How Will Republican Governance Change the U.S. Energy Transition?

Dismantling Energy Sector Innovation Policies Would Be a Strategic Mistake

By Seaver Wang

Political pundits and cartoonists alike have long joked that contrary to voters’ implicit expectations, policymakers cannot simply turn a dial labeled “the economy”. Similarly, the Oval Office contains no dial that controls “national carbon emissions”. As Trump’s new policies mix with and in many cases supplant Biden-era policies, the next four years are uncertain enough that it’s hard to say what the trend in near-term US emissions will be. 

To a degree, this would have likely been true under a Harris-led successor Democratic administration as well. Efforts to significantly expand U.S. climate or clean energy policies beyond the Inflation Reduction Act would have faced daunting political constraints of their own. Biden’s goal of halving national emissions by 2030 in deference to 1.5C climate pathways was never plausibly within reach to begin with, despite the entreaties of international climate meetings and much of the mainstream environmental movement. Voter sentiment this year seems to suggest that the necessary politics for prioritizing climate as a top national policy issue just aren’t in place—and likely never will be. Most importantly, between worried speculation over everything from U.S. economic health amid a tariff war to drone attacks on Red Sea shipping to a rocky Chinese economy, uncertainty in how U.S. emissions will respond to shifting world events may well far outweigh the impact of relatively narrow changes to U.S. energy and environmental policies.

Rather, the critical question is how a Trump presidency and full Republican control of the federal government will influence U.S. competitiveness in advanced energy technologies. For the next four years and likely beyond, even the most ardent environmental advocates must recognize that technology, not regulation, will have to drive national momentum towards decarbonization.

Likely, many climate advocates will devote much attention and critique towards other environmental policy actions under Trump that will matter far less for national and global energy transition efforts than those advocates might care to admit. For example, U.S. withdrawal from the Paris international climate agreement and possibly the UN Framework Convention on Climate Change will ultimately exert minimal real impacts on progress towards global climate goals. Many countries like Japan, the United Kingdom, and Brazil remain far off-track from near-term emissions targets and must reckon with that uncomfortable reality within years. Few governments seem inclined to make stricter, more ambitious voluntary climate commitments needed for the increasingly unreachable 1.5C climate pathway, but neither would countries court unnecessary condemnation by following the U.S. in exiting the Paris Agreement.

Environmentalists will also doggedly oppose Republican policies to boost fossil fuel production, build fossil fuel infrastructure including Gulf Coast natural gas export terminals, and roll back federal environmental regulations. The environmental impacts of such fossil energy development efforts will not be negligible, certainly. But neither are they catastrophic. For example, the Biden EPA itself estimated that its proposed stronger regulations for U.S. coal and gas-fired power plants would only reduce national emissions by an added 36 million tons of CO2 (Mt CO2) per year by 2035. Should the Trump administration roll back this rule, the stakes will amount to less than one percent of annual U.S. emissions, or just slightly higher than the city of Hong Kong’s emissions in 2023.

In contrast, the federal government’s approach to public energy sector innovation over the next few years may well define the long-term trajectory of the nation’s whole energy system. A well-developed advanced energy toolbox will prove critical for assuring U.S. technology leadership, reducing fossil fuel dependence, and curbing carbon pollution. Haphazard dismantlement of Biden-era policies supporting nuclear and other clean power sources, solar and battery manufacturing, or critical minerals projects could prevent the nation from developing powerful new capabilities and economic assets.

One major outstanding policy question, which received surprisingly little discussion in pre-election climate commentary, involves Trump’s campaign promises to impose new steep tariffs on overseas imports—suggesting possibilities like heavy tariffs on imports from Mexico, 60% tariffs on all goods from China, and 10% on goods from all other countries. Any and all of these trade actions would induce significant economy-wide effects and likely produce strong domestic and international political reactions.

From an energy sector perspective, supply chain costs would rise across the board, frustrating development of domestic energy infrastructure, strategic technologies, and manufacturing. When it comes to electricity grids, the United States faces a double import dependence, firstly on Chinese transformers and grid equipment, and secondly on the electrical steel needed to try and manufacture more transformers domestically. Hefty tariffs would significantly impact clean technology deployment as well—partly because the U.S. continues to import many technologies like batteries and solar modules from China. Protection and high market demand for products to replace tariffed imports could stimulate investment in some sectors, especially for upstream sectors that produce inputs and raw materials. But long lead times to establish such upstream industrial capacity might weaken the investment case for downstream domestic manufacturing projects. For example, a proposed battery gigafactory may find itself neither able to pay +60% extra for imported cathodes, nor able to wait several years for an alternative domestic cathode material plant to get up and running. Projects must also account for the risk that the administration backtracks on the tariffs as part of international negotiations or in response to political backlash, effectively changing the market landscape for competition again.

