The silver lining in Trump’s win? Market forces driving global climate action, not politics

While Trump’s victory is casting doubt on US climate action, global momentum is unlikely to wane because it is fuelled by economic realities and the urgent need for climate solutions

For everyone in the climate space, the following line is still sinking in. Donald Trump will be the next President of the United States. His victory, just ahead of the COP29 summit, has led to global uncertainty about the US’ climate leadership role. While climate wasn’t a central issue during campaigning, energy and climate policy were addressed. Trump openly proclaimed he would prioritise fossil fuel interests. This is a significant shift from the 2020 elections where analysis had shown climate concerns helped secure Joe Biden’s win.

This time, though, it was the economy—especially inflation—that took centrestage, pushed higher by the US’ continued reliance on fossil fuels. Annual inflation in the US hit its peak in June 2022 at 9.1%, with energy prices accounting for a third of that increase, according to the Roosevelt Institute. The institute noted that fossil fuels carry “the highest indirect impacts on inflation of any prices in the U.S. economy,” as their price volatility drives up costs across other sectors. 

If Trump’s first term is anything to go by, the US’ climate action could see significant rollbacks. Back then, Trump withdrew the U.S. from the Paris Agreement, rolled back over 100 environmental regulations, and expanded oil and gas leasing by loosening environmental requirements for fossil fuel projects. But even the most powerful person in the world can’t ignore market dynamics. His term also coincided with a surge in renewable deployment as a result of the approved capacity as a legacy of the Obama administration, a period of lower interest rates and weak oil prices. This is the silver lining that the US has to leverage — momentum in renewable energy investment built during prior administrations, supported by favourable market conditions, which could sustain growth in clean energy sectors even if federal support wanes. 

Impact on COP29 and other climate agreements

The general fear is that Trump in power would mean the US completely disengaging from global climate efforts, including exiting from the Paris Agreement. But will other countries follow suit? This is highly unlikely. The last time Trump announced his decision to withdraw from the Paris Agreement, more than 80 countries such as China and India, doubled down on their commitments. Even if the US were to leave the Paris Agreement, it will still have to submit its updated Nationally Determined Contribution (NDC) before it exits. 

But any sudden shocks at COP29 are unlikely as the Biden administration will be at the negotiating table. There will be no change of guard in the US until Inauguration Day in January. Leaders from the EU, Brazil, and the Commonwealth are pushing to highlight the urgency of multilateral efforts to tackle climate change. Countries will likely be keen to also build new alliances to take up the opportunities lost by the US clean tech industry. 

Biden also committed to increasing international climate finance to more than $11 billion by 2024. To begin with, this isn’t a very high number. Therefore, global climate finance goals are not solely dependent on the US providing funds. But an ambitious NCQG is now the need of the hour so that money flows to the developing world even if the US decides to withdraw all its contributions. 

What Trump’s presidency means for US climate policy

An analysis by Carbon Brief found Trump’s victory could lead to an additional 4 billion tonnes of US emissions by 2030 compared to Biden’s plans. Deregulation and expansion of fossil fuel production have been the cornerstone of Trump’s approach to climate policy. The former was reflected in his “drill baby drill” mantra that he put forth during his recent presidential campaign. This is a far cry from the clean energy initiatives that were taken by the Biden administration. Some experts believe this may be the end of all hopes of limiting warming to 1.5°C.

If the same approach continues during Trump 2.0, federal support for clean energy initiatives are likely to be one of the first policies to take a hit, slowing down the momentum of renewable energy in the US. But the economic competitiveness of clean energy when compared to fossil fuels — as seen in its vast potential to create jobs and business opportunities for states and international investors alike — will hold the sector in good stead in the long term. In 2023, clean energy growth accounted for 6% of the US’ GDP growth. Hope also comes in the form of a coalition of US states on climate action — as seen in Trump’s first term, which will see them continue implementing their own net-zero goals and standards for clean energy growth. This shows that the US’ energy transition is being increasingly driven by economic incentives and local demand for renewables, and not necessarily federal funding. 

The global ramifications of Trump’s energy policies  

The Inflation Reduction Act (IRA) has been the Biden administration’s flagship climate policy, leading to a massive boom in clean tech and manufacturing. Since it was introduced in 2023, around 280 clean energy projects worth $282 billion have been announced, creating at least 175,000 jobs. In 2022, clean energy jobs in the US grew 3.9%  and stood at 3.1 million. What didn’t probably work in its favour in this election was the lack of awareness among voters about its impact. Less than a third of Americans have heard about the IRA. But it had positioned the US as a leader in global clean energy market. 

Trump’s proposed rollback of these policies could threaten the US’ standing, opening space for other clean energy heavyweights like China and, to some extent, India to vie for the top spots. China has proved its dominance in this space and is already leading the way on batteries and other clean tech manufacturing. In the event of a trade war, countries, especially in Asia are yet to reveal their stance between the US and China. But India is the only nation actively adjusting tariffs on China, looking to capitalise on gaps in the US-China trade relations to benefit its domestic solar PV industry.

Trump has already said he would end Biden’s pause on liquefied natural gas (LNG) export terminal approvals and provide more affordable gas to international buyers, especially in Asia. But LNG demand forecasts have indicated potential oversupply until 2035, making any new projects economically unviable, thereby increasing the risk of creating stranded assets. There will be pressure to make LNG exports cost-competitive against renewables in the global energy market, which is a tough task.

It is evident that while this election outcome is likely the worst-case scenario for US climate action, it is not the same situation for international efforts. Other global powers stand ready to lead and will continue to make headway in addressing the climate crisis. While Trump may steer the US away from climate leadership, the momentum worldwide is unlikely to diminish because it is driven by both economic ground realities and the determination of a world in urgent need of climate solutions. The show will and must go on, albeit with new challenges.

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Anushka Mohite

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