Back to the Laboratories: U.S. State Climate Initiatives Amid Federal Transition
While federal policymaking has already begun to shift away from the climate change programs of the Obama and Biden administrations, many states are expected to continue pursuing expansive climate policies and building upon their existing initiatives, setting up potential conflicts with federal priorities. This article gives an overview of recent and anticipated developments on several climate-related issues that may prove significant during President Trump's second term.
Greenhouse Gas ("GHG") Reduction Targets: President Trump issued an executive order in the opening days of his administration withdrawing the United States from the Paris Agreement under the United Nations Framework Convention on Climate Change, which sets international targets for GHG emission reductions by signatory nations. Shortly before the presidential transition and issuance of that executive order, a group of 24 state governors pledged to pursue GHG emission reduction goals under the Paris Agreement, signaling the likelihood of future federal-versus-state conflict over this issue. While Trump's second term has so far seen relatively few developments in the area of state-level emissions targets, states and localities are expected to take action in related areas such as corporate disclosures and "climate superfund" laws.
Offshore Wind: Offshore wind farms are permitted and regulated primarily by the federal Bureau of Ocean Energy Management, but coastal states are active in this space through various means. Nine Eastern states and California have set offshore wind generation targets. (Oregon has also evaluated, though not committed to, a target for as yet unauctioned leases off its coast). States are also using procurement and direct investment to drive policy: Massachusetts and Rhode Island have announced a joint procurement of 2,878 MW from wind farms in their waters, and states on both coasts have invested extensively in port infrastructure, job training, and research. But there is new uncertainty about the future of these and other projects because on January 20, 2025, President Trump issued an executive order withdrawing all areas of the Outer Continental Shelf from disposition for wind energy leasing, and directing the Secretary of the Interior to evaluate the need and legal basis for terminating existing leases. Finally, last month New Jersey Gov. Phil Murphy's administration cancelled an upcoming fourth round of lease auctions, citing project withdrawals by several developers and uncertainty due to federal actions.
Vehicle Emissions: The last few years have seen numerous state vehicle emissions efforts, including those related to fuel standards and Zero Emissions Vehicles ("ZEV"). In 2022, California adopted the Advanced Clean Cars II ("ACC II") regulations which impose escalating targets for ZEV's share of new car sales, from 35% in 2026 to 100% in 2035. The state is also requiring similar phased ZEV targets for vehicle fleets and heavy duty trucks. President Trump has been expected to renew his administration's wholesale attack on California's Clean Air Act waiver, and Section 2(e) of the "Unleashing American Energy" executive order directs federal agencies to block some state vehicle emissions policies. However, the specific approaches of both sides of this issue are still evolving: In January, California strategically withdrew its remaining four waiver requests pending EPA approval at the end of Biden's term, and early efforts by the administration to force a legislative repeal of certain waiver approvals as well as to stall litigation relating to the ACC II waiver approval have both been unsuccessful.
Inflation Reduction Act ("IRA") Projects: The Trump administration has taken swift action to reevaluate federal spending priorities, including issuing executive orders that impact funding under the Inflation Reduction Act ("IRA") and the Bipartisan Infrastructure Law ("BIL"). The White House Office of Management and Budget ("OMB") recently implemented a funding freeze on a wide range of federal financial assistance, echoing concerns over government spending and energy policy. Although a previous freeze was rescinded amid multiple lawsuits, the new administration's Unleashing American Energy Order and other deregulatory measures may further alter the funding landscape. While IRA and BIL funds are largely distributed through tax credits, grants, and loan guarantees, their continued availability may face uncertainty under the administration's fiscal policy shifts. However, with many projects already underway, both economic and political resistance to significant funding cuts is expected, potentially leading to further legal battles and legislative negotiations.
As with most interparty transitions at the federal level, the next few years will see heightened volatility in the climate regulatory landscape. Businesses should be mindful of the increased contrast and inconsistency between federal and state regulations that is likely to emerge, as well as impacts from state-federal litigation.
