In his first week of office in January 2025, President Donald Trump enacted several measures signaling a decisive shift in U.S. climate policy. This indicates the tone that the next 4 years of his presidency will take with regard to climate action.
On 20 January, Trump signed the executive order "Unleashing American Energy," declaring a national energy emergency to expedite fossil fuel development. This order will accelerate the permitting processes for oil, gas, and power projects. This is in line with his energy-dominance stance and highlights how reduced federal support for decarbonization will put heightened pressure on individual states to deliver on their climate objectives. President Trump's intentions to support fossil fuels and traditional energy sources contradict the previous administration's focus on renewable energy and cleaner forms of transportation. This will provide a critical backdrop to the future course of state-level carbon markets, given the strengthening of Washington’s Cap-and-Invest program after the survival of the ballot initiative and anticipated program amendments to California’s Cap and Invest under the Western Climate Initiative (WCI) and the Regional Greenhouse Gas Initiative (RGGI). T
his is further described in ClearBlue’s blog post, North America’s cap-and-trade markets: ClearBlue’s expectations for 2025. In his last term, Trump attempted to dismantle California’s joint market with Quebec under the WCI but was unsuccessful. We may see similar attempts play out in this presidency, underscoring the need for state-level autonomy and action to maintain their climate ambitions.
As part of the national energy emergency, Trump announced his intention to reverse the Electric Vehicle (EV) mandate implemented by the Biden Administration. The mandate refers to a set of policies aimed at significantly increasing the adoption of EVs in the U.S.
This includes a ruling by the Environmental Protection Agency (EPA) that requires auto manufacturers to reduce emissions in all new light and medium-duty vehicles beginning in 2027, effectively aiming for half of all new vehicles sold in the country to be zero-emissions by 2030, a mandate to electrify the federal government fleet by 2035, as well as funding to catalyze the EV market. President Trump signed an executive order to eliminate the EV sales mandate and is likely to repeal the $7,500 tax credit for EV purchases.
This will undermine efforts to reduce emissions from the transportation sector, eliminating federal supports that typically complement state-wide initiatives. While this has no direct impact on state-level mandates, this underscores the need for individual states to address emissions from their transportation sectors given the removal of federal support. As a result, states with existing ambitions may hone in and strengthen their efforts to reduce emissions from their transportation sectors. For example, the California Low-Carbon Fuel Standard is a state-level program that addresses emissions from transportation fuels and is finalizing program amendments that would increase the stringency. Similarly, New Mexico is anticipated to implement their own state-wide clean fuels program towards the end of this year.
Concurrently, President Trump announced the U.S.'s withdrawal from the Paris Agreement, marking the second time the nation has exited the international climate accord under his leadership. This underscores a broader strategy to prioritize economic growth and energy independence over global climate commitments. The administration also proposed reducing the role of the Federal Emergency Management Agency (FEMA), suggesting that disaster response responsibilities be shifted to individual states. This could leave less-resourced states vulnerable to climate-related disasters. This comes at the heels of President Biden’s increase of the U.S. Nationally Determined Contribution under the Paris Agreement, which in December 2024 he announced would be a 61-66% reduction in 2035 from 2005 levels.
As part of Trump’s dubious stance regarding climate change, which he has publicly called a hoax, he may reduce the social cost of carbon (SCC) in the U.S., which is a critical measure for assessing the economic impact and damage from greenhouse gas emissions. The current value is USD 190 per tonne of CO2 as per the EPA’s 2023 update and Trump will likely reduce this to less than USD 5 per tonne. While he has not officially announced a SCC value, in his first administration Trump significantly reduced the SCC to less than USD 5 per tonne which serves as a baseline for expectations under this administration. This sends an overall signal on global climate priorities, given that the U.S. is a key player in these efforts and that other countries facing upcoming elections may leverage this to avoid taking action on climate commitments.
Trump also indicated intentions to rescind the Green New Deal, which is a set of policies and goals aimed at addressing climate change and economic inequality in the U.S. It is not a single piece of legislation but rather a resolution that outlines ambitious targets for transitioning to a sustainable economy while addressing social justice issues.
While no specific remarks were made about the Inflation Reduction Act (IRA), which delivers funding for key Green New Deal goals and commitments, this announcement paints a picture of the future of climate action. While Trump may not dismantle all elements of the IRA given some of the benefits it provides to red states, there will likely be some critical changes to its allocation and focus areas. Notably, highly-anticipated guidance regarding the 45Z clean fuels tax credit was released before Trump’s inauguration, however, the Trump administration will be responsible for determining key details on the treatment of farming practices for clean fuel production under the tax credit. Please refer to ClearBlue’s live update US Federal Guidance on Clean Fuels Production Credit for further details.
The withdrawal of major banks from the Net Zero Banking Alliance coincides with Trump’s early days in office. It should be noted that the banks remain committed to their targets but have shifted away from the UN-backed alliance as a means of accountability.
In Canada, provincial governments are uniting on a joint retaliatory effort against potential tariffs on Canadian goods, as outlined in ClearBlue’s blog post: Canada’s First Ministers Meeting Addresses Potential U.S. Tariffs. Ontario Premier Doug Ford has announced he will be calling for a snap provincial election, potentially locking him in for another term given the need for a strong representative to face Trump’s tariff threats amidst the transitions occurring in Canada’s federal government.
ClearBlue will continue monitoring these developments and will provide updates and further insights.