Alert 01.10.25
New Year, New Presidency: What to Expect on Day One of President Trump 2.0
There are several key policy shifts and executive actions to watch as Trump 2.0 unfolds.
Alert
01.16.25
Come January 20, 2025, President-elect Donald Trump is expected to take aggressive action to reverse President Biden’s environmental agenda, including the Biden administration’s broad effort to cut greenhouse gas emissions and focus on environmental justice concerns. The process of repealing and replacing Biden’s rules may be lengthy, however, and the Trump administration is expected to maintain some Biden policies and may even expand others where those policies may benefit both renewable energy and traditional fossil fuels.
Despite support for many renewable energy programs, including support from some congressional Republicans, the Trump administration is unlikely to be deterred. As we have described in prior alerts, President Trump’s second term is expected to bring sweeping changes to the energy sector. With respect to renewable energy, among other things, the Trump administration is anticipated to:
Inflation Reduction Act
In August of 2022, President Biden approved Congress’s Inflation Reduction Act (IRA), which is arguably the single most significant Congressional action in history to promote clean energy and prevent climate change. The IRA fosters a transition to clean energy through tax incentives, grants, loans and other investments. It includes some two-dozen tax incentive programs to accelerate the deployment and production of clean energy, clean buildings, clean vehicles and clean manufacturing. In addition, the IRA provides billions of dollars in loan and grant programs for clean energy transition projects.
The Trump administration is expected to take quick and decisive action to weaken the IRA once he takes office. In September of 2024, Trump stated that he planned to terminate the IRA, and he further indicated that, in the event the IRA cannot be fully terminated, he plans to rescind funds allocated but not yet spent under the IRA. Trump has not specified which IRA programs he would target, but such measures might include redirecting funds allocated for clean energy and climate change prevention to programs more in line with his focus on domestic energy production or infrastructure projects. For example, Trump has previously discussed redirecting the unused “Green New Scam” funds for construction of roads, dams and bridges. One area in particular that the Trump administration may target is the offshore wind sector, which not only receives benefits of tax credits under the IRA, but also has enjoyed loosened requirements in recognition of the increased difficulties involved in offshore wind construction.
Trump may find a full repeal or even redirection of IRA funds to be a difficult task, however. For one, a significant portion of IRA funds have already been spent—nearly half of the $105 billion the IRA allocated for climate grant programs has already been invested or committed, with more to be committed before Biden leaves office. Trump’s administration would have difficulty clawing back funds that have already been committed under the IRA, as it would require termination of existing award agreements—which can occur only in limited circumstances. Any attempts to rescind, reallocate or draw back funds allocated under the IRA will open up the opportunity for court challenges, as such efforts could run afoul of the Constitution’s Appropriation Clause. Further, no more than 10% of funds allocated to any IRA program are permitted to be transferred to another use, and withholding IRA funds requires the approval of Congress pursuant to the Impoundment Control Act.
Finally, significant action to unwind the IRA could require new legislation. This could prove challenging to pass, given the slimly divided House, and the fact that many Republican districts have or stand to benefit from IRA-supported projects. Texas, for example, is a major beneficiary of renewable investments uplifted by the IRA. Modeling has demonstrated a predicted reduction in annual energy costs by nearly $78 annually per household in Texas by 2030. The IRA is anticipated to cause significant job growth in Texas and other states, as clean energy and manufacturing jobs increase. Additionally, repealing aspects of the IRA that extend manufacturing credits for EV batteries and components may result in greater pushback from the Trump administration’s constituents.
Absent new legislation, since the IRA’s tax programs directly changed the tax code, interference by the executive branch with the IRA’s tax incentive programs would likely face a legal challenge. Moreover, it may not be in the Trump administration’s best interest to repeal all portions of the IRA—for example, the IRA contains many incentives for investing in energy independence and onshore manufacturing, which are stated goals for the Trump platform. Notably, it may also be possible for the executive branch to interfere with the IRA through regulatory action—for example, rules passed that bypass applicable statutes on the basis of good cause.
