What will a Trump administration mean for climate?
Hello everyone,
Heading into 2025, many people are wanting to understand the climate implications of a new Trump administration. I was interviewed recently about this and I have a different, more optimistic, view from what you have likely heard. Here’s a clip from me about it.
During Trump’s first term he did a number of things including withdrawing from the Paris Climate Agreement, rolling back various Environmental Protection Agency regulations on emissions, promoted fossil fuel development, reduced restrictions on drilling and reduced fuel efficiency standards for vehicles. Sounds like a lot, so what impact did those measures have on carbon emissions? In this week’s newsletter I want to go much deeper into why I am more optimistic than others about the next four years.
The USA is Decarbonising, Trump or not..
Between 2007 and 2022, total emissions in the USA dropped from ~7,500 to ~6,300 million tonnes CO2 equivalent per year, representing a reduction of approximately ~16%.
USA Total Greenhouse Emissions (Million-Tonnes)
USA Sector Greenhouse Emissions (Million-Tonnes)
Looking more into the most material sectors, the electric power industry has decarbonised by a whooping 36% since 2007 (see above). What has caused this decarbonisation and what happened during Trumps 1st term?
Electricity decarbonisation (-36%)
The huge decarbonisation of electricity in the USA is from a shift from coal to natural gas and renewables. According to the Global Coal Plant Tracker database1, there have been more than 300 retirements of coal-fired power stations since 2007. New generation capacity has been gas and renewables, which have a much lower carbon intensity.
Number of US Coal Power Retirements
Despite his ‘pro-coal’ policies, about 29 coal-fired power stations were retired per year under the first Trump administration. The total of 115 retirements during this four year period accounts for about one-third of all coal-plant retirements since 2007.
What is clear from this is that politicians aren’t dictating trends in the low-carbon transition within electricity supply - the massive decarbonisation has been driven by economic and technology factors, state policies and consumers demanding more low carbon energy options.
Annual % decarbonisation for each sector since 2007
Each year the electricity sector in the USA is decarbonising -2.7% in Trump years and non-Trump years. Politics isn’t driving the energy transition.
Transport decarbonisation (-8%)
Transportation emissions in the USA have proven more difficult to reduce. They peaked at 1,967 million metric tonnes of CO2 equivalent per year in 2007 but, outside of the Global Financial Crisis and COVID, they remained around 1,800 million metric tonnes, a reduction of 8.4% between 2007 and 2022.
The power generation sector has achieved significant emissions reductions by switching from coal to natural gas and renewables. However, transportation emissions have remained stubbornly high because there has been a much lower market penetration of low-carbon alternatives. Transportation has now overtaken electric power as the largest source of emissions in the USA, highlighting the challenges of decarbonising a sector that remains heavily dependent on fossil fuels despite improvements in vehicle efficiency.
Transportation now the largest Footprint
That said, despite ‘pro-drilling’ policies, decarbonisation of transport still occurred under the first Trump administration.
Decarbonisation under Trumps 2nd Term
The Shift from Coal Continues
Number of planned coal retirements
Looking ahead to Trump’s second term (2025-2028), according to the Global Coal Plant Tracker, there are 55 coal plants currently scheduled to retire in the period, irrespective of Trumps posturing around coal. These retirements would prevent approximately 229.6 million tonnes of lifetime CO2 emissions. The retirements are distributed across the term, 15 plants in 2025, 12 in 2026, 10 in 2027, and reaching a peak of 18 plants in 2028.
These data suggest that the transition away from coal-fired power continues to progress, driven by economic and technological factors.
Decarbonising Transport - The Musk Factor
Tesla CEO Elon Musk has become one of the most influential figures for Donald Trump. Although Musk has softened his stance on climate change, electrification of transport is still very much close to his heart.
Donald Trump expressed opposition to electric vehicles during his campaign, but his new alliance with Elon Musk has raised doubts about his stance on EVs once he officially becomes president in January 2025.
It looks like government tax subsidies for EVs put in place under the Biden administration will be removed by Trump. In addition, his threatened tariffs on Chinese imports would create serious barriers to the lowest cost EVs entering the US market.
However, given Musk’s global popularity and influence, along with his electrification of transport agenda, I would argue there could be more not less investment in low-carbon fuels, battery technology, EV infrastructure, and even backflips on government incentives or tariffs in transport in Trump’s 2nd term.
The net impact of these factors is difficult to predict. If, as a consequence of Musk’s prominence, electrification of transport accelerates under the 2nd Trump term, then that could create a larger decarbonisation pathway than under any other President, because transport has the biggest sectoral emissions footprint in the USA.
Most people are assuming there will be no climate progress in the US over the next four years. The carbon data suggest otherwise - markets and technologies are driving decarbonisation trends irrespective of politics. That’s very important for investors who are considering the carbon exposure of their portfolios.
Thanks for reading. Until next time.
Ben