How Trump’s climate policies could complicate global climate action

Posted by | Fuld & Company

In recent years, major oil and gas companies, once heralded as leaders in the energy transition, have begun scaling back their net-zero commitments. Shell, BP, and others have slowed their renewable energy investments, prioritizing profitability and energy security amid rising economic pressures and market uncertainties. Meanwhile, national governments and international organizations are intensifying their push for net-zero regulations, creating a striking divergence between public policy mandates and corporate strategies. This tension raises critical questions about the future of the energy transition and the global fight against climate change.

The corporate retreat from net-zero

Oil and gas majors are revisiting their strategies as economic and geopolitical realities reshape the energy landscape. Rising costs, supply chain challenges, and concerns over project profitability have caused companies to rethink their low-carbon ambitions. For instance:

Shell adjusted its 2030 carbon intensity reduction target from 20% to 15-20%, reflecting a moderated pace for its energy transition. BP revised its planned oil and gas production cuts, reducing its initial target from 35- 40% to 20-30% by 2030.

This recalibration is further amplified by geopolitical factors, such as Russia’s invasion of Ukraine, which has underscored the continued importance of gas in ensuring global energy security.

The rise of net-zero mandates

In stark contrast, governments and supranational organizations are intensifying efforts to enforce net-zero regulations. As of 2024, more than 77 net-zero-related policies are in effect globally, nearly quadrupling in the past four years. Key developments include the expansion of carbon pricing mechanisms like cap-and-trade systems and carbon taxes to penalize high-emission industries, sector-specific mandates requiring electric vehicle adoption, renewable energy quotas, and industrial emissions reductions, and international frameworks such as the International Maritime Organization’s binding global regulations to cut greenhouse gas emissions from shipping.

The Trump factor: A climate policy shift

Adding complexity to this dynamic is the resurgence of a climate-unfriendly policy stance under President Donald Trump, who hinted at rolling back climate policies if he returned to power. His previous administration was marked by withdrawal from the Paris Agreement, rollbacks of environmental regulations (repeal of Clean Power Plan, weakening of emissions standards for vehicles and industrial and removal of tax credits for EVs). The incoming Trump administration is anticipated to prioritize deregulation for oil and gas companies, focusing on “energy dominance” rather than sustainability, highlighted by the expected appointment of a shale czar to lead the Department of Energy.

Trump or a similarly climate-skeptical leader’s return to power, could embolden oil and gas majors to delay or scale back their net-zero efforts further, especially in the U.S. market. A climate-unfriendly U.S. policy stance could also weaken global momentum for stringent net-zero regulations and reduce pressure on multinational corporations.

The scenarios ahead

This divergence between corporate and government agendas, further complicated by the potential impact of U.S. policy shifts, could evolve in several ways:

• Enhanced regulatory pressure: Other nations and supranational bodies may double down on enforcement to counteract U.S. inaction, using penalties, subsidies, and public-private partnerships to compel corporate compliance. However, this could create an uneven global regulatory environment, with companies leveraging weaker U.S. policies to delay broader commitments.

• Corporate pushback: Resistance from industries could intensify, especially in regions with lax regulations, leading to delays in policy implementation and watered-down commitments in global frameworks like the Paris Agreement.

• Regional divergence: A geopolitical divide may emerge, with Europe and other climate-committed regions enforcing strict net-zero policies while the U.S. pivots toward a pro-fossil fuel stance. This could fragment global markets and hinder international collaboration on climate issues.

• Technological breakthroughs: Innovation remains a wild card. Breakthroughs in areas like hydrogen, carbon capture, and energy storage could mitigate tensions by reducing the economic costs of compliance, making it easier for companies to align with net-zero goals regardless of political dynamics.

• Collaborative governance: Governments and corporations could co-create frameworks to balance economic growth with sustainability goals, despite political uncertainties. Public-private partnerships and industry-specific roadmaps could offer a path forward, even in a divided policy landscape.

The growing risk of shareholder revolts and legal actions

The divergence between corporate reluctance and regulatory mandates could also lead to significant internal and external pressures:

• Shareholder revolts: Activist investors, institutional shareholders, and climate-focused groups are increasingly demanding stronger commitments to sustainability. Companies like Shell and BP could face leadership challenges or demands for more ambitious climate strategies if they fail to align with global net-zero expectations.
• Public protests: Environmental activists and consumer advocacy groups are amplifying the pressure on oil and gas majors, risking reputational damage and influencing public perception. Employee activism could also impact corporate strategies and talent retention.
• Court cases: Legal challenges against companies failing to meet climate targets are on the rise. While Shell recently won an appeal against a Dutch court ruling that had required it to reduce emissions by 45% by 2030, future lawsuits are likely to focus on holding corporations accountable for climate-related damages or allegations of misleading ESG claims.

Conclusion

The divergence between corporate reluctance and government mandates, compounded by the potential return of climate-unfriendly U.S. policies, underscores the complexities of achieving a global energy transition. Shareholder revolts, public protests, and court cases are not hypothetical—they are real and growing risks for companies that fail to reconcile profitability with climate responsibility.

As governments intensify regulations and societal pressures mount, oil and gas majors will need to adapt or risk being forced into compliance through external mechanisms. Whether through enhanced regulations, technological innovations, or collaborative governance, bridging this gap is essential. The stakes are no longer just about emissions—they concern the financial stability, public trust, and long-term viability of some of the world’s largest corporations. In this delicate balancing act, the energy transition will ultimately be defined by the ability of all stakeholders to find common ground.

Tags: Emerging Markets, Energy, Sustainability, Technology & Innovation Research