Trump, Harris, and Project 2025: Impacts on Infrastructure Developments in Energy Sector
In the race for the 2028 Democratic Party's presidential candidacy, California Governor Gavin Newsom emerges as the current close frontrunner, though he has yet to officially declare his candidacy. Many observers view him as the most promising candidate.
On the Republican side, the Party's proposed goals, as outlined in the Project 2025 plan, include promoting the fossil fuel industry, withdrawing the US from the Paris Agreement on climate change, and rolling back clean energy regulations. These proposals aim to reverse the progress made by the Biden administration's green industrial plan.
The clean energy market, however, has already faced two years of severe macroeconomic challenges, with some of the uncertainty surrounding Trump's potential actions having been "priced in." Ashley Keet argues that many clean energy projects are competitive without subsidies, such as utility-scale solar often being cheaper than natural gas or coal in the US.
One significant policy supporting clean energy is the Inflation Reduction Act (IRA), a key component of the green industrial plan. This legislation has resulted in a 71% increase in business and consumer investment in clean technologies, totalling $493 billion in the two years since its implementation, according to a Rhodium Group report.
The IRA tax credits allow investors to receive extra funding early on in the business development process, making it popular among investors. However, the political landscape remains uncertain, with energy transition investors adopting a "wait and see" approach, wanting to know the outcome of the November US presidential elections before committing to any major new investments, especially ones that take advantage of the IRA tax credits.
Chris Berkouwer, portfolio manager of Robeco's Sustainable Global Stars Equities fund, shares this sentiment. He estimates that the chance of Trump actually following through with the threats to attempt to fully repeal the IRA is only 20%. Berkouwer also mentions that there are many different scenarios to consider regarding what Trump would do if elected.
Some experts, like AXA IM and Robeco, believe that Trump's threat to the IRA is generally "overstated" due to the bipartisan nature of the legislation and the benefits to swing states and Republican states. They argue that the Republican proposals, if enacted, would face a political challenge in pushing any rollbacks through Congress.
Companies are also responding to customer/consumer demand for reduced emissions, a trend independent of policy. For instance, Microsoft has signed the largest clean energy deal in history for renewable energy from Brookfield for its upcoming data centres.
In the current polls, Democrat presidential candidate Kamala Harris enjoys a narrow lead, but the race is still too tight to call. The outcome of the elections will undoubtedly have a significant impact on the clean energy market and the nation's commitment to addressing climate change.
