How will Trump’s re-election impact climate action?

As we head into the COP29 summit with the news of Donald Trump’s re-election, two Henley academics provide their thoughts on his potential impact on climate action and finance. Are we right to be pessimistic about policy direction in this area?

Professor Simone Varotto, professor in finance

I believe that the new Republican administration is likely to support the climate scepticism of the president-elect, leading to a drastic reduction in subsidies for green technologies strongly supported by the current administration through the Inflation Reduction Act.

Indeed, the prices of major U.S. and European renewable stocks have seen a significant drop following Donald Trump’s election victory. Instead, Trump has stated he will support highly polluting industries such as oil and gas.

The likely withdrawal of the U.S. from the Paris Climate Agreement could significantly undermine global climate cooperation and financial commitments. This could have serious consequences for developing countries that depend heavily on foreign financial support to implement effective and urgent climate adaptation measures.

The potential scaling back of the U.S. in the fight against climate change represents a major setback not only for the U.S., which is affected by more frequent and severe extreme weather events, but also globally.

This is a moral failure, in addition to a political one, as the consequences of climate change faced by the Global South are mostly due to the cumulative effect of greenhouse gas emissions from developed economies over the last half-century, of which the U.S. is a major contributor.

The climate stance of the new administration completely disregards principles of solidarity and justice that should inform the foreign policy of a global leader. Such principles promote global stability by fostering a more stable and peaceful international environment and reinforce global cooperation, which is critical in these uncertain times of geopolitical turmoil.

A self-interested America, as envisioned by the president-elect, may sadly undermine its own interests and those of the rest of the world.

Dr Mininder Sethi, associate professor of finance

A withdrawal from the Paris Agreement could have negative consequences. The U.S. was the second largest global emitter of greenhouse gases in 2022 with an estimated 11% share of global emissions (IMF Data, Production Based Emissions), behind China with a 29% share of global emissions. And we may now see the complete removal of emissions targets.

The U.S. has also been a big funder of climate projects in developing countries through multilateral agencies including the World Bank and the Green Climate Fund (GCF) and we may see a slowdown in such funding.

However, as in any situation, we should also look for potential positives. Trump is an advocate for US energy independence, he is also an advocate for lower regulatory hurdles for businesses in general. Consequently, we would expect to see increased crude oil and natural gas production from the U.S., however this may partially displace global production from other countries who operate with lower fugitive emissions standards.

In any case, while baseline emissions standards are set at the federal level they may be strengthened further at the state level, individual states would then still be able to opt to further reduce emissions if elected statewide legislatures chose to do so.

At the same time, the U.S. is the second largest global producer of climate technology, being a leader in critical technologies including EV production, Carbon Capture and Storage (CCS) Systems and Biofuels. The path towards greater energy independence, coupled with lower regulatory burdens may strengthen the US climate technology sector and sector exports.

Increased global competition could lead to faster technical development and consequently to lower global prices for climate technology, all of which should benefit the global path towards net-zero. It could also help to remove some of the geopolitical risk that exists in current climate technology supply chains.

We may, or may not, be happy with the outcome of the election. However, we must accept the result and adjust our paths forward accordingly, that is the core of democracy.