.0?). Maybe even an executive order to pause in cases where funds are sitting with intermediaries. As a counterpoint, maybe having a lot of the work actually happening in majority Republican states, will make this less of an issue.?
• Musk’s wishlist - Trump and Musk have spent a lot of time together since election day. The potential influence of Elon Musk in the administration and how this might affect policies, especially those linked to Tesla (EVs, Autonomous, Robots), SpaceX, X / Twitter, and Neurolink. Musk is motivated to end all incentives, which would favor firms like Tesla that have achieved scale.? And invitation to Chinese firms to build cars in America is also interesting.?
• AI - Hard to predict actual additional demand for clean power. Some of the demand might not be real. Some of the demand might come from existing sources like coal , as EPA emissions rules are gutted. Some of the demands might be about resilience and independence from the grid. That said big tech was leading on purchasing clean power before the IRA, so there is good reason to expect this to happen again.?

What you can do

Understand funding process and timelines - if you’ve received commitments from a Federal Gov program, you need to understand the timeline and the closer we get to the end of the year, the more likely you’ll have to figure out contingencies.?

Understand customer purchase processes - some customers are likely to feel less pressure or re-evaluate investments without incentives. So it’s essential to re-evaluate how the above changes might be impacting 2025 pipeline.?

Understand immigration implications - in Trump 1.0, there were a range of uncertainties linked to immigration, such as bans on specific countries (and therefore their passport holders). Right now, some teams are changing vacation schedule to let team members visit overseas family ahead of potential changes. Additionally some teams opted to set up EU or Canadian offices to ensure that had more predictable access for talent. The upside of post Covid world, is we have more tools and strategies for remote.?