The return of President Trump is set to profoundly reshape US climate and energy policy, with far-reaching repercussions internationally. The European Union’s strategy for dealing with these repercussions should have three underpinnings: global climate action, energy policy and competitiveness, and clean-tech investment and trade. Fortunately for the EU, this approach largely coincides with its own strategic interests.
The first consequence of Trump’s victory will of course be US backtracking on climate action. He is expected to aggressively dismantle federal environmental and climate regulations, which will be only partly offset by stronger climate policy in US states and by the interests of the private sector in pursuing the green transition. Trump will likely withdraw the US from the Paris Agreement again, weakening global climate momentum at a time of increasing acrimony among emerging markets and developing economies about the West’s failure to provide sufficient support. Without the US, the EU risks greater isolation in climate diplomacy.
In response, the EU must push ahead with its own domestic decarbonisation agenda, leading by example at the global level. This is in Europe’s own economic interest, for three reasons. First, global decarbonisation is vital for the EU in seeking to limit increasingly expensive climate damage in the future. Second, it will help the EU enhance its economic competitiveness and economic security. Third, it represents a clean-tech export opportunity for Europe. The EU must stick with its plan even as difficult trade-offs get tougher – such as increased tension between the need to hike defence spending and public investment needs in climate.
The EU must also strengthen its climate diplomacy efforts with major emitters including China and India, if only to prevent others from following the US. The EU should build alliances to ensure that the 2025 nationally determined contributions – or country emissions reduction pledges – to be submitted by world’s governments ahead of the 2025 COP30 climate summit, are ambitious, detailed and likely to mobilise enough green investment in the coming years.
Secondly, Trump aims to make the US not just “energy independent”, but “energy dominant”. He has pledged to halve natural gas and electricity prices within a year, largely through increased natural gas production. If this happens, it would widen the EU-US energy price gap, further undermining EU industrial competitiveness.
The only structural solution to the EU’s high energy price problem is the green transition. This must be accelerated. A unified approach to clean electrification is fundamental to ensure efficient development of renewable energy and of the required electricity grid and flexibility infrastructure.
Trump’s fossil-fuel agenda is in the selfish interest of the US; it has no content for the EU, which is not endowed with fossil-fuel resources.
On clean-tech investment and trade, Trump has threatened to rescind or substantially scale back the US Inflation Reduction Act (IRA), calling it a “socialist green new scam”. He may retain some provisions, particularly to keep clean-tech manufacturing investments in Republican states that benefit from the IRA, but his stance nevertheless suggests a departure from the current trajectory of US clean-tech investment. The uptake of mature renewables will likely persist driven by market fundamentals, but policy volatility may deter less-mature clean technologies, particularly in sectors that depend on federal subsidies. Deployment of offshore wind may also be deterred, damaging European companies heavily invested in the sector.
Trump has also signalled a return of ‘America First’ policies in trade, potentially with severe consequences for European exports to the US, especially in the already under-stress automotive sector. Moreover, Chinese goods excluded from the US market might flow into the EU, putting pressure on European industries and complicating the trade-offs between decarbonisation, competitiveness and security that Europe already faces.
This underscores the pressing need for stronger clean industrial policy, via the EU Clean Industrial Deal promised by European Commission president Ursula von der Leyen in the first 100 days of her second term. Trump’s victory should serve as a wake-up call on the need to stimulate domestic green investments and to agree new clean trade and investment partnerships with third countries.
Trump’s return should therefore be considered a substantial boost to the implementation of the EU’s climate and energy strategy. This is not just about protection against Trump’s policies. The EU should reinforce its position as a self-reliant climate leader in a fractured global landscape. Indecision and fragmentation are not options. Trump’s return to power must be a strong push for the EU and its members to overcome political divisions and unite around the objective of pursuing decarbonisation, while boosting industrial competitiveness and increasing the continent’s security.
About the authors:
Simone Tagliapietra is a Senior fellow at Bruegel.
Cecilia Trasi works at Bruegel as a Research analyst.