In recent weeks, the shooting incident involving Donald Trump, combined with President Joe Biden's gaffe that raised public concerns about his cognitive health, led to Biden announcing he would not seek re-election and would support Vice President Kamala Harris as the Democratic candidate.
However, most analysts believe that regardless of who the Democrats nominate, the outcome of the 2024 US presidential election is almost predetermined. Wall Street and various industries are starting to focus on whether Trump's return to office will impact the US and global economy, particularly regarding issues like interest rates, inflation, climate change, and trade protectionism. Let's first look at the potential impact of combating climate change.
Energy Technology Investments Driven by the IRA
In 2022, the US Congress, with a Democratic majority, passed the Inflation Reduction Act (IRA). This act was passed with unanimous support from Democratic members and complete opposition from Republicans, highlighting the Republican opposition to this legislation.
The primary aim of the IRA is to reduce inflation, but it is more noted for its promise to invest US$369 billion in incentives, including tax credits, loans, and subsidies, to invest in clean energy technologies for national energy security and combating climate change, including subsidies for purchasing electric vehicles (EVs).
These incentives have led to massive investments in various types of climate technology. According to data analysis from the Rhodium Group and the Massachusetts Institute of Technology (MIT), as of mid-2024, this act has attracted about US$350 billion in investments into the US clean energy sector, from batteries, renewable energy, hydrogen energy to sustainable aviation fuel (SAF), creating over 300,000 jobs.
Analyses also noted that for every dollar the US government spends on this act, private companies invest an average of US$5.47.
Trump has always been skeptical about global warming and climate change, even withdrawing from the Paris Climate Agreement during his previous term. In his campaign speeches, Trump has promised to continue embracing fossil fuels, including coal, and has repeatedly expressed dissatisfaction with the IRA, calling it the "Green New Scam."
Trump stated he would redirect these funds toward infrastructure projects like roads, bridges, and dams. Hence, the industry is concerned about whether Trump will halt the development of climate technology if he takes office again. For instance, Trump clearly stated at the recent Republican convention that if elected, he would end the EV mandate and increase US automobile manufacturing.
The so-called EV mandate Trump referred to does not exist. The US Environmental Protection Agency (EPA) has proposed an automotive emissions reduction plan that only requires automakers to reduce overall new car carbon emissions by 50% in 2032 compared to 2026. It's not a mandate that only EVs can be sold.
Currently, EVs manufactured in North America enjoy a subsidy of up to US$7,500, which significantly boosts sales of electric and plug-in hybrid electric vehicles (PHEVs). Without this subsidy, the desire to purchase EVs among Americans, who live in a massive country and often face range anxiety, will likely be even lower.
It's no wonder that Tesla CEO Elon Musk immediately pledged US$45 million per month to Trump's campaign after the shooting incident, hoping that Trump would continue to provide subsidies for EVs if he takes office again.
Red States Are the Biggest Beneficiaries of the IRA
The US is also a country deeply divided by partisan politics, with its red (Republican) and blue (Democratic) factions. According to CNN's analysis of data from the Rhodium Group and MIT, nearly 78% of the approximately US$350 billion investment announced thus far has flowed to districts represented by Republican members of Congress. Of the top ten districts receiving the most clean technology investments, nine are represented by Republican members of the House.
These massive investments have created numerous job opportunities, leading some Republican members of these districts who previously opposed the IRA to now support its retention. Furthermore, many large oil companies, almost all of whom are Trump supporters, have invested in climate technology research, whether for sustainable development or just public relations. These companies have received considerable funding and tax credits from the government, with some hoping to retain parts of the IRA favorable to them, such as carbon capture, hydrogen energy, and SAF.
Will the IRA Be Canceled?
The IRA is a congressional act that cannot be canceled solely by the President without going through the legislative process in both the House and Senate. Concurrently with the presidential election, there will also be congressional elections at the end of the year, so the future majority control of Congress remains uncertain.
Even if Trump wins, if the Republicans do not control both the House and Senate, Trump cannot unilaterally abolish the IRA.
However, given Trump's history of making unilateral decisions, it is very likely that he would use executive orders or other means to limit subsidies or tax credits for some climate technologies if he cannot repeal the IRA through Congress. Therefore, the detailed changes to the IRA will only become clear after the congressional and presidential election results are finalized and the new president takes office in 2025.