Permitting Reform
Trump has vowed to end delays in federal drilling permits and leases for oil and gas production, and to undo changes made by Biden to increase oil and gas lease costs and restrictions on acreage availability. During his campaign, Trump also said that he would declare a national emergency to push energy production, promptly approving new pipelines, drilling, power plants, refineries and nuclear reactors. Although such an approach was unsuccessful in Trump’s first administration, Republican control in Congress will decrease opposition and increase Trump’s ability to take such steps.
While these permitting streamlining efforts are intended to focus on the oil and gas industry, they stand to also benefit the renewable energy industry. Currently, permitting under the National Environmental Policy Act (NEPA) and other environmental statutes can create a significant burden on renewable projects. If the Trump administration is successful in reforming NEPA and other statutes, this could accelerate renewable energy development by streamlining the environmental review and permitting process for renewable projects, which often face lengthy permitting delays. Therefore, even as other support is withdrawn, renewable projects could see some benefit as permitting becomes a faster process with less red tape.
Offshore Wind Industry
Trump stated in September that he planned to “make sure that [offshore wind] ends on day one” of his new administration. Following Trump’s victory, some offshore wind company stocks saw a significant drop. The incoming administration is also expected to cut back offshore wind leasing, which will have an impact on the industry’s potential. Multiple offshore wind projects are underway, though, with some already operational. Trump is unlikely to succeed in ending these projects, particularly since offshore wind produces cheap electricity and encourages domestic energy production, benefits that align with the incoming administration’s larger goals of ending inflation and lowering prices.
Further, actions taken by the Trump administration to streamline offshore oil and gas permitting may actually help maintain some but not all of offshore wind’s momentum. That’s because offshore wind has faced significant permitting challenges and delays. Offshore wind permitting follows the same general permitting framework and is regulated by the same agency (the Bureau of Ocean Energy Management) that regulates offshore oil. Therefore, efforts by the Trump administration to streamline offshore oil permitting may also serve to streamline offshore wind permitting, helping remove some of the burdens and helping offshore projects—wind and oil—receive permits in a timelier manner.
Solar Industry
The solar industry’s lobbying strategy for the new Trump administration has shifted from its Biden-era emphasis on its role as a climate change combatant to its status as a driver for domestic jobs that enable the United States to meet its increasing power demands. Trump’s position on solar is not yet clear and will likely be dependent on who ultimately becomes his top energy advisors. Chris Wright, President-elect Trump’s pick for Secretary of Energy, and Governor Doug Burgum, Trump’s Energy Czar and pick for Interior Secretary, both support an “all-of-the-above” energy policy which includes development of renewable sources such as solar. However, both also strongly support development of fossil resources. Further, Wright has expressed skepticism about the environmental benefits of solar and criticized its reliability and intermittency. Trump’s official policy agenda does not address solar energy at all, despite attacking wind energy in multiple instances.
Further, if the Trump administration’s phase-out of IRA tax credits is successful, the solar industry is likely to take a hit given the role that clean energy tax credits and tax equity have played in solar project development. He also is anticipated to cut back solar leasing through executive action by altering public lands leasing, which will greatly impact solar industry growth. Similarly, if the plan proposed in Project 2025 to cut funding for the Department of Energy’s Office of Energy Efficiency and Renewable Energy is successful, this would likely have a strong impact on investment and deployment of solar energy. Nonetheless, it is possible that Trump’s proposed position on permitting reform and corporate tax cuts could also lead to some trickle-down benefits for the solar industry.
Conclusion
Though Trump is likely to take decisive action once he takes office to change energy industry regulation in a manner that closely aligns with his campaign promises, the new administration will likely be selective and maintain certain programs (such as portions of the IRA). Other industries can expect to see less regulation and enhanced incentives in the coming years, including the oil and gas, nuclear, and hydroelectric power industries.