Published September 30, 2025 in Energy • 8 min read • 
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The lurch toward authoritarianism in the US and elsewhere has brought effective climate action into question. The clean energy transition requires governments around the world to help finance and coordinate efforts toward decarbonization. But what happens when one of the major combatants in the war on climate change goes AWOL – or, worse still, aims to reverse course and double down on fossil fuels?
The transition from the Biden administration to the second Trump administration saw a radical change of course. In 2022, Joe Biden signed the most ambitious climate bill in history – the Inflation Reduction Act (IRA), which promised hundreds of billions in funding for the clean energy transition and environmental remediation. Less than three years later, Donald Trump effectively nullified the IRA, throwing into question the billions in business investment that had relied on a transition to net zero.
What are the prospects for that transition now? Will business give up on the clean energy transition? Or is the economics of clean energy too compelling to forsake?
It has been getting a lot hotter here on Earth. The 10 hottest years on record all occurred within the past decade, and the past few years saw a particular off-trend spike in year-round temperatures.
It’s no coincidence that the concentration of heat-trapping carbon dioxide in the atmosphere has risen dramatically over the past 65 years. The Keeling Curve shows the concentration of carbon dioxide parts per million (ppm) as measured at the Mauna Loa observatory in Hawaii, providing a consistent data series going back to 1960. In that year, carbon ppm was below 320. Today it stands at 425, a level unprecedented in human history.
About 80% of annual carbon emissions come from the use of fossil fuels. Burning coal throws off 15 gigatons a year, oil produces 12, and burning gas is responsible for eight. All of these sources of carbon have increased without interruption for generations, save for a modest (and brief) decline during the early part of the COVID-19 pandemic.
The source of these emissions is remarkably concentrated in a small number of “carbon majors”. In 2019, The Guardian reported that just 20 firms were responsible for one-third of the carbon emissions since 1965. By 2023, emissions were even more concentrated.
One might say, “Great! If we can just persuade these 20 companies to transition to a fossil-free energy future, our problem is mostly solved.” (If you said this to yourself, I admire your optimism.) Unfortunately, this would misunderstand the nature of for-profit business enterprises. It would also miss the fact that 16 of the 20 biggest fossil companies are owned by their governments, most of which are autocracies. The five biggest emitters were state-owned: Aramco (Saudi Arabia), Coal India (India), CHN Energy (China), NIOC (Iran), and Jinneng Group (China) – all but one in authoritarian states. Meanwhile, the top investor-owned emitters were ExxonMobil (US), Chevron (US), Shell (UK), Total (France), and BP (UK). The prospects for fundamental transformation in highly profitable corporations owned by their revenue-hungry governments are, let’s say, modest.
Perhaps we can solve the problem on the demand side by taxing carbon and letting the wonder of the free market fix things. Unfortunately, we do not have much time. Markets may be magical, but we need action now. Consider a parallel: imagine that an unnamed nation has invaded Poland, Denmark, Norway, Belgium, the Netherlands, Luxembourg, France, Yugoslavia, and Greece. Would reasonable people say, “Let’s let the market and entrepreneurs come up with a bold solution”? Not if we hoped to survive. Environmentalist Bill McKibben made this parallel explicit almost a decade ago, when he argued that the war against climate change really was a war – in effect, a third world war. “The question is not, are we in a world war? The question is, will we fight back? And if we do, can we defeat an enemy as powerful and inexorable as the laws of physics?” His prognosis was stark: we had the tools and materials we needed to take on this challenge, but it would require society-wide mobilization.
It seems the only plausible pathway is to get the major emitting nations to create coordinated decarbonization blueprints that work within their own economies. Specifically, the five biggest emitters are China (32% of the world’s “market share” for carbon emissions), the US (13%), India (8%), Russia (5%), and Japan (2.6%). Unfortunately, one of them has experienced a bit of a reversal lately, and its prospects for leading the charge on addressing climate change are in serious doubt.
The US takes justified pride in its national projects. When the goal is inspiring, such as landing a man on the Moon, or existential like preserving democracy and ending the threat of fascism in Europe, America and its government can accomplish the impossible.
