Trump Targets Biden’s Climate Law: Stocks That Could Survive.
TL/DR –
Donald Trump has criticized the 2022 Inflation Reduction Act, stating its subsidies for electric vehicles and clean power are wasteful. The potential of Trump winning the upcoming election and amending the law has affected clean-energy stocks, which have already been impacted by high interest rates and supply-chain issues. Despite this, many businesses and industries, including the oil-and-gas industry, support parts of the legislation due to their benefits, and scrapping the law could put billions of dollars worth of investments at risk.
Trump’s Critique of Inflation Reduction Act Shakes Clean Energy Stocks
Donald Trump criticizes the Inflation Reduction Act of 2022 as the “largest tax hike in history,” fueling fears of potential repeals under a potential Trump presidency. Alongside high interest rates and supply chain woes, the possibility of severe amendments to the law darkens the outlook for clean-energy stocks. The WilderHill Clean Energy Index has fallen by 20% this year, following a notable decline in 2023.
Companies vested in solar and wind power are reassuring investors of their resilience regardless of the election’s outcome. John Ketchum, CEO of renewable-focused utility NextEra Energy, emphasizes the unlikely nature of total tax credit repeal. Investors, however, remain selective.
Analyst Maheep Mandloi of Mizuho Securities explores the law’s aspects most vulnerable to a Trump victory and their potential impact on companies. A Trump-led repeal of the Inflation Reduction Act would require a Republican-held Congress, unlikely to overturn the whole law.
Mandloi argues that the IRA has bipartisan support due to its wide-reaching benefits and effectiveness in rejuvenating US manufacturing. Overturning the law threatens billions in planned investments. However, even the oil-and-gas industry supports aspects of the law, and Exxon Mobil CEO Darren Woods voices his backing, while Mike Sommers of the American Petroleum Institute opposes a full repeal.
Mandloi predicts electric vehicle subsidies may be at risk under a Trump administration, with possible repercussions for EV manufacturers benefiting from customer tax credits and government support for batteries.
Solar and wind developers could face tax credit cuts under Trump, potentially affecting the production of solar panels and wind turbines. Mandloi suggests demand for solar projects would consequently plummet, though companies such as Enphase, SolarEdge, Sunrun, Sunnova, and SunPower could endure the harshest impact.
One company that may survive relatively unscathed is Hannon Armstrong Sustainable Infrastructure, due to its lesser dependence on government subsidies. However, the fate of clean energy stocks is also tied to interest rates, technological advances, and state-level subsidies. Clean energy even outperformed stock market averages during Trump’s previous presidency, contradicting its performance under President Biden.
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