By
Kevin A. Maley
, Senior Vice President
The results of last week’s elections mean the Republican Party will take control of the White House and Senate, and all signs point towards the party maintaining its majority in the House of Representatives. ?Led by President-elect Donald Trump and likely aided by a unified government, the GOP is expected to take a dramatically different approach to governance than that of President Biden or Vice President Harris.
What does that mean for environmental sustainability and climate change? Below we summarize where we expect the incoming Trump administration to act on some key issues:
- The Inflation Reduction Act. The Inflation Reduction Act (IRA) was one of the most significant pieces of climate legislation passed in the United States, responsible for mobilizing hundreds of billions of dollars to climate technology. As a candidate, Trump vowed to get rid of the IRA, but a full repeal is unlikely. That is at least in part due to the fact that a vast majority of the subsidies have gone red states and big energy companies – the latter of whom have advocated against gutting the IRA. While Trump may seek to cut or defund individual provisions such as electric vehicle subsidies, it looks more likely Republicans will approach the IRA with “a scalpel and not a sledgehammer”.
- Environmental regulation. If the first Trump administration (2017-2021) is any indication, the second Trump administration will take a very “business-friendly” approach to environmental regulation and seek to undermine the Environmental Protection Agency’s (EPA) to issue any meaningful restraints on industry. This will likely include efforts to repeal EPA rules issued by the Biden administration, including those around clean water, power plant standards, mercury pollution and tailpipe emissions. On November 11, Trump announced he had selected former Congressman Lee Zeldin (R-NY) to lead the EPA. Following the announcement, Zeldin, who lost the 2022 New York governor’s race to Kathy Hochul, promised to “restore US energy dominance, revitalize our auto industry to bring back American jobs, and make the US the global leader of AI. We will do so while protecting access to clean air and water.”
- SEC rule on climate risk disclosure. The Securities and Exchange Commission’s (SEC) climate disclosure rule that mandates corporate disclosure of material climate-related risks was already in limbo, given that it has been put on hold by federal courts as it undergoes judicial review. A new Trump administration will almost certainly seek to repeal the rule. What remains to be seen is if federal judges – up to and including the Supreme Court – seek to issue a verdict regardless of whether it is repealed. The idea behind this is that it would provide clarity (likely in the form of restrictions) on the legal authority the SEC has in the realm of corporate climate disclosure. Recent Supreme Court rulings including Loper Bright Enterprises v. Raimondo and Corner Post v. Federal Reserve indicate this as a possibility. ?
- International climate cooperation. This week, business leaders, policymakers and NGOs from around the world are gathering in Baku, Azerbaijan for COP29, the pre-eminent climate conference put on each year by the United Nations. It was at an earlier COP, in 2015, that the Paris Climate Agreement was born – later becoming the framework for international cooperation to address climate change. The Trump administration is set to withdraw the U.S. from the Paris Agreement, just as it did so in its first term. That also means it is unlikely the U.S. will bother to submit “nationally determined contributions” – i.e., climate reduction goals – that the Agreement obligates signatories to do.
- ESG investing. The idea of investors using environmental or social criteria in their investment decisions has long been criticized by Republicans, who argue this is a legal breach of fiduciary duty (in other words, these are not material issues.) The first Trump administration banned retirement-plan fiduciaries from considering environmental, social and governance (ESG) factors in their decisions. This ban was reversed by the Biden administration and is likely to be reimposed by the second Trump administration. The new administration is also expected to put limits on ESG-related shareholder proposals filed during proxy season this spring and beyond. And there’s also a possibility that House or Senate Republicans reconvene hearings that target financial institutions that have “net zero” or decarbonization goals, which the GOP has argued is discriminatory against energy companies and may be indicative of illegal collusion.
Look out for additional policy changes that come through Executive Orders, which give the presidency wide leeway on a whole host of issues and provide an avenue to circumvent the legislature. Given expected Republican majorities in both houses and a generally GOP-friendly judiciary, President-elect Trump’s policy approaches will probably succeed for the most part. As was the case under the first Trump administration, the impetus for strong climate action may now shift from the public sector to the private. ?
