With President Donald Trump’s return to the White House, U.S. transport and energy policy has undergone a dramatic 180 degree shift, to say the least. Executive orders (EOs) issued in the first weeks of his Administration have effectively paused or reversed many climate-focused policies of the Biden era, particularly those affecting transport energy. This blog post examines these changes, their implications for the automotive and fuel industries and what might come next.
The New Direction: Energy Affordability and Reliability Over Climate
The overarching theme of the new Administration is prioritizing energy affordability, domestic production, and regulatory rollback over climate-driven initiatives. No more climate crisis, no more net zero. Two key executive orders—“Unleashing American Energy” and “Declaring a National Energy Emergency”—set the tone:
- Rolling Back the EV Transition: The Administration has committed to revoking federal GHG and fuel economy standards finalized in 2024, which would have pushed EV adoption to as much as 56% by 2032. Additionally, Trump is targeting California’s ability to set its own vehicle emissions standards, a move that could reshape the national regulatory landscape.
- Suspending IRA and IIJA Funding: Federal agencies have been directed to pause disbursement of Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) funds, particularly those supporting EV tax credits and charging infrastructure.
- Focusing on Domestic Energy Production: The administration is emphasizing domestic oil, gas, coal, nuclear, and biofuels while accelerating the development of critical minerals essential for battery production all under the umbrella of national and energy security.
Implications for Automakers and the Energy Sector
The impact of these policies will vary across sectors. Here’s a breakdown:
Automakers and the EV Market
- Regulatory Uncertainty: The move to revoke EPA’s GHG and NHTSA’s CAFE standards could create yet another round of uncertainty, particularly as litigation is expected. Automakers must now weigh whether to slow their EV transition or continue investing in electrification to meet long-term market and state-level mandates.
- Impact on Consumer Incentives: The likely repeal of the EV tax credit (Section 30D) removes a major purchase incentive for consumers. However, some automakers and analysts believe the credit’s complexity limited its effectiveness, making its removal less impactful than anticipated.
- Critical Minerals and Domestic Production: While the administration’s focus on critical mineral development could strengthen the U.S. supply chain for EVs in the long term, the near-term effect may be to slow down investments in electrification.
Refiners and Fuel Producers
- Rollback of Emissions Standards: The repeal of stringent vehicle emissions and fuel economy standards means continued demand for gasoline and diesel in the near term, benefiting refiners.
- E15 Expansion: The Administration is pushing for greater availability of ethanol-blended E15 fuel, a mixed bag for refiners. Some are well-positioned for this shift with significant investments in the sector.
- Tax Credits in Limbo: The future of the Clean Fuel Production Tax Credit (Section 45Z), hydrogen production credits (Section 45V), and carbon capture incentives (Section 45Q) is unclear. The prevailing theory has been President Trump won’t go after these tax credits because massive investments have been made primarily in Republican states. Surely he wouldn’t? I submit that he would. And he can. And he just might. There are no guardrails these days.
What’s Next? The Legal and Political Landscape
- Litigation Battles Ahead: Any attempt to revoke emissions standards, fuel economy regulations, or California’s waiver will face legal challenges. There already are and they will get supercharged. A theme for me in this Administration is emerging and that’s durability.
- Congressional Action on Energy Policy: Republicans in Congress may seek to codify some of these executive orders into law, particularly around permitting reform and critical minerals development.
- State-Level Resistance: Progressive states such as California and New York will likely double down on their own climate policies, setting up a potential federal-state showdown.
Conclusion
While the media has largely framed these moves as a retreat from climate action, the reality may be more nuanced. Trump’s energy strategy may not necessarily be about abandoning cleaner technologies but rather about reshaping their development to align with his administration’s broader economic and geopolitical goals. For example, the emphasis on domestic critical mineral production could ultimately support EV and battery manufacturing, while regulatory rollbacks may provide breathing room for industries to adapt. We’ll see if I’m right. Trump could burn it all down, too.
The coming months will be critical in determining how these policies unfold and what it means for many of your companies that have made investments in the sector. Is the energy transition over? Will it take on a new shape and form? What are the challenges and opportunities for the affected sectors, not just in the U.S., but around the world?
I’ll be attempting to answer these questions for clients and members of the Transport Energy Outlook service providing the strategic insights and competitive intelligence they’ve come to count on. It’s going to be an interesting year – buckle up!
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