The impact of the 2024 US elections on the issue of decarbonization is of paramount importance, considering that the year marks a significant election period globally, with 64 countries and the European Union at the polls, representing almost half of the world’s population. The US elections stand out for their potential to shape future climate policy and the pursuit of decarbonization. On 5 November, US citizens will vote to elect a new president, the entire House of Representatives and one-third of the Senate. The Biden administration has made great strides in climate policy with the passage of the Inflation Reduction Act (IRA), which aims to reduce US greenhouse gas emissions by 40 per cent by 2030 compared to 2005. With an estimated budget of $400 billion, this legislation seeks to decarbonize and revitalize the US economy.
The potential for a complete repeal of the IRA is low, but uncertainty about its future affects the issue of decarbonization. The scenarios vary depending on the election results. A Biden victory with Democratic control of the House would likely preserve the IRA, possibly extending regulatory support further. If Biden wins with a divided Congress, the IRA will remain protected, although no additional legislation is expected.
What a different scenario
A Trump victory with a divided Congress might not result in a complete repeal of the IRA, but it could lead to US withdrawal from the Paris Agreement, a process that would take four years. Republicans could also limit the IRA by adjusting IRS regulations, making accessing tax benefits more difficult. A threefold Republican victory (winning the presidency, retaining the House and winning back the Senate), although currently considered unlikely, with a 30-35% probability by oddsmakers, would increase efforts to repeal the IRA. Through regulations, tax incentives and government support. However, the actual cost could exceed initial estimates due to the tax credits’ inclusive nature.
Why a total repeal is unlikely
The difficulty of fully repealing significant legislation in the US makes a complete overturn of the IRA unlikely. Historical attempts, such as the failure to repeal Obamacare reform in 2017 and the inability to reverse Trump’s tax cuts, illustrate the challenges involved. The GOP has proposed the ‘Limit, Save, Grow Act’ to reduce IRAs, but this plan primarily seeks to limit rather than eliminate many of its provisions. Clean energy allocations within the IRA are going to red states and red districts. Some IRA benefits also have Republican support: for example, South Dakota Senator John Thune, the second-ranking GOP senator, is a strong supporter of biofuels.
Given their rising costs and political significance, electric vehicle tax credits are probably the most at risk. Still, the political consensus could change if the perception of electric vehicles shifts to competition against China.
In the long term, economics matters more than politics
Despite Trump’s promise to restore coal during his first presidency, the share of this fuel in US energy production has plummeted from 31% to 20%, the fastest decline in any presidential term. At the same time, the share of renewable energy rose to 9% from 6%, and Republican-dominated Texas overtook California as the largest renewable energy state. Solar energy is now the cheapest source of electricity worldwide, even without subsidies, and battery costs have resumed their inexorable decline. Ultimately, the economy will drive the transition.
In summary, the 2024 US elections will influence sentiment around the topic of decarbonization, with various scenarios influencing the future of the IRA and, by extension, US climate policy. In the long term, economics matters more than politics and the falling costs of green technologies should remain the main driver of the transition.
