New generation assets will take time to develop, especially for natural gas, nuclear, and hydroelectric power plants, while coal assets are aging and remain largely uncompetitive. This means it will become increasingly challenging to meet the rising demand, which is fueled by the new administration’s ambitions to remain a global leader in artificial intelligence (AI) and to develop data center infrastructure and digital industries within the country. President Trump may find himself forced to abandon or at least scale back some of these ambitions due to an inadequate electricity system. While the tech sector may continue to support renewable energy development, this policy could also increase tensions and vulnerabilities already widespread in the American power grid, especially if opposition to nationwide grid planning persists. Overall, wind and solar energy developments – set to provide most of the capacity added over the next five years – are likely to continue, but at a much slower pace as federal pressure intensifies. Offshore wind is currently the technology most affected by federal actions. Insufficient power generation could also lead to higher electricity prices for US consumers. It remains to be seen whether there will be support for the next generation of technologies not yet mastered by China, such as fusion or solid-state batteries.
 

Import tariffs and the recently adopted OBBBA threaten the US cleantech industry, which makes up 5% of the country’s exports and had been expanding manufacturing capacity under the IRA. Abandoning this industry would have wide-reaching effects: first, even if the Trump administration moves away from the energy transition, the US will still import low-carbon products and run a deficit in this sector; second, a decline in this industry would cause significant job losses, unlikely to be offset by growth in fossil fuel sectors. The gradual removal of IRA subsidies primarily affects electric vehicles, as well as the solar and wind sectors. On the other hand, provisions for carbon capture and storage, where the US still leads, have been preserved.

The US withdrawal from the Paris Agreement is ongoing. While it remains challenging to predict short- and medium-term developments, forecasts suggest a significant slowdown in the long-term decline of US greenhouse gas emissions, even with a potential increase in emissions for the year 2025. The US withdrawal is also accompanied by a decrease in international funding and sends a misleading signal globally.