Australia’s thin silver lining in Trump’s dark clouds for climate action

Donald Trump’s US election win could redirect billions of green investments from America to Australia and increase the availability of cheaper electric cars, even as his return to the White House opens a new era of uncertainty for global decarbonisation goals.

Trump, who has called global warming a “hoax”, has vowed to pull out of the Paris Agreement on climate change, as he did during his first term, and boost production of oil and gas. He has also said he would “terminate” the Inflation Reduction Act, which is providing $567 billion in financial assistance to green industries, and heavily tax Chinese electric vehicles “to make them utterly unaffordable in the United States”.

Australia is aiming to double the share of renewable energy in the grid by 2030, but is yet to set its climate targets for 2035.Credit: Getty

As Trump readies to withdraw the support of the world’s largest economy from the global climate accord, the remaining 195 nations who have signed the Paris Agreement will be forced to reassess their positions. This includes Australia, which under the terms of the deal is required to set a more ambitious emissions-reduction target for 2035.

Experts say it is now more likely Australia, which was due to unveil its 2035 target by February, will hold off on making that commitment amid concerns that a delayed energy transition in the US will influence the timing of other countries’ 2035 promises, a prospect that has not been ruled out by Climate Change and Energy Minister Chris Bowen.

Australia may also end up opting for a weaker climate target than it would have pursued if Trump had not been returned for a second term.

Grattan Institute energy and climate change program director Tony Wood said Trump’s win, driven in part by voter anger at the rising cost of living, could force the Albanese government to rethink the extent of Australia’s next-decade climate ambitions.

Wood said the government might ask why it should be more ambitious with its target when the US was not.

While a second Trump presidency will intensify the global challenges of averting catastrophic climate change, investors and experts say it could also open the door to potential benefits for Australia.

The European Union said last month it would impose tariffs of up to 35 per cent on Chinese EVs, while Trump has said he could slap tariffs of up to 200 per cent on them. China makes about half of the world’s EVs.

If Chinese carmakers were cut off from a major market such as the US, their production would have to find a new home, Wood said.

“If Trump slaps a 100 per cent or 200 per cent tariff on Chinese electric cars, and the Europeans slap ... tariffs on Chinese electric cars, well, we don’t have any car manufacturing industry to protect any more, so we might be the beneficiary of really cheap electric cars,” he said.

Electric Vehicle Council head of legal, policy and advocacy Aman Gaur said Australian consumers could be the winners if the US proceeded with its plan to restrict EV imports.

“If the US restricts imports, I think we can expect to see increased supply to Australia and quality EVs in our market under $30,000,” he said.

Trump’s promise to rescind “unspent” funds under US President Joe Biden’s signature Inflation Reduction Act could also be a boon for Australian green energy industries, experts and investors believe, as it would make the US less attractive in the race for global capital.

Johns Hopkins University think tank the Net Zero Industrial Policy Lab said a US retreat on clean energy policy could open up an $80 billion opportunity for international markets to tap global green investments in industries such as EV components, hydrogen, solar panels and wind turbines.

Net Zero Industrial Policy Lab co-director Bentley Allan said “the abdication of US leadership on climate technology will hurt the United States more than it hurts other countries.

“At this point, the climate transition is inevitable – Europe, China, Japan, South Korea, and other countries have put their economies all-in on the energy transition.”

The Investor Group on Climate Change, a coalition of 104 local and global funds including AustralianSuper, HESTA, BlackRock, Fidelity and Vanguard, said the strength of Australia’s 2035 target could make or break decisions to spend on long-term projects.

“A good 2035 target can decide whether an international investor invests in your country or not,” the group’s policy director, Erwin Jackson, said.

The investor group’s members would also be eying the potential benefits for Australian green technology developers if Trump pulled back on lucrative subsidies on offer in the US, he added.

“In some respects, this could remove a competitor from the field,” he said.

“If the US wants to shoot itself in the foot by walking away from the opportunities, it can.”

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