The clean tech space is gearing up for an uncertain future after former US president Donald Trump was re-elected. That’s because Trump, who defeated Kamala Harris with 51% of the votes, has vowed to rescind any “unspent” funds under the Inflation Reduction Act (IRA), introduced by the Biden-Harris administration.

A change in political direction is likely to have negative consequences for the EV supply chain and the hydrogen industry. Having denounced the energy transition and general climate action as a “green new scam,” Trump is expected to extend the life of fossil fuels in the country.

The Republicans now hold more power than ever with a trifecta, having won a majority in the Senate and the House of Representatives.

Many questions now surround the future of the IRA – Biden’s $500 billion package to boost clean energy, reduce healthcare costs, and increase tax revenues.

IMPACT OF POSSIBLE ELECTION OUTCOMES ON CLIMATE-RELATED SECTORS’ BUSINESS PROSPECTS

SOURCE: BLOOMBERGNEF

EV supply chain
As of July, IRA investments and tax credits had already spurred $177 billion of private-sector investment in EV and battery manufacturing, according to the US government.

Its complementary measure, the Bipartisan Infrastructure Law, allocated $7 billion for battery supply chains, $2.5 billion for charging and fuelling infrastructure for alternative fuels, and $1.7 billion to convert automotive factories to EV manufacturing and assembly. 

Joe Biden aimed to achieve a 50% EV market penetration by 2030. This target, which was already likely to be missed, is expected to be further pushed back under a Trump government. EVs accounted for 18.7% of new sales in the second quarter of this year, according to official data, and the US market has recorded a slowdown in demand. 

Yet, a Trump administration does not necessarily spell the end of the road. His policies may depend on Elon Musk’s potential influence following the surprise endorsement earlier this year.

The Tesla co-founder and ceo emerged as a major supporter pledging millions not only to the Republican campaign, but also as giveaways to voters signing up a petition in favour of free speech and gun rights. 

Trump, previously a fervent opponent of EVs, softened his stance during the campaign. “I’m for electric cars, I have to be because Elon endorsed me very strongly,” he said in August, when he also stated he was “against everybody having an electric car.”

Before Musk’s support became visible, it was projected a new Trump administration would undo IRA’s tax breaks on EVs, such as the $7,500 credit for buyers under Section 30D. Now, the expectation is around stricter requirements for vehicle components to be manufactured and assembled in America to qualify for the credit.

It is unlikely the whole IRA will be repealed or the money being disbursed will be clawed back. Many provisions for the EV supply chain primarily benefited Republican-led states, such as Michigan and the so-called Battery Belt – a group of Southeast states such as Georgia and Tennessee, traditionally a hub for automotive manufacturing. There may be bipartisan interest in keeping these investments alive, albeit in a new iteration.

“[The Trump administration] could put restrictions on things like the EV credits or slow down the allocation of the disbursement of the funds, or put other barriers up that would reduce the effectiveness of those programmes,” David Reichmuth, senior engineer at the Union of Concerned Scientists (UCS), tells Kallanish.

Meanwhile, capital initially intended for clean tech that has not yet been allocated may be directed elsewhere – even fossil fuels. The most egregious example is the Department of Energy’s (DOE) Loan Programs Office uncommitted money pool, which BloombergNEF estimates is as big as $200 billion. 

According to William Tobin, assistant director at the think tank Atlantic Council, these undeployed funds may now be used to offset Trump’s promised tax cuts. The Committee for a Responsible Federal Budget estimates Trump’s campaign plan would increase national debt by $7.75 trillion. For example, individual income tax cuts under the Tax Cuts and Jobs Act (TCJA) are up for negotiation next year, and may be renewed or increased. The TCJA was signed into law in 2018, during the first Trump administration, to cut a range of levies, including on shareholders and taxpayers.

