Trump’s climate rollbacks spark a new era of economics-led sustainability

The Trump administration’s recent wave of policy decisions, from introducing the highest global trade tariffs in a century to dismantling climate regulations, are triggering shifts in Environmental, Social and Governance (ESG) frameworks. As global markets absorb the impact of Trump’s ‘Liberation Day’ announcement, imposing at least 10% tariffs on US imports, with much harsher duties on some 60 nations, a new high-stakes showdown is emerging: America’s retreat from climate action. Trump 2.0 has set his sights on dismantling key environmental regulations, raising concerns about the US’s role in the fight against climate change. So, what’s changing?

1) US withdrawal from the Paris Agreement, again
2) Rolled back environmental regulations
3) Promotion of fossil fuel development
4) Reduction of renewable energy incentives

In mid-March, Lee Zeldin, the newly appointed head of the US Environmental Protection Agency (EPA) announced sweeping changes to existing Federal policies to fight climate change, including the scaling back or elimination of 31 environmental rules. The aim: to reclaim a portion of the USD 20 billion in funding allocated during the Biden administration for clean energy and transportation through the Greenhouse Gas Reduction Fund. 

“Today is the greatest day of deregulation our nation has seen,” he said. “We are driving a dagger straight into the heart of the climate change religion to drive down the cost of living for American families, unleash American energy, bring auto jobs back to the US, and more.”¹

The move came after the US announced plans to withdraw from the Paris Agreement on Climate Change – for the second time, after controversially pulling out of the Accord during Trump’s first term citing ‘economic concerns.’² In a November 2024 interview, United Nations Secretary General, António Guterres, pre-empted the move, likening it to losing a limb. “The Paris Agreement can survive, but people sometimes can lose important organs or lose the legs and survive,” he said. “We don’t want a crippled Paris Agreement.”³ This is a valid concern given Washington historically provides more than 20% of the body’s USD 100 billion operational budget.

Since adoption [of the Paris Agreement], renewables like wind and solar energy have grown exponentially, and clean energy investments have nearly doubled compared to fossil fuels

The Paris Agreement, signed under Obama’s watch in 2015, is a landmark international treaty aimed at limiting global warming to below 2 degrees Celsius, with efforts to keep it to 1.5 degrees Celsius. Since adoption, renewables like wind and solar energy have grown exponentially, and clean energy investments have nearly doubled compared to fossil fuels.⁴ Investment in the low-carbon energy transition worldwide grew 11% in 2024 to hit a record USD 2.1 trillion, according to BloombergNEF’s Energy Transition Investment Trends 2025. The lion’s share came from China, which is emerging as a leader in renewable energy, counteracting its substantial greenhouse gas emissions. And, despite still relying heavily on coal to meet its growing energy demands, China has made significant strides in expanding its clean energy infrastructure and manufacturing capabilities, investing USD 818 billion in renewables in 2024, eclipsing the US, the European Union, and the United Kingdom.⁵

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Trump’s new energy strategy centres on achieving energy independence. He has consistently positioned fracking as the cornerstone of his Energy Dominance Agenda and directed his administration to increase fossil fuel production, modernise infrastructure, and pump new life into the most carbon-intensive coal sector.⁶ Critics argue the move would significantly hinder progress in the fight against climate change, particularly as coal still supplies over a third of global energy production and is responsible for up to 40% of global CO₂ emissions, according to the International Energy Agency (IEA).⁷

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All is not lost

America’s withdrawal from the Paris Agreement and reduction in funding for green initiatives may be hampering the international cooperation needed to tackle the climate crisis at scale, but the policy decisions won’t reverse the economic drivers which are already reshaping global sustainability efforts. Instead, they have rewritten the rulebook. The dynamics are now shifting from policy-led progress to economics-led, driven by environmental necessity and economic opportunity.

Over three quarters of new renewable energy capacity added in 2024 was cheaper than fossil fuels

Here’s a look at the key drivers:

Cost competitiveness

Renewable energy sources, such as solar and wind, have become increasingly cost-effective, often undercutting fossil fuels due to technological advances and improved efficiency. According to a report by the International Renewable Energy Agency (IRENA), over three quarters of new renewable energy capacity added in 2024 was cheaper than fossil fuels.⁸ The economic advantage encourages continued investment in clean energy infrastructure. 