As McKibben pointed out, the mobilization for the Second World War is the closest parallel to the climate crisis. The US joined the war late, after the attack on Pearl Harbor in December 1941, but the federal government rapidly coordinated a vast, economy-wide effort to win the war. It created the War Production Board and the Office of Price Administration to coordinate industry for wartime production and stabilize the economy. Major manufacturers such as Ford and General Motors converted to the production of tanks and planes, creating the “arsenal of democracy”. Millions of men were drafted into the military, and millions of women joined the workforce in manufacturing and elsewhere, while the government standardized labor practices across the economy. War bonds turned households into investors in the war effort. And science and technology were mobilized on an unprecedented scale, including the Manhattan Project that yielded the atomic bomb. Four years later, the war was over. Western Europe began reconstruction on a (mostly) democratic footing, and America’s economy and society had been transformed forever.
America can be highly adept at mobilizing at a society-wide level to take on existential challenges. The Biden administration aimed to build on this precedent to take on the climate crisis. The centerpiece of its effort was the Inflation Reduction Act, a misleadingly named bill that was widely recognized as the most significant piece of climate legislation in American history. The bill was ambitious, and its provisions wide-ranging, including hundreds of billions for investment in clean energy (solar, wind, geothermal, batteries, etc.), massive tax credits for renewable energy installation and electric vehicles, credits for clean energy manufacturing and infrastructure upgrades, funding for remediation, especially for disadvantaged communities, and support for sustainable agriculture and rural clean energy production. At long last, the US had joined the fight in earnest.
Was it all just a dream? Just three years ago, the US was poised to help lead the clean energy transition with aggressive investment in renewables, batteries, infrastructure, and remediation. New enterprises opened across the land, and existing businesses such as Ford and General Motors joined the fight, rolling out new products and going all in on the green transition – much as they had transformed 80 years earlier. As for me, I bought a Ford Mach-E electric car, installed a vehicle charger at my house, replaced my furnace and central air conditioner with a heat pump, put solar panels on the roof, and bought a whole-house battery. (These last two required getting a new roof as well.) Thanks in part to generous tax breaks, my household made a big leap toward decarbonization over the past two years.
Today, those incentives are gone. Trump has withdrawn the US from the Paris Agreement, renounced the UN’s Sustainable Development Goals, rescinded large swaths of climate regulation, voided the funding opportunities from the IRA, crippled the Environmental Protection Agency, and suppressed and defunded climate science. On his first day in office, he declared a “National Energy Emergency” as a pretext to expand domestic coal, oil, and gas production in an effort to achieve so-called “energy dominance”.
Businesses are reeling as they seek to find solid ground for their climate investments. Entire industries are put at risk by policies that read as a photo negative of the previous administration. The world’s second-largest carbon emitter has made a rapid U-turn back to the past. Meanwhile, the US-centered AI industry is investing hundreds of billions of dollars in energy and water-hungry data centers in an apparent effort to replicate the Easter Island experience (where it has long been thought that society collapsed due to environmental degradation, although new research has called this narrative into question).
And yet, the US is not the only government (or market) that matters when it comes to climate change. Among S&P 500 companies that report their international revenues, 36% come from outside the US, and for the “Magnificent Seven”, it’s over half. Just over 50% of Alphabet’s revenues are from non-US sources. For Microsoft, it’s 49%, Tesla, 51%, Nvidia, 53%, Apple, 57%, and Meta, 62%. Even Amazon, the most domestically oriented of the seven, earns nearly 40% of its revenues outside North America.
As my co-authors and I argued in the Stanford Social Innovation Review in 2008, this situation creates an opportunity. Multinational corporations are subject to regulation wherever they do business, and for many of them – particularly Big Tech – the European Union is a vast and profitable market that they cannot afford to lose. We argued that the EU sets the standards for environmental impact and product safety: its regulations (such as the Corporate Sustainability Reporting Directive) tend to be the most demanding, and it’s easier for multinationals to simply adopt a single standard across their product portfolio – making the EU in effect their global regulator. Anu Bradford at Columbia University calls this the “Brussels Effect”. The EU’s Carbon Border Adjustment Mