Significant policy shifts on market-based actions to address climate change could come from US states if former president Donald Trump is re-elected.
A Trump administration is expected to be much less friendly to environmental markets, with the Republican nominee pledging on the campaign trail to repeal major tax incentives and other policies that support emissions-reduction efforts. That could open the door to more action by Democratic-led states, according to speakers Monday at the Environmental Markets Association (EMA) annual meeting in Scottsdale, Arizona.
"When Republicans win the White House, you tend to see the blue and purple states lean more aggressively into getting in the driver's seat on climate action," said Eric Scheriff, Capstone senior managing director of sustainability practice.
Scheriff highlighted eight states that increased their renewable portfolio standard (RPS) targets during the first Trump administration and said there is further potential for programs to expand and set more ambitious mandates in response to a second Trump presidency. A Republican-led White House would likely catalyze further development of New York's proposed cap-and-trade program, while spurring a more aggressive Low Carbon Fuel Standard program in California.
Expectations are that vice president Kamala Harris, the Democratic nominee, would continue President Joe Biden's climate policies. But a Harris administration has the potential to create a more durable voluntary carbon market, according to Janet Peace, head of policy for Anew Climate.
"You could have the enshrinement on a government principle of what is high quality carbon," Peace said.
Action by the US Congress could give the Commodity Futures Trading Commission the authority needed to create a more transparent voluntary carbon market, Peace said.
But the voluntary market could have the opportunity to expand under either administration, she said.
Meanwhile, the fate of the Inflation Reduction Act (IRA) remains a point of contention under a Trump administration.
Trump has pledged to repeal many of the energy tax credits in the IRA, while Harris has promised to create "America forward tax credits" that focus on growth for certain industries.
While money from the IRA has flowed to Republican states, this is unlikely to stem appetites to go after the provisions in a Trump administration, according to Kevin Poloncarz, partner and co-chair of the environmental and energy practice group at the law firm Covington & Burling.
"There's lots of ways it could be nibbled around the edges," Poloncarz said.
This could come in the form of how the US Treasury and Internal Revenue Service go about implementing provisions of the IRA since the final rules for some have not yet been issued, such as what qualifies for the 45V clean hydrogen tax credit.
A rush by the Biden administration to finalize the rules before the election would not necessarily remove any uncertainty, Poloncarz said. Congress under a Trump administration could pass a Congressional Review Act resolution, scuttling the rules and effectively prohibiting the agencies from adopting similar rules without the express permission of lawmakers.
