The US elected Trump. What does it mean for Europe’s green transition and industrial policy?

There’s no sugarcoating it: Donald Trump’s victory in the US presidential election represents a significant setback for global climate policy and for transatlantic cooperation on the green transition. With a likely retreat of the US from federal climate action – including key components of the green economic agenda championed by President Biden – the focus will shift to subnational actors, such as states, municipalities, and businesses, to drive the transition forward. While uncertainty remains over the exact course of Trump’s second term, it is clear that Europe must remain agile, continuing to push for international cooperation and delivering on the transition. To respond to the failure of a longtime ally, European leaders will have to find a coordinated approach.

This article explores the expected impacts of a second Trump presidency on Europe’s green transition and industrial policy, and proposes ways in which the EU can effectively navigate this new geopolitical landscape.

Even though the precise outlines of Trump’s second term remain uncertain, much can be learned from his campaign rhetoric and his first term in office.

Trump’s campaign was marked by mockery of electric vehicles (EVs) and renewable energy, attacks on Biden’s Inflation Reduction Act (IRA), and promises to end what he called the “green new scam”. He pledged to drastically ramp up domestic oil and gas production and reverse renewable energy policies, including plans to cancel offshore wind projects on his first day in office. He also indicated that he would scrap the Biden administration’s methane fee, which targets emissions from oil and gas operators. Finally, Trump might repeal one of the most ambitious climate policies, Biden’s limits on tailpipe emissions from cars, which foresees that two-thirds of passenger cars and a quarter of heavy trucks sold in the US should be fully electric by 2032.

The future of the Inflation Reduction Act is now in question. In recent years, the IRA has driven significant growth in the clean energy and cleantech sectors, creating thousands of jobs, many of which (57%) in traditionally republican “red states”. As a result, it may be in Trump’s interest to preserve certain aspects of it to safeguard these jobs, which benefit his electoral base. For these reasons, in August, 18 House Republicans wrote a letter to the speaker of the House of Representatives, Mike Johnson, urging him not to repeal the tax credits delivered under the IRA. While a full repeal of the IRA seems unlikely, significant changes are expected. For instance, Trump is likely to restrict access to subsidies for foreign-owned companies as part of his “America-first” protectionist agenda.

In addition, efforts to facilitate trade between the US and the EU and to continue on a path of decarbonisation – such as with the Global Arrangement on Sustainable Steel and Aluminium – are likely to be stalled by the incoming Trump Administration. Instead of pursuing joint action, the US will likely impose tariffs on key European industries, including cars and steel.

The return of Donald Trump to the White House looms over COP29, which is currently held in Baku. He has announced to retreat from the Paris Climate Agreement, and some fear that he might also withdraw from the United Nations Framework Convention on Climate Change (UNFCCC), undermining global cooperation on climate action. While he has not personally stated plans to do so, such a move is outlined in Project 2025, a policy manifesto crafted by some of his closest allies and the conservative Heritage Foundation. This document is widely seen as a potential blueprint for a second Trump presidency. If implemented, withdraw from the UNFCCC might be an almost irreversible step, as rejoining the treaty under a future administration would require a two-thirds majority in the US Senate – a scenario highly unlikely given the current political landscape.

However, while the US will likely retreat from climate commitments, the global cleantech race is set to continue. Therefore, the EU needs to prepare and readjust its strategy quite significantly.

First and foremost, the US’s retreat from climate policy is no reason for Europe to change its course. Scaling back Europe’s decarbonisation efforts would mean losing significant political, economic and social capital already invested and would send the wrong signal to the world. Whether Donald Trump is in the White House or not, the climate crisis will continue its course and can no longer be stopped but only slowed, with a multiplication of the horrific implications such as floods, wildfires and hurricanes.

However, Europe will have to change its current approach of “leading by ambition”, which has not been sufficient to create viable global action towards net-zero. It is not because the EU wants to be a virtuous role model that others will follow, especially not if the business case behind the green transition is not obvious.

