With a second Trump presidency, the climate tech sector finds itself at a critical juncture. The return of an administration focused on deregulation, domestic manufacturing, and energy security poses both challenges and opportunities for innovators. While support for renewables may dwindle, opportunities related to clean firm power and reshoring could gain momentum. For investors and entrepreneurs, success will hinge on their ability to adapt quickly and anchor strategies to robust financial fundamentals rather than fleeting policy incentives.
Energy security and independence remain the Trump administration's rallying cry. In the declaration of a National Energy Emergency, we have already seen explicit favoring of oil and gas, coupled with the rolling back of regulations that were implemented under the Biden administration. This trend is expected to continue with the Environmental Protection Agency (EPA) relaxing oversight and easing restrictions on greenhouse gas emissions and fossil fuel export permits.
For clean energy advocates, the news isn’t all bleak. Deregulation could accelerate the deployment of nuclear and geothermal energy, opening the door for innovative technologies like Small Modular Reactors (SMRs) and next-generation geothermal systems. These technologies align with the Trump administration's energy independence goals and could garner bipartisan support. Still, the push for fossil fuels and the reduced emphasis on renewable subsidies may suppress demand for wind and solar projects, presenting a mixed bag for the climate sector.
The IRA, a cornerstone of the Biden administration’s climate strategy, faces a similarly uncertain future under the second Trump presidency. The administration’s immediate freeze on IRA funding for green industries has already placed billions of dollars in investment in limbo. While a full repeal is unlikely, a reallocation of tax incentives is expected, fundamentally altering the program’s landscape.
To evaluate which IRA provisions are most vulnerable, we conducted an analysis weighing each provision's political risk against its ten-year cost to the federal government. We reviewed budgetary allocations for key provisions alongside the states most impacted by each. We also considered the partisan breakdown of those states’ congressional delegations, focusing on how many Republican lawmakers would need to cross partisan lines to block a repeal. Each provision was then rated on its alignment with administrative priorities, such as deregulation, energy security, and reshoring.
The findings reveal clear vulnerabilities:
Renewable energy tax credits, particularly the Clean Energy Investment Tax Credits (ITC) and Production Tax Credits (PTC), face the greatest risk.
Meanwhile, domestic manufacturing incentives for semiconductors, batteries, and critical minerals—through the Advanced Manufacturing ITC and PTC—are likely to survive.
For renewable developers, state-level policies may become an increasingly vital lifeline as federal incentives waver. Conversely, innovators in clean firm power and supply chain resilience may be better positioned to thrive under deregulation. As the political landscape shifts, adaptability will remain critical for climate tech stakeholders navigating these changes.
The Machin-Barasso bill, or Energy Permitting reform act, could deliver much-needed relief to renewable energy projects if passed—but not without tradeoffs. The legislation aims to streamline a federal permitting process that has left over 95% of 2,600 gigawatts of proposed renewable projects stuck in interconnection queues. By resolving these delays, the bill could unlock investment in grid infrastructure and long-duration energy storage, accelerating the energy transition and safeguarding up to 80% of the IRA’s emissions reduction potential.
But, the reforms don’t stop with renewables. The bill also benefits oil and gas developers by mandating offshore lease sales, expanding onshore leasing, and fast tracking LNG export approvals that were halted under the Biden administration. For renewables developers, the changes offer much-needed relief from regulatory bottlenecks. For environmental advocates, it’s a compromise that underscores the hidden cost of progress.
In a very recent action, President Trump’s “Unleashing American Energy” executive order complicates the Manchin-Barasso bill’s legislative outlook. The order effectively achieves many of the bill’s goals—expediting permits for fossil fuels, nuclear, grid upgrades, and domestic mining. Framed as a national security measure, the order may reduce congressional need and urgency for the bill. Regardless, the dual-track approach (via congress and executive order) highlights widespread demand for U.S. energy policy reform.
Increased tariffs on foreign minerals, particularly those sourced from China, are expected to accelerate domestic supply chain development for critical materials like lithium and rare earths. While this could bolster US competitiveness in sectors like electric vehicle (EV) manufacturing, the potential scrapping of consumer EV credits may inflate costs for manufacturers and consumers alike. Still, the defense sector’s interest in advanced materials and clean technologies could indirectly stimulate innovation, creating niche opportunities for climate tech startups.
Biofuels may see fragmented support, with agricultural lobbies influencing policy direction. Ethanol and other biofuels tied to Republican-leaning farming communities could retain backing, while advanced biofuels and e-fuels face subsidy cuts. Carbon Capture, Utilization, and Storage (CCUS), largely driven by private sector demand, may encounter funding gaps if Department of Energy (DOE) grants are reduced. This could force consolidation in the sector, slowing innovation despite strong oil and gas (O&G) interest in these technologies.
Deregulation could ease permitting for new factories, benefiting carbon-intensive processes. However, initiatives promoting supply chain resiliency and reshoring could present unexpected opportunities for clean manufacturing. Companies that position themselves as enablers of advanced manufacturing and domestic job creation may find pathways to growth even as overall decarbonization efforts slow.
For venture capitalists and startups, a second Trump term requires strategic recalibration. Key considerations include:
While the exact trajectory of Trump's policies remains uncertain, the climate tech landscape is undoubtedly entering a period of change. Technologies aligned with the federal priorities of energy security and reshoring stand to gain the most, while those capable of operating under deregulation will be best positioned to endure. As the climate tech sector braces for potential upheaval, one thing is clear: success in this rapidly shifting regulatory environment will hinge on durable physics and financial fundamentals.
