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Donald Trump’s win in the US election this month bodes negatively for climate policy in the US, writes Marco Kisic, Head of ESG Research in Nordea Equities. He shares which greentech areas are most at risk.
With Donald Trump headed back to the White House in January, many of the environmental regulations enacted by the Biden administration could be at risk. Trump is likely to withdraw once more from the Paris Agreement. And with Republicans now winning control of both chambers of Congress, Trump could in principle pursue a significant rollback of the Inflation Reduction Act (IRA). However, even with the clean Republican sweep, we see it as more likely that he will take a selective approach.
Among the measures we see as less at risk are the tax credits for renewable energy generation, the Production Tax Credit (PTC) and Investment Tax Credit (ITC). Both measures were passed 20 years ago and garnered bipartisan support.
We also view nuclear tax credits as less at risk, and to some extent the clean manufacturing investments tax credits, given that the majority of these credits are especially leveraged in rural communities and Republican states. Residential energy efficiency tax credits also proved particularly popular, so should be fairly protected.
On the other hand, areas we see facing a higher risk of repeal include electric vehicle (EV) tax credits, although Trump has lately warmed somewhat to this segment; offshore wind; clean fuels such as hydrogen; and other clean technologies.
Among other measures, Trump vowed to approve plans for terminals for the export of LNG as soon as possible, which should help reduce gas prices in Europe. This political change could also give Europe new impetus for climate action and investment.
| Tax credit | Risk of repeal |
| Renewable Energy Production Tax Credit (PTC) | Low |
| Energy Investment Tax Credit (ITC) | Low |
| Nuclear Production Tax Credit (45U) | Low |
| Residential Energy Efficiency Tax Credit | Low-Medium |
| Clean Manufacturing Investment Tax Credit (45X) | Medium |
| Clean Fuel Production Tax Credit (45Z) | Medium-High |
| New and used EV tax credits | High |
| Carbon Capture Tax Credit (45Q) | High |
| Hydrogen Production Tax Credit (45V) | High |
Source: Nordea
In Trump’s 2016 victory, greentech stocks across both side of the Atlantic suffered pre- elections, but performed well after that, supported by the general risk-on environment and Trump’s broader policy action.
| 1m before | 3m after | 6m after | |
| Nordic | -5% | 16% | 24% |
| Europe | -3% | 13% | 24% |
| US | -9% | 10% | 17% |
| MSCI | -1% | 10% | 13% |
This time around, we need to see how Trump’s policy agenda develops – however, after the initial knee-jerk reaction, we think the risk is concentrated in the themes where the policy rollback is likely. We are relatively sanguine on the other areas, which should be fairly immune from the political change and, if anything, supported by Trump’s wider economic policy and market sentiment.
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