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A new administration has been selected after this week’s long-anticipated presidential election has ended. Now that the results are in, what does that mean for the many renewable energy and sustainability initiatives that have progressed over the past four years, including the Inflation Reduction Act? Obviously, we do not really know the answer, but we do know the attitudes of the incoming administration on environmental legislation and the support of fossil fuels. So here are some possible scenarios for the energy and process and discrete manufacturing markets. As we draft this article, the fate of Congress is unclear, but a GOP majority in the Senate, Supreme Court, and Executive Branch could potentially allow for swift policy shifts including renewable energy policies and environmental legislation. A majority in all branches of government would leave little room for debate on policy.
Over the last four years, the Biden administration invested hundreds of billions of dollars to support domestic energy transition efforts, including the Bipartisan Infrastructure Law and the Inflation Reduction Act (IRA). However, these investments—and the tax credits supporting them—now face uncertainty.
Resource: Unsplash
The Inflation Reduction Act
Since 2022, states with GOP leadership have received more than half of the $387.8 billion allocated through the IRA, including states such as Texas and Louisiana whose regulatory climates are more conducive to business due to fewer regulatory barriers, (e.g., limited public commentary periods for energy projects). GOP-leaning states offer advantages for clean energy projects, including established industrial energy infrastructure, ample land, and abundant natural resources.
This is the breakdown of where private clean energy projects post IRA have been announced. The findings above are reflected below, as Republican-led states have been where much of this activity is happening.
Source: Clean Investment Monitor
Just days before the recent presidential election, more than a dozen House Republicans urged Speaker Mike Johnson to preserve the clean energy credits within the IRA if the GOP keeps or expands its House majority. They argued that removing these credits could result in a “worst-case scenario,” as numerous companies have already begun projects based on the assumption that these credits would remain in place. Cutting them, they contend, could waste billions of dollars already invested.
Meanwhile, in 2024, 99 percent of all new power generation capacity in the US was wind and solar. It is cheaper and faster to construct, despite the federal permitting process being a hurdle for some regions of the country. Much of the new on-demand generation capacity, those plants that need to start up quickly in the event of a need for more power on the grid, are still gas fired turbines mixed with battery storage. This is also true for states such as Texas, which now has more wind and solar capacity than any other state in the union. This is a good example of a market at work, and this scenario is not likely to change with the incoming administration.
What About Tariffs?
Tariffs are also expected to play a significant role in this administration’s economic strategy, a stance that dates to the 2016 administration. Now in 2024, proposals include significant tariff increases on foreign goods to support US manufacturing and job growth. Plans floated during the campaign suggested a universal tariff of 10 percent to 29 percent on most foreign products, a 60 percent tariff on Chinese goods, and the removal of China’s permanent normal trading status. A proposed “reciprocal” tariff would match the tariffs other countries place on US goods. How this stance on tariffs plays out in the market remains to be seen, as they historically have had both positive and negative consequences.
While tariffs are intended as taxes on goods crossing US borders, importers often pass the costs onto consumers, potentially affecting US manufacturers dependent on imported resources. China, a major supplier of electric vehicle (EV) batteries, is likely to be impacted by these tariffs, leading to increased costs for EV materials and pricing many consumers out of the EV market. Currently, the US domestic supply chain for key low-carbon products, such as EV batteries and solar panels, remains insufficiently scaled to compete with foreign sources. Although tariffs may encourage domestic production, they could also increase costs for American manufacturers, reducing revenues.
However, that picture is changing. In just the past couple of years, massive lithium deposits, a key ingredient in EV batteries, have been discovered in the US. ExxonMobil also became a huge lithium producer in 2023 with the acquisition of 120,000 gross acres of the Smackover Formation in southern Arkansas, one of the most prolific resources of its kind in North America. The direct lithium extraction that will be used by ExxonMobil utilizes 2/3 less carbon intensity than conventional extraction methods.
The Fate of Electric Vehicles
EV sales continue to grow overall, and the US share of electric and hybrid vehicle sales increased in the second quarter of 2024. The new administration, however, could roll back emission regulations, which would likely decrease the demand for EVs, outside of strong pro-EV states like California, which may go on its own while increasing demand for oil, gas, and combustion-engine vehicles. Additionally, policies on methane emissions may be revisited. Any changes to methane regulations could impact US oil and gas exports, as international buyers increasingly prioritize products aligned with methane-reduction goals. A withdrawal from the Paris Agreement is also possible, which would slow international efforts toward coordinated energy transition.
The Biden administration’s stance on the energy transition has been clear, highlighting the perceived economic benefits of focusing on traditional energy sources and support for clean energy. Nonetheless, the impact of the IRA’s clean energy investments over recent years shows the potential for economic opportunity across party lines. While the next four years will bring changes, the momentum behind the clean energy transition remains significant and difficult to ignore.
Will the LNG Export Boom Continue?
Since Russia’s invasion of Ukraine in 2022, Europe has increasingly relied on international suppliers for fuels and oil, with the US emerging as a leading supplier of LNG and crude oil. In 2023 alone, US LNG exports to Europe surpassed $30 billion, accounting for two-thirds of all US LNG shipments. This surge has contributed significantly to US revenue and tax income. Meanwhile, European consumers have faced higher energy costs, which have accelerated Europe’s shift away from fossil fuels.
Since 2022, Europe has had to turn to the US for key Energy Resources such as Oil and Gas
Resource: Reuters
While European policymakers remain concerned about potential tariffs from the next US administration, they aim to maintain trade relations with the US, especially given tensions in trade with China. However, if a tariff conflict were to arise, retaliatory measures on both sides could strain the US-EU relationship. The US may be cautious, as European buyers have alternatives for LNG, potentially forcing the US to turn to more distant buyers like China, increasing shipping costs. Although US LNG production is expected to remain robust, the risk of a trade dispute with major European customers poses challenges to sustaining the current export boom.
This incoming administration has campaigned on a strong opinion on not interfering in the Russian conflict. If the Russian invasion continues without (or less) US support to Ukraine the conflict could have detrimental effects on an international scale. In terms of US fossil fuel export policies, the Russian economy will favor these policies. LNG purchasers such as Europe may not agree with the decisions of the new administration and could result in some consequences for US LNG exporters.