Such narrow business decision calculus would in turn unfold amidst broader national economic trends. Tariffs would raise costs of many products for households including clothing, shoes, many consumer goods, foods, electronics, appliances, pharmaceuticals, hardware supplies, automobiles and more. Increased consumer prices—and retaliatory tariffs targeting U.S. industries—could produce broad economic shocks like reduced household spending, financial sector volatility, and sector-specific job losses, potentially producing profound political discontent.

More narrowly for the energy sector, the incoming administration sees low value in renewable energy efforts and has committed to intensely scrutinizing federal spending in general, throwing the fate of many existing policies supporting strategic energy technologies into question. At the same time, Republican control of both House and Senate opens up large portions of the IRA to revisions, with Republican leaders eager to shrink and cut tax credit programs to make room for a desired extension of the 2017 Tax Cuts and Jobs Act.

However, federal policymakers would be wise to refine IRA provisions using “a scalpel and not a sledgehammer,” as House Speaker Mike Johnson articulated in September. Republicans may feel skeptical that wind, solar, and electric vehicles are ready to assume large shares of the nation’s electricity and transportation sectors, but should consider that all of these technologies possess clear long-term value and growth potential. Across just North Carolina, South Carolina, Georgia, Michigan, and Texas, the IRA has stimulated over $70 billion in manufacturing investments across 141 projects. The U.S. cannot afford to fully cede U.S. competitiveness in these areas by indiscriminately eliminating IRA policy support or repealing the bill altogether. Energy policy observers have already begun theorizing that revisions to the IRA will seek a faster phaseout for tax credits for wind and solar electricity and elimination of the electric vehicle purchase tax credits, while preserving other incentives for advanced manufacturing and clean fuels. Indeed, it will be especially important for Congress and the new administration to continue vigorously supporting and developing emerging energy technologies like advanced nuclear, geothermal, carbon capture, and alternative fuels.

Since energy is an essential input into all, and especially advanced, economic activities, investments in these technologies will likely produce long-term economic gains that more than outweigh near-term expenditures—a value proposition emphasizing the importance of not only the continuity of innovation policies themselves but the federal infrastructure administering them. Indiscriminate cuts to agencies like Energy, Interior, FERC, USGS, NOAA, or the Nuclear Regulatory Commission may inhibit their ability to support national infrastructure efforts and stall important strategic efforts like critical mineral mapping, long-term energy system planning, and nuclear technology development. Any such cuts should be carefully and intentionally targeted to improve, not impair, administrative efficiency and state capacity. The incoming administration should similarly consider the importance of skilled industrial workers for building a strong future energy system and work closely with labor groups to align interests and foster workforce growth.

Ultimately the question of whether U.S. emissions tick marginally upwards over the next few years stands separate from the far more pivotal question of how to drive a sustained, structural, multi-decadal energy transition with an accompanying decline in carbon emissions. The recent election reinforces the hard lesson that politically-durable decarbonization depends upon making alternative energy sources more viable, as opposed to a principal strategy of hoping to regulate oil and gas into decline. Congressional legislation passed on very narrow margins via budget reconciliation, similarly, always confronts the risk of revision through the same mechanism.

In principle, room exists to align a new Republican federal government with an energy innovation agenda. Republican leadership will continue to favor near-term, America-first thinking on energy that prioritizes affordability, competitiveness, and energy security over climate. Such a philosophy could support structural energy sector trends that reduce emissions, if alternative technologies can convincingly demonstrate that they can advance these priorities. Clean energy transition proponents have long maintained—with ample supporting evidence—that this is precisely the promise that clean energy technologies like solar, batteries, geothermal, and nuclear offer. A strategic de-polarization of clean energy technologies along these lines may prove vital to establishing a new broad consensus on U.S. energy strategy that can advance both geostrategic and decarbonization goals.

Indeed, for the foreseeable future, a Trump White House makes it clear that the United States will have to find a way to advance the energy transition forward in the absence of muscular regulation on pollution. Technological progress and the strategic public sector support necessary to accelerate such innovation has never been more crucial to reducing pollution and securing a strong position for the U.S. in tomorrow’s global energy landscape. A robust political coalition must reemphasize to Congress and the new administration that America ultimately needs more than just wellpads and drilling platforms to guarantee a bright national future.