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How will the next four years under President-elect Donald Trump impact climate policy?
All eyes are on the 2022 Inflation Reduction Act, a landmark climate law enacted by President Joe Biden that Trump has said he wants to repeal. The law offers subsidies for electric vehicles, batteries, and other clean energy technologies.
On a Dec. 4, 2024, episode of the “What If It Works?” podcast, hosted by the MIT Energy Initiative, MIT Sloan professor and economist offered a few early predictions on the potential short- and long-term climate and energy impacts of the second Trump presidency. Knittel appeared on the show with co-hosts Kara Miller and Robert Stoner, the founding director of the MIT Tata Center for Technology and Design and deputy director of MITEI.
The presenters considered a wide range of topics, including which parts of the IRA might be repealed, whether tariffs could help lower emissions, and whether a carbon tax might be in America’s future. Here are three of their predictions.
1. Offshore wind and electric vehicle subsidies are under threat
The new Trump administration will be closely examining the IRA, trying to figure out which subsidies to keep and which to eliminate, said Knittel, who is director of MIT’s Center for Energy and Environmental Policy Research and the MIT Climate Policy Center. He predicted that offshore wind subsidies, which primarily benefit coastal Democratic states, will vanish, and perhaps electric vehicle subsidies as well.
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The danger with the latter scenario is that China will “sadly” start dominating the EV sector if support from the incoming administration goes away, Knittel said.
“My biggest concern over the next four years is we’ll be leapfrogged by everybody else,” he said. “And that’s going to actually have very long-term repercussions. If the Trump administration is going to really be [against] clean technology, then that’s going to put us four years behind on those industries. And by then, it might just be too late.”
However, Knittel doesn’t see the new administration repealing the act entirely, in part because 85% of IRA subsidies are going to Republican areas of the country. “I do think we will continue to make movements toward hydrogen demonstration projects around carbon capture storage or building more battery manufacturing plants,” Knittel said.
2. Tariffs will hurt lower-income families but might have benefits for overall emissions
Trump has said that he plans to implement hefty tariffs on a range of sectors to protect American workers. Most solar panels installed in the U.S. are made overseas, and manufacturing solar panels in the U.S. will make them more expensive.
“You can have a factory in the U.S. where people obviously make more money than they probably would in China, so it’s like American-made jobs for Americans, but it’s going to cost you a bunch of money to put some solar panels on your roof,” Miller said.
Unfortunately, lower-income families will face the brunt of these higher prices if the cost of building clean tech goes up. With EV prices, for example, “you’re already pushing toward the upper part of the income distribution,” Knittel said. Additional tariffs on foreign-made electric vehicles could make them even less affordable.
On the positive side, Stoner said that introducing tariffs on imported goods largely from low-income countries like China “means we’re bringing [manufacturing] out of an economy that is extremely carbon intensive.” In this way, repatriating manufacturing to the U.S. could reduce global emissions, “maybe even quite dramatically,” Stoner said.
Knittel noted that if the price of popular consumer goods goes up, that may cause Americans to buy less stuff, which could in turn push emissions downward.
3. The U.S. may be getting closer to a carbon tax
Up until now, the U.S. has resisted levying a carbon tax on businesses, but Knittel said it might be moving in that direction. One model has shown that "the emissions reductions of the IRA are significantly augmented under scenarios that add a modest carbon fee.”
The European Union’s carbon border adjustment mechanism, currently in a pilot phase, requires that the cost of any goods imported into Europe be adjusted based on their carbon content, Knittel said.
“That is creating pressure by the countries that were exporting to Europe to think about adopting their own carbon taxes,” he said. “It’s also providing some cover for U.S. policymakers on both sides of the aisle actually to think about ‘Well, if we’re going to start doing tariffs, maybe we do tariffs based on carbon content as opposed to just flat-out tariffs.’”
