How Trump’s Presidency Might Challenge UK and EU Sustainability

As Donald Trump resumes the US presidency as the 47th president, his administration brings an ideological shift that will resonate globally, especially on issues as critical as climate change. With COP29 on the horizon, Trump’s stance on international climate co-operation, his influence on global energy prices, and the economic ripple effects for the UK and EU will be scrutinised. Furthermore, the UK’s Labour government, with its ambitious green agenda, may find itself navigating a dramatically altered landscape in the realm of energy policy and sustainable investment.

Director of Risk Management for True, Ruari Cairns, say, “Although we can't know for certain what a Trump administration will do once in power, we do have previous form to work off and the signs are that we will see a period of American isolationism, with a strong focus on domestic energy production and expected increases in energy exports. However, the climate scepticism seen from both the previous Trump administration and the recent election campaign would point towards a continued pullback of environmental protections and global sustainability goals.”

Impact on Global Climate Negotiations Ahead of COP29

One of the most immediate concerns is how Trump’s election might reshape the outcomes from COP29; anything the Biden administration agree to would likely be rolled back as soon as Trump takes office in January. Known for his scepticism on climate change during his first term, Trump not only exited the Paris Agreement but also rolled back significant environmental protections. The global climate community is now wary of a similar trajectory. Trump has hinted at a renewed focus on economic interests, suggesting that any climate policy that could constrain the US economy will likely face resistance.

Our sustainability strategist, Pollyxeni Gupta, had this to say on the topic, “As a Sustainability Strategist and an individual who is passionate about helping businesses reach Net Zero, I am deeply concerned for global climate action in the face of another Trump administration. His actions during his previous term in office, his climate-sceptic campaign rhetoric and the decisive mandate he has received via the election, do not bode well for US leadership in reducing global carbon emissions.”

For climate negotiations, this shift could lead to heightened polarisation. Countries committed to ambitious climate targets, such as the UK, Germany, and France, may push forward unilaterally or through coalitions, but they would face a weakened bargaining position without US alignment. This might also embolden other hesitant or high-emitting nations, diluting the momentum towards stringent global targets.

From a practical standpoint, Trump's return could stall vital financial commitments needed for climate adaptation and mitigation in vulnerable countries. The US, one of the largest contributors to the Green Climate Fund, might reduce or even withdraw funding under Trump’s directive, straining resources meant to assist lower-income nations in their climate adaptations. As a result, COP29 may evolve into a forum for smaller, committed nations to devise regional agreements, potentially sidelining the US in terms of collaborative efforts on climate finance and emission reduction strategies.

Ultimately the immediate responsibility for enacting positive change is likely to have to be taken up elsewhere. As Polly says, “Conscientious businesses must take on the mantel of responsibility and continue to embed sustainability throughout their organisations to help limit global warming to 1.5°C."

Impact on Global Energy Prices

A Trump presidency is also anticipated to affect global energy prices, with oil and gas markets likely to experience substantial turbulence. Trump has consistently championed the US’s energy independence, supporting policies that promote domestic oil, coal, and natural gas production. In his first term, Trump rolled back restrictions on fossil fuel production, leading to a boost in US oil output and lower global oil prices due to increased supply.

The likely resurgence of these policies could reshape the global energy landscape once more. With increased US production, global oil and gas prices might initially see downward pressure, particularly beneficial for import-dependent economies. However, this dynamic also brings volatility, especially in the context of Trump’s strained diplomatic relations with oil-producing nations like Iran and Venezuela. Any tensions in these regions could exacerbate market uncertainty and trigger price surges, disproportionately impacting Europe and Asia, which remain heavily reliant on energy imports.

For the renewable energy sector, however, Trump’s fossil fuel-focused policies could dampen the momentum, particularly in the US, for renewable energy investments and innovation. The broader implications for renewable energy prices globally may hinge on how European and Asian markets respond. European nations, for instance, may double down on their renewable commitments, which could create pockets of demand stability, though growth may decelerate without the US market’s parallel push for green technology.