The growing energy needs of technologies such as AI, are driving demand for reliable and sustainable power sources, further incentivising the shift towards renewables

Technological innovation

Innovation is at the forefront of advancing sustainability efforts globally through substantial investments, policy commitment, and technological advancements. The growing energy needs of technologies such as artificial intelligence (AI), are driving demand for reliable and sustainable power sources, further incentivising the shift towards renewables. The IEA forecasts electricity consumption for AI data centres will more than double by 2030. And, while AI places significant demands on the world’s energy systems, it could also assist with new technologies to offset some of those demands, such as driverless cars or detecting threats to infrastructure.⁹

Many corporations are transitioning to renewable energy not only to meet sustainability goals but to align with evolving consumer expectations and enhance brand reputation

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Market demand

Many corporations are transitioning to renewable energy not only to meet sustainability goals but to align with evolving consumer expectations and enhance brand reputation. Those leading in decarbonisation efforts are poised to capitalise on emerging opportunities, recognising the need for continued innovation towards more profitable and scalable sustainable technologies. Demand for renewables, like solar and wind, is projected to grow steadily over the next decade.¹⁰ Fossil fuels (comprising coal, natural gas, and oil) accounted for approximately 56% of global power generation in 2024, with renewable energy sources (including wind, hydro, and solar) supplying a record 32% of global electricity, up from 30% in 2023, according to a report by energy think tank Ember. The trend looks set to continue. By 2035, renewables and nuclear energy are expected to account for most of the global electricity supply, with fossil fuels forecast to supply just 31%.¹¹

Investors recognise the long-term value and resilience in environmentally conscious investments

Investor interest

Government subsidies have long been a key driver in bringing down the cost of renewable energy technologies, helping them compete with the heavily subsidised fossil fuel industry. However, renewable energy is still viewed as environmentally beneficial and economically advantageous, and this is driving continued investments into clean energy. While increased tariffs may pose challenges to the renewable energy supply chain in the short-term given many components originate in Asia, investors recognise the long-term value and resilience in environmentally conscious investments.

While it remains the world’s biggest carbon emitter, China is also the world’s biggest producer of renewable energy, holding a dominant position across clean technologies

The China factor

China is making substantial progress in the green energy transition due to strategic policymaking, aggressive funding and innovation-driven research. While it remains the world’s biggest carbon emitter, accounting for 32% of the world’s total greenhouse gas (GHG) emissions in 2024,¹² it is also the world’s biggest producer of renewable energy, holding a dominant position across clean technologies.¹³

• Beijing has earmarked USD 800 billion over the next six years to modernise its power grid infrastructure to accommodate the rapid expansion of renewable energy sources, and to meet its 2060 carbon neutrality goals¹⁴
• China continues to lead the global electric vehicle (EV) market. Chinese brands were responsible for 62% of global EV sales in 2024, reflecting its expanding influence beyond domestic borders¹⁵
• Chinese firms are at the forefront of clean technology manufacturing, producing a significant share of the world’s solar panels and wind turbines
• It has already surpassed its 2030 target for installed solar and wind capacity – six years earlier than planned.¹⁶
• China has emerged as a driving force in advancing the deployment of next-generation energy solutions, including large-scale energy storage and clean hydrogen technologies.

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Despite high levies from the Trump administration, China’s strategic electrification efforts are not slowing. Determined to achieve energy independence, China is rapidly transforming into the world’s first electrostate, where electricity looks set to become the dominant energy carrier across all sectors. This comes as Beijing accelerates its AI ambitions, putting more pressure on already high demand for electricity. Earlier this year, China gained worldwide attention with the emergence of DeepSeek, its homegrown AI model, highlighting its growing influence in the AI space and the strategic importance placed on AI development in the country. While the growing energy needs from AI present a challenge, it also presents opportunity. Investment is accelerating as more and more companies turn to solar, wind and other clean energy solutions to power data centres sustainably. And China is doing everything it can to reinforce its position as a global leader in the transition to sustainable energy.

The transition to a more sustainable economy persists, with or without Trump’s help, driven by the compelling economic, environmental and efficiency incentives

What does this mean for the future of sustainability?

The Trump administration’s policy changes, particularly regarding tariff hikes and the environment, have set the stage for a highly charged COP30 in the Amazon city of Belém later this year, and will undoubtedly influence dynamics at the annual United Nations climate summit, but they have not derailed the global transition to a low-carbon economy. The transition to a more sustainable economy persists, with or without Trump’s help, driven by the compelling economic, environmental and efficiency incentives. 

The driving forces are no longer policy-led, instead economic pragmatism is keeping sustainability on track:

• Innovation continues to meet the world’s surging demand for energy
• Clean energy is now cheaper than fossil fuels in much of the world
• Consumers expect climate-conscious action, investors demand accountability
• And businesses are embracing sustainability, not because they have to, but because it makes financial sense.

Trump has shifted the narrative around the climate transition. Policy environments will be different going forward. Undoubtedly, the shape, pace and milestones of the transition will evolve. The transition may be more disorderly, more chaotic, than many may wish for. But we believe the end destination continues to be a net-zero economy – as the only model that is viable over the long term, and that ultimately benefits from the stronger economic fundamentals.