“There are still a lot of people on the Republican side in the House of Representatives for whom fiscal responsibility is a priority, so I think they’re going to try and find as many means as possible to offset the costs of extending the tax cuts in the TCJA,” Tobin explains. “That’s where some of these existing pools of money might be vulnerable.”

Overall, Trump has promised to help the domestic automotive industry by waging war on EVs. Yet, the global move to electrification requires US carmakers to keep up. 

“We need to be competitive in the EV supply chain to have a globally competitive automotive industry, and I think there are a lot of Republican advisors who are of the same mind, so I hope that cooler heads will prevail,” adds Tobin.

A stronger risk factor for US automakers will be a reduction in consumer spending power. According to the Peterson Institute for International Economics, Trump’s proposed import tariffs – a general 20% levy and a 60% duty on Chinese imports – would cost a typical US household in the middle of the income distribution over $2,600 a year. The tariffs announced so far have attracted mixed reactions. For example, graphite producers who stand to benefit from more expensive Chinese imports have welcomed them; meanwhile, the cross-industry Americans for Free Trade coalition has warned it will raise costs for companies and consumers alike.

PROJECTED INFLATION CHANGE BASED ON ASSUMED TRUMP'S ECONOMIC POLICIES 
Change from baseline under two scenarios, 2025-40

 
SOURCE: PIIE

Hydrogen
The situation may be similar for the hydrogen industry. Support may not cease completely, but is likely to change direction in favour of blue or grey hydrogen, rather than green.

Biden bet on hydrogen to support the decarbonisation of the economy. Under the US National Clean Hydrogen Strategy and Roadmap, the DOE is deploying $9.5 billion for clean hydrogen – although the definition of what constitutes “clean” hydrogen is yet to be determined under the Section 45V guidance, which will be released by year-end. 

It is unclear what the Trump administration will do with the seven regional hydrogen hubs across the country that are receiving $7 billion from the DOE, an initiative estimated to spur $40 billion in private investment and support over 334,000 direct jobs. The ultimate goal has been to lower the hydrogen price to $1/kilogramme, which is estimated to boost the use of hydrogen by at least five times, eventually cutting 10% of US greenhouse gas emissions by mid-century. Again, this may be deprioritised. 

Julie McNamara, deputy policy director at the UCS, says there is still a future for hydrogen, though it will probably scale up much more slowly. As industries such as steel and heavy transport strive to decarbonise, they will drive demand for hydrogen.

“We are seeing in those companies that are interested in doing international business, actually selling the commodities that are decarbonised because of use of clean hydrogen… They’re not interested in dirty hydrogen,” says McNamara.

“Any company that is interested in doing business internationally can’t fake the math, emissions are emissions and when other countries count them, they’ll still be there, even if the US attempts policies to ignore them.”

In this scenario, it is in the best interest of US companies that Washington implements emissions requirements that are aligned with the rest of the world, ensuring that clean hydrogen in the US is considered clean everywhere else to avoid penalising exports.

Reichmuth also points out that individual states, such as California, have their own emissions regulations and requirements for zero-emission vehicles, which are expected to continue driving demand for EVs and hydrogen. EVs accounted for 39% of the state’s new sales in the first nine months of 2024, according to the California New Car Dealer Association.

“We saw, during the first Trump administration, some automakers looking to enter into voluntary agreements with California and other states to have certainty, because it’s very difficult for them to deal with policies that may change every four years or even on a shorter time frame,” Reichmuth notes.

Regardless of rhetoric around climate action, it is clear that there are money and jobs on the line when it comes to investing in the clean energy transition, points McNamara. “That’s why I think we continue to see policymakers from both sides of the aisle stating that the IRA has proven popular and, we expect, largely durable,” she says.

“Now, there are components that are at real risk, and that’s really concerning, because we can’t just have a few pieces. We need a whole of economy transition to meet the climate targets that are so critical,” McNamara concludes. “One of the greatest concerns of this moment is that there will be this window of opportunity for those solely looking out for their profit, especially from polluting industries… but that does not have to be where we end up.”