August 2024, In the Loop -
The U.S. presidential candidates have outlined starkly different priorities for energy and transportation policy.
How these contrasting agendas could translate into governmental action bears close watching. Policy divergences on renewable energy and electric vehicles (EVs) have the potential to be the most impactful for companies and investors.
The election will have important implications for the Inflation Reduction Act (IRA). This signature legislation, passed during President Biden’s second year in office, uses direct payments and tax credits to promote the greening of U.S. industry over the coming decade.
“A Harris win likely would ensure that the IRA is implemented in ways that align with her policy objectives....”
A Harris win likely would ensure that the IRA is implemented in ways that align with her policy objectives, providing clarity and support for renewables, EVs, and other clean-energy technologies.
On the regulatory front, we would expect a Harris administration to keep restrictions on leasing public lands and waters for energy drilling. Efforts to reduce greenhouse gas emissions from transportation, power plants, and oil and gas operations would also continue.
Any push for permitting reform on energy infrastructure likely would emphasize electricity transmission. Grid upgrades will be critical to system reliability as electricity demand grows and renewable power sources are brought online.
Despite Trump’s criticisms of the IRA, a full repeal of the law could prove challenging even if Republicans also control the U.S. Senate and House of Representatives. Many of the states that voted for Trump in the 2020 election are benefiting from the IRA as its incentives—especially for advanced manufacturing—drive project announcements in their communities.
Changes to specific elements of the IRA appear more likely. The makeup of Congress could influence the potential pathways for these adjustments and their complexion:
Uncertainty is high, and the range of potential outcomes is wide. Nevertheless, Trump’s policy priorities suggest that certain areas of the IRA could be more at risk for targeted action than others.
“......Trump’s policy priorities suggest that certain areas of the IRA could be more at risk for targeted action than others.”
All signs point toward Trump renewing his push to reduce the regulatory burden on fossil fuels in his second term.
Rolling back tighter emission rules and drilling restrictions advanced by the Biden administration would likely be on the agenda. Permitting reform could also place more of an emphasis on fossil fuel-related infrastructure. These moves would benefit the energy sector at the margin.
Meanwhile, Trump’s preference for trade tariffs and possible efforts to crack down on the re-exportation of Chinese goods through other countries could increase costs for EVs and renewable energy.
The outcome of the U.S. presidential election could have important implications for America’s energy transition and efforts to reduce the economy’s carbon emissions. For investors, the biggest potential impacts are likely in EVs and electricity generation.
Gilad Fortgang
Washington Associate Analyst, U.S. Equity Division
Gilad Fortgang is an associate analyst covering Washington and regulatory research in the T. Rowe Price Investment Management U.S. Equity Division.
The next U.S. president faces a significant fiscal cliff in his first 12 months in office.
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