Trump’s proposals to redirect unspent climate funding away from renewable projects towards traditional infrastructure signal a profound shift in policy that could undermine billions of dollars in public and private investment in the sector. European investors, in particular, may find themselves re-evaluating their commitments as the landscape shifts in favour of fossil fuels.
Climate funds in the crosshairs
US President-elect Donald Trump campaigned on promises to dismantle what he termed Washington’s “green new scam.”
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Yet, the Inflation Reduction Act (IRA), a landmark 2022 climate law, has been designed with significant protections to withstand political shifts, with many contracts already in place. While Trump’s victory may not fully halt the country’s transition to green energy, it casts uncertainty over the pace of reform, even if the direction remains set.
Trump described his plans for “dollars that are sitting there not yet spent” when accepting the Republican presidential nomination in Milwaukee, vowing to “redirect that money for important projects” like roads, bridges, and dams. This redirection puts approximately $60 billion earmarked by the Department of Energy (DoE) for renewable initiatives at risk. According to the Bloomberg report, much of this funding has yet to reach projects on the ground, making it especially vulnerable.
“We’re trying to get as much of it contracted by the end of the year as possible,” said David Crane, undersecretary for infrastructure at the DoE, in an interview with Bloomberg before the election, adding that once funds are contracted, “that can’t really be undone — or, at least, historically, it has never been undone.”
This urgency reflects the administration’s awareness of how fragile federal commitments can be in a politically polarised environment. Trump’s intention to claw back unspent funds, however, has sent a clear message to both domestic and international investors in the US clean energy sector: the future of federal support for renewables is in jeopardy.
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By GlobalDataEuropean equipment finance and the FDI impact
This shift raises particular concerns for European equipment finance firms, many of which have benefited from the recent US emphasis on renewables. Europe’s capital markets are increasingly interwoven with US clean energy projects, with asset managers actively backing climate-focused initiatives. European investors have played a critical role in scaling up the US renewable energy supply chain, financing developments in wind and solar farms, battery production, and equipment manufacturing. However, with the expected rollback of US climate funding, these investors may face reduced returns.
Shares in European clean energy companies fell sharply following Donald Trump’s election as US president, as markets reacted to his pledges to dismantle support for renewable energy and climate policies. Trump has vowed to halt offshore wind projects through executive order and to reverse climate regulations implemented under President Joe Biden, including re-exiting the Paris Agreement and potentially weakening Biden’s Inflation Reduction Act (IRA), which offers substantial subsidies for clean energy technologies.
The world’s largest offshore wind developer, Ørsted, saw its stock fall by as much as 14%, while wind turbine manufacturers Vestas and Nordex dropped around 11% and 7.6%, respectively. The US renewables sector remains a key growth market for several European utilities, including Portugal’s EDP Renováveis, Ørsted, and Germany’s leading utility, RWE, Deutsche Bank analysts noted.
Still, some analysts observed that a full repeal of the IRA would require Congressional approval, which has flipped to Republicans.
Christopher Granville of TS Lombard warns that a Trump presidency could reshape US foreign direct investment (FDI) patterns, with implications for green energy financing. Trump’s proposed extension of corporate tax cuts, possibly lowering rates to “as low as 15%,” aims to encourage US firms to repatriate profits held in tax havens, such as Ireland. This shift could disrupt the traditional balance of FDI, tipping flows toward US-based investments.
While Granville’s analysis focuses on FDI, one interpretation suggests this shift could impact green energy. Reduced outbound FDI may limit funds for international green projects, while lower US tax revenues could restrict domestic green infrastructure support, especially if Trump’s energy policies favour traditional fuels over renewables. The long-term impact on green energy financing remains uncertain, but Trump’s tax agenda could alter investment dynamics both domestically and globally.
The risks for renewable equipment suppliers
One of the immediate consequences for European equipment suppliers will likely be a contraction of the US renewable energy market. The Department of Energy, racing to allocate around $80 billion in grants, had earmarked these funds for clean energy projects that would necessitate significant procurement of European-manufactured wind turbines, solar panels, and EV components. Trump’s policy could mean these contracts are either postponed or cancelled, which would deal a blow to European firms heavily invested in the US market.
Beth Viola, senior policy adviser at the law firm Holland & Knight, noted the urgency with which companies are now rushing to finalise deals to insulate their contracts from policy changes, Bloomberg reported. However, some projects, like the $16.8 billion in grants targeting greenhouse gas reduction and power line expansion, remain more vulnerable. Viola explains that while contracts may offer some protection, “projects still awaiting appropriation or requiring further vetting may have to brace for cuts.”
A shift back to fossil fuels
Trump’s expected rollback of green initiatives not only disrupts current investments but signals a return to fossil-fuel-friendly policies. With climate policies under threat, US markets may see a shift back to traditional energy sources. Reclaim Finance has flagged this trend as a major risk, cautioning that global capital flows into renewable energy could slow if the US no longer prioritises the sector.
This could pose a longer-term threat to the global green energy transition. Europe’s equipment finance sector may be compelled to pivot focus back to markets where government incentives remain stable and supportive, potentially turning to other regions, such as Asia. A diminished US demand for renewables will likely place pressure on European manufacturers to seek alternative markets to maintain growth and offset losses.
Looking ahead: European caution on US renewables
The green energy transition in the US is now uncertain, and European investors face a dilemma: remain in a volatile US market or redirect focus to more stable regions.
The European equipment finance sector may thus adopt a cautious approach, balancing investments carefully in a politically volatile environment. Trump’s stance on unspent funds and his call for “real infrastructure” spending marks a shift that could reshape how international capital views the US’s role in the global green energy transition.
European investors will need to weigh the risks and rewards in a market that, for now, seems poised to take a step back from its climate commitments.
Trump’s tax cuts could redirect US FDI, impacting green energy financing
