The following is taken from a Live Update for clients, issued by ClearBlue's Market Intelligence team on April 9, 2025.
On 8 April, President Trump signed three energy-related Executive Orders promoting coal and targeting state "overreach" including carbon trading:
- Reinvigorating America’s Beautiful Clean Coal Industry and Amending Executive Order 14241 - promoting coal mining, leasing, exports and use of coal power for AI, plus relief from the US EPA Mercury and Air Toxics Standards (MATS) rule.
- Strengthening the Reliability and Security of the United States Electric Grid - focusing on meeting surging electricity demand from AI data centers and increased manufacturing.
- Protecting American Energy from State Overreach - removing unlawful and burdensome state-level impediments to domestic energy production.
The Executive Order related to state overreach specifically calls out the California Cap-and-Trade program as an example, along with climate superfund laws passed in New York and Vermont in 2024 (and proposed in California) that hold energy companies responsible for damages based on prior GHG emissions:
"American energy dominance is threatened when State and local governments seek to regulate energy beyond their constitutional or statutory authorities. For example, when States target or discriminate against out-of-State energy producers by imposing significant barriers to interstate and international trade, American energy suffers, and the equality of each State enshrined by the Constitution is undermined. Similarly, when States subject energy producers to arbitrary or excessive fines through retroactive penalties or seek to control energy development, siting, or production activities on Federal land, American energy suffers.
Many States have enacted, or are in the process of enacting, burdensome and ideologically motivated “climate change” or energy policies that threaten American energy dominance and our economic and national security. New York, for example, enacted a “climate change” extortion law that seeks to retroactively impose billions in fines (erroneously labelled “compensatory payments”) on traditional energy producers for their purported past contributions to greenhouse gas emissions not only in New York but also anywhere in the United States and the world. Vermont similarly extorts energy producers for alleged past contributions to greenhouse gas emissions anywhere in the United States or the globe.
Other States have taken different approaches in an effort to dictate national energy policy. California, for example, punishes carbon use by adopting impossible caps on the amount of carbon businesses may use, all but forcing businesses to pay large sums to “trade” carbon credits to meet California’s radical requirements. Some States delay review of permit applications to produce energy, creating de facto barriers to entry in the energy market. States have also sued energy companies for supposed “climate change” harm under nuisance or other tort regimes that could result in crippling damages."
The state overreach appears to be in the context of dictating national energy policy, discriminating against out-of-state producers and imposing barriers to interstate and international trade. Of course, California has imposed a Cap-and-Trade obligation since 2013, and the RGGI states have operated their linked program since 2009. The new superfund laws are already facing legal challenges.
According to the associated Fact Sheet, the Executive Order calls for the Attorney General to:
- Identify and take action against state laws and policies that burden the use of domestic energy resources and that are unconstitutional, preempted by federal law, or otherwise unenforceable.
- Prioritize taking action against laws and policies purporting to address “climate change” policies, or involving “environmental, social, and governance” initiatives, “environmental justice,” carbon or “greenhouse gas” emissions, and funds to collect carbon penalties or carbon taxes.
- Submit a report to the President detailing actions taken and additional recommendations to protect American energy pursuant to the Order in 60 days.
This action goes beyond the efforts of the prior Trump administration, which challenged the linkage of California's Cap-and-Trade to Quebec, but did not attempt to derail California's state programs. The linkage legal challenge was not succeeding on the merits, although the administration was not able to pursue appeals of the lower court rulings. Past challenges to the constitutionality of California's LCFS program on the basis of the Commerce Clause and regulating extraterritorially have failed.
Actions taken by the US Attorney General in accordance with Trump's most recent Executive Orders will certainly be challenged by the states. New York Governor Kathy Hochul and New Mexico Governor Michelle Lujan Grisham, Co-Chairs of the United States Climate Alliance bipartisan coalition of 24 governors, issued a statement asserting states' rights: “The federal government cannot unilaterally strip states’ independent constitutional authority. We are a nation of states — and laws — and we will not be deterred. We will keep advancing solutions to the climate crisis that safeguard Americans’ fundamental right to clean air and water, create good-paying jobs, grow the clean energy economy, and make our future healthier and safer.”
Meanwhile, uncertainty in the carbon markets will increase with bearish pricing implications. ClearBlue will continue to monitor any developments and keep clients updated. Contact us to become a ClearBlue Market Intelligence subscriber.