“It would be hard for me to think of cleantech or climate tech sectors that aren’t facing huge risks,” says Noah Kaufman, senior research scholar at the Center on Global Energy Policy at Columbia University, who served on the Council of Economic Advisers under President Joe Biden.
“I think we’re a country without a federal climate strategy at this point, with an economy headed in the wrong direction, so I don’t see a lot of reason to be optimistic,” he adds.
Indeed, there are mounting challenges and rising risks across the cleantech and climate tech sectors. How deep and wide-ranging the impact of the economic changes could be depends on many variables and on reactions still taking shape. In particular, the negotiations underway in Congress over the budget will determine the fate of subsidies for electric vehicles, battery production, and other support for clean energy. Many of those programs were established by former president Biden’s signature climate law, the Inflation Reduction Act.
Beyond the tenuous government support, any slowdown in the broader economy threatens to tighten corporate and venture capital funding for startups working on carbon removal, synthetic aviation fuels, electric delivery vehicles, and other technologies that help companies meet climate action goals.
In addition, Trump’s tariffs, particularly the now 54% levy on Chinese goods, will push up the costs of key components for many businesses. Notably, the US imported $4 billion worth of lithium-ion batteries from China during the first four months of last year, so the tariff increase would impose a huge tax on products that go into electric vehicles, laptops, phones, and many other devices.
Higher prices for aluminum, steel, copper, cement, and numerous other goods and materials will also drive up the costs of doing all sorts of business, including building wind turbines, solar farms, and geothermal plants. And if China, Canada, the European Union, and other nations respond with retaliatory trade measures, as is widely expected, it will also become harder or more expensive for US companies to export goods like EVs or battery components to overseas markets.
Even traditional energy stocks took a beating on Wall Street Thursday, out of fear that any broader economic sluggishness will drive down electricity demand.
Trump administration cuts to the Department of Energy and other federal programs could also take away money from demonstration projects that help cleantech companies test and scale up their technologies. And if Congress does eliminate certain subsidies in the Inflation Reduction Act, it could halt billion-dollar projects that are being planned or perhaps even some that are already under construction.
