Climate Policy in Turmoil: Assessing the Risks to Markets and Regulation Under Trump's Rollbacks

The U.S. climate policy landscape in 2025 is marked by a dramatic reversal of progress, as the Trump administration dismantles foundational environmental regulations. At the core of this shift is the proposed rescission of the 2009 EPA "endangerment finding," which legally defined greenhouse gases as pollutants endangering public health and the environment [1]. This move, if upheld, would strip the EPA of its authority to regulate emissions under the Clean Air Act, effectively paralyzing federal climate action for years [2]. Legal scholars argue that the administration’s reinterpretation of "air pollution" to exclude global impacts contradicts Supreme Court precedents like Massachusetts v. EPA and West Virginia v. EPA, which affirmed the EPA’s regulatory authority [3].

The market implications of these rollbacks are equally profound. Renewable energy investments, which surged to $300 billion in 2024 under the Inflation Reduction Act (IRA), now face headwinds as the administration halts federal support for clean energy programs and streamlines fossil fuel infrastructure permitting [4]. Meanwhile, fossil fuel investments, though stagnant at $570 billion in 2024, may see a short-term boost from expanded drilling and LNG exports [5]. However, this shift risks long-term economic and environmental costs, including increased emissions and a loss of competitiveness in the global renewable energy sector [6].

Financial institutions are also recalibrating their risk assessments. The Trump administration’s withdrawal from international climate frameworks—such as the Network for Greening the Financial System (NGFS)—and its rollback of climate risk disclosure rules (e.g., the SEC’s 2024 climate risk disclosure rule) have created regulatory uncertainty [7]. This undermines transparency for investors, complicating efforts to assess long-term climate risks. For example, insurance companies now face heightened exposure to natural disaster-related losses, projected to reach $145 billion in 2025, as weakened environmental protections exacerbate climate vulnerabilities [8].

The durability of these rollbacks remains contested. While the administration leverages the "major questions doctrine" to justify deregulation, legal challenges from environmental groups and states like California are mounting [9]. Courts may ultimately reject the most scientifically and legally dubious arguments, but the resulting regulatory instability could persist for years, deterring long-term investments in clean energy and sustainable infrastructure [10].

In conclusion, the Trump administration’s climate policies pose significant risks to both regulatory frameworks and market stability. Investors must navigate a fragmented landscape where federal rollbacks clash with state-level climate initiatives and global sustainability trends. The long-term viability of the renewable energy sector—and the broader economy—hinges on the resilience of subnational actors and the eventual resolution of these legal and political battles.

Source:
[1] The US government has declared war on the very idea of climate change, [https://www.cnn.com/2025/08/01/politics/us-government-epa-climate-change]
[2] A Legal Analysis of the Trump EPA's Plan to Revoke the Endangerment Finding, [https://earthjustice.org/experts/hana-vizcarra/a-legal-analysis-of-the-trump-epas-plan-to-revoke-the-endangerment-finding]
[3] Contributor: Trump's EPA proposes to end the U.S. fight, [https://www.latimes.com/opinion/story/2025-08-05/climate-change-epa-greenhouse-gas-emissions-endangerment-finding]
[4] Overview and key findings – World Energy Investment 2024, [https://www.iea.org/reports/world-energy-investment-2024/overview-and-key-findings]
[5] US pressure for laxer climate rules puts world at greater financial risk, experts say, [https://greencentralbanking.com/2025/06/24/us-pressure-for-laxer-climate-rules-puts-world-at-greater-financial-risk-experts-say/]
[6] Reversing climate progress: consequences and solutions, [https://www.nature.com/articles/s44168-025-00247-0]
[7] 100 Days of Trump 2.0: The US Weakens Regulations Addressing the Financial Cost of Climate Change, [https://blogs.law.columbia.edu/climatechange/2025/04/30/100-days-of-trump-2-0-the-us-weakens-regulations-addressing-the-financial-cost-of-climate-change/]
[8] Trump's Climate and Clean Energy Rollback Tracker, [https://www.actonclimate.com/trumptracker/]
[9] Environmental Groups Face 'Generational' Setbacks Under Trump, [https://www.nytimes.com/2025/08/16/climate/environmental-strategy-trump.html]
[10] Trump EPA rollbacks would weaken rules projected to save billions of dollars and thousands of lives, [https://www.ap.org/news-highlights/spotlights/2025/trump-epa-rollbacks-would-weaken-rules-projected-to-save-billions-of-dollars-and-thousands-of-lives/]