In terms of how businesses can prepare for this future, Ruari Cairns notes, “Perhaps one of the only certainties at the moment is that the markets will remain volatile, and it is therefore more important than ever that energy buyers are primed and ready to take advantage of any market opportunities and hedge against upside risk.”

Impact on UK and EU Businesses with Global Markets

For businesses in the UK and EU, a Trump presidency creates a mixed bag of opportunities and challenges. Many multinational corporations have aligned with sustainability agendas, often with an eye towards US markets, which are substantial consumers and increasingly aligned with green principles. With Trump’s less supportive stance on climate goals, these businesses could encounter regulatory conflicts or face difficulties maintaining cohesive sustainability strategies across their markets. For example, a firm committed to net-zero goals in Europe might find itself in a complex situation with the US market where carbon regulations could be less stringent or more leniently enforced.

In the energy-intensive sectors, such as manufacturing and transport, EU and UK businesses may benefit from lower oil and gas prices, especially if Trump’s energy policies drive increased US output. However, lower energy prices could also slow down their pivot to renewables, creating friction between short-term financial benefits and long-term sustainability goals. Companies investing in green technologies might find the economic case for renewables harder to justify if energy prices dip under a Trump administration.

Additionally, the UK’s labour market could face challenges. If Trump’s policies contribute to lower US inflation, the Federal Reserve might opt for lower interest rates, strengthening the US dollar. A stronger dollar would make UK exports more expensive, affecting the competitiveness of UK and EU firms in US markets.

Labour Government’s Green Energy Plans and Potential Impact

With the recent election of a Labour government in the UK, committed to transforming the UK into a 'clean energy superpower', the return of Trump poses substantial external pressures. Labour’s vision includes ambitious plans to push forward a National Wealth Fund aimed at funnelling investment into renewable energy projects and green infrastructure. However, these plans rely, to some degree, on a supportive or at least neutral international environment.

Trump’s policies could have several implications for Labour’s green agenda. The downward pressure on global oil and gas prices could make the financial case for renewable investments more complex. While Labour’s policies focus on long-term sustainability benefits, they may need to offer enhanced incentives to encourage businesses and consumers to adopt renewables despite lower fossil fuel prices. This may necessitate increased public spending or more aggressive subsidies for renewables, adding pressure to the UK’s fiscal plans.

Moreover, Trump’s stance on climate finance and green technology cooperation might lead the Labour government to seek stronger ties with the EU for climate collaboration, especially if US investment in renewables declines. The UK may look to European neighbours to share knowledge and resources, pushing for joint investments in clean energy projects or even cross-border green innovation funds. Labour’s green strategy may need to become more Eurocentric, positioning the UK as a bridge for green technology between Europe and markets in the Middle East and Africa.

Finally, with the US potentially adopting a less proactive stance on climate action, Labour might face political challenges in making its case to domestic constituencies. For instance, sectors heavily reliant on exports or affected by energy prices may lobby for policies that align with Trump’s approach, potentially undermining Labour’s cohesive vision for a green economy. Labour’s ability to explain the lasting benefits of sustainable energy independence, protected from the ups and downs of fossil fuel markets, could boost support among the general public and eco-conscious businesses.

Conclusion

The re-election of Donald Trump presents a complex set of challenges for global climate action and the UK’s Labour government’s green aspirations. COP29 may prove to be a bit of a lame duck, but COP30 could evolve into a more fragmented forum, where individual nations or coalitions push forward on ambitious goals while others, possibly encouraged by US policy, lag behind. Lower energy prices may provide short-term economic relief but at the potential cost of momentum towards global green transitions. For UK and EU businesses, the renewed US approach may present both financial opportunities and regulatory hurdles as they navigate sustainability commitments.

Labour’s green agenda will likely have to adapt to these shifts, potentially accelerating its collaboration with Europe and amplifying incentives to offset any competitive disadvantage posed by cheap fossil fuels. In the face of a Trump presidency, Labour’s commitment to establishing the UK as a clean energy leader may become an even more critical stance, not just for the UK’s economic resilience but for a global green economy increasingly in need of reliable champions.