First, the EU should focus on delivering the European Green Deal in a way that brings tangible benefits to citizens and businesses; and complementing it with a “Clean Industrial Deal” that makes decarbonisation a path towards growth and competitiveness.

The European Commission should double down on its efforts to deliver a comprehensive and ambitious Clean Industrial Deal, which would create a framework to make climate policies economically viable and create more predictable conditions for business investments. Member states should fully support these efforts – in particular France and Germany, whose economies are both in a bind. This could also have a signalling effect to the world that decarbonising can be economically successful. Even more so if done in a fair and democratic manner.

The EU will have to navigate a much more difficult multipolar environment, with weakened international organisations. This is why the EU should renew old alliances, such as with the UK, as well as find new ones, especially with emerging economies. 

As European businesses will probably have more difficulties to stay competitive in an increasingly inward-looking, protectionist and isolated US economy, the European Commission should do two things: First, deepen the single market, and therefore create better market conditions for our economy ‘at home’; Second, create a framework for European industries to develop technologies and manufacturing of cleantech for emerging markets, which have different needs than the European market and where there is untapped potential. The new Clean Trade and Investment Partnership (CTIP) that the Commission plans to develop could be a tool for this.

Lastly, the European Commission should also review its strategy on critical raw materials. For now, the EU is part of the Minerals Security Partnership Forum, which includes several countries home to these resources, except for China. As Trump is likely to pursue an anti-Chinese agenda, the EU should look for an alternative forum in which it can still lead a dialogue with China, as the country is home to many critical raw materials necessary for the green transition. The EU should do so rapidly, preferably before Trump’s investiture, in order to avoid potential retaliatory measures from the US administration.

The EU and member states should stand firm in their commitment to the Paris Climate Agreement, showing that they can act decisively even in the face of a potential US withdrawal. For that, the EU should invest in a strategy to know what steps to take should this happen; and have talks with potential allies to create strong partnerships towards an ambitious climate policy in a world without US leadership – with other like-minded G7 countries and emerging economies, like Brazil or Indonesia – and continue to cooperate with China on decarbonisation.

The EU should also step in and take the lead to ensure strong international climate financing for developing countries – an issue that will be central to this year’s COP and likely to stay an important issue in the coming years as climate disasters will multiply and decarbonisation efforts be stepped up worldwide.

While a second Trump presidency would likely impede federal-level climate action, there are significant silver linings to consider. A lesson from the first presidency is that climate action in the US will not completely disappear. It will continue, perhaps not at federal level, but driven by subnational actors and the private sector – whether motivated by conviction or by the growing recognition of economic opportunities tied to clean energy.

As John Podesta, Senior Advisor for clean energy and climate to President Biden, emphasised this week at COP29, the private sector must remain at the forefront of the transition to a low-carbon economy. The commitment to climate action is not solely dependent on federal policy. States, cities, and industries will continue to make strides in decarbonisation. Many US states, especially those with Democratic leadership, have set ambitious climate targets and are investing in clean energy infrastructure and will continue to do so regardless of shifts in federal policy.

With Trump’s inauguration planned mid-January 2025, Europe has less than two months to prepare for the radical shift that will affect several aspects of EU policymaking. Trump’s second mandate will heavily affect the bilateral transatlantic relations, especially in terms of defence and security; it will also have negative impacts on its economy and trade relations. Most importantly, it means multilateral governance, on which the EU relies heavily to find solutions to global problems, will be fully deserted by the US. In this new, volatile and difficult geopolitical context, EU leaders need to invest in preparedness and ensure that the EU follows a coordinated rather than a piecemeal approach.

Above all, the EU should not allow the loss of its transatlantic partner to derail its decarbonisation efforts, as this is crucial to ensure its long-term competitiveness. Although the US federal government may retreat from global climate action, actors at the subnational level and within the business sector will continue to drive the transition. The EU should acknowledge this evolving reality and seek to build on it in its own trade and ‘green diplomacy’ policies, fostering stronger collaboration with US subnational actors and the private sector. This approach could open up new avenues for transatlantic cooperation.