The Political Erosion of Climate Science and Its Implications for Energy and Environmental Markets

The intersection of climate science and policy has long been a cornerstone of global energy transitions. However, the past five years have witnessed a deliberate political erosion of climate science consensus in the United States, with profound implications for energy markets and environmental investments. From regulatory rollbacks to targeted funding cuts, anti-science policies under the Trump administration (2020–2025) have created a landscape of uncertainty, reshaping risk profiles for clean energy and fossil fuel sectors alike. This analysis examines the financial risks of these policies, their measurable impacts on market dynamics, and the broader implications for long-term climate resilience.

Policy Rollbacks and the Rewriting of Climate Incentives

The Trump administration's One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, epitomizes the shift toward fossil fuel-centric policy. By tightening domestic content requirements for clean energy tax credits and revising the 45Q carbon capture tax credit to prioritize enhanced oil recovery (EOR), the act has redirected incentives away from renewables and toward higher-emission applications according to analysis. For instance, the parity provision in 45Q, which equalizes tax credits for carbon sequestration and utilization, risks incentivizing carbon capture technologies that ultimately bolster oil production rather than decarbonization. This policy pivot has introduced compliance hurdles for renewable energy developers, particularly those reliant on foreign supply chains, as foreign entity of concern (FEOC) restrictions now limit eligibility for tax credits.

The financial toll of these rollbacks is evident. According to a report by the Union of Concerned Scientists, the administration's systematic dismantling of the IRA and IIJA has disrupted clean energy incentives, slowing the deployment of wind and solar projects by an estimated 15–20% compared to pre-2024 projections. Meanwhile, fossil fuel production has seen a resurgence, with U.S. coal and gas capacity increasing despite global trends toward decarbonization.

Funding Cuts and the Stifling of Innovation

Beyond regulatory changes, the Trump administration has weaponized budgetary authority to undermine climate science. In October 2025, the Department of Energy abruptly terminated $7.5 billion in funding for 223 clean energy projects, including grid modernization and hydrogen hub initiatives according to a report. This move, which disproportionately targeted projects in Democratic-leaning states like California, has stifled innovation in critical areas such as advanced manufacturing and energy storage. Concurrently, the National Institutes of Health (NIH) and National Science Foundation (NSF) saw a 22% decline in competitive grants in 2025, hampering research into climate-related public health risks and clean energy technologies.

The consequences of these cuts extend beyond the U.S. report, the administration's cancellation of $23.3 billion in climate funding has created a vacuum in global climate finance, with U.S. banks and investors retreating from public climate commitments-a phenomenon dubbed "greenhushing." This retreat has not halted global clean energy investment entirely; global renewables spending hit a record $386 billion in the first half of 2025. However, U.S. contributions to this growth have waned, with committed spending on renewables declining by 36% since late 2024.

Market Volatility and Investor Behavior

The uncertainty generated by anti-science policies has directly influenced financial market dynamics. Research from Frontiers in Environmental Science highlights that climate policy uncertainty (CPU) has amplified stock market volatility in clean energy sectors, particularly during U.S. presidential elections. For example, the rollback of IRA tax credits for solar and wind has led to a 12% increase in volatility for renewable energy firms, as investors grapple with regulatory unpredictability. This volatility is compounded by the administration's exploitation of economic leverage to promote U.S. LNG exports, creating geopolitical risks for energy-dependent markets.

Despite these challenges, some sectors have shown resilience. Clean energy and transportation investments grew by 7% year-on-year in Q1 2025 according to data, suggesting that private capital remains attracted to long-term decarbonization trends. However, this growth is tempered by the administration's prioritization of fossil fuels, which has diverted capital from high-impact clean energy projects.

Implications for Long-Term Climate Resilience

The erosion of climate science in policymaking poses a dual risk: short-term market instability and long-term climate vulnerability. By undermining research and regulatory frameworks, the Trump administration has weakened the U.S.'s capacity to lead in clean energy innovation-a sector projected to drive global economic growth in the coming decades. Meanwhile, the redirection of carbon capture incentives toward EOR risks locking in fossil fuel infrastructure, exacerbating future climate risks.

For investors, the lesson is clear: anti-science policies amplify transition risks while eroding the social license for fossil fuels. As the Rhodium Group notes, U.S. greenhouse gas emissions are projected to decline by 26–41% by 2040 relative to 2005 levels, but this trajectory hinges on future policy shifts. Markets that fail to account for political volatility in climate policy may face stranded assets and reputational risks as global decarbonization accelerates.

Conclusion

The Trump administration's anti-science climate policies have created a fragmented energy landscape, where short-term political gains clash with long-term climate imperatives. While global clean energy investment continues to rise, the U.S. has ceded ground in innovation and market leadership. For investors, the path forward demands a nuanced understanding of policy risks and a commitment to aligning portfolios with resilient, science-based strategies. As the world moves toward net-zero economies, the financial costs of ignoring climate science will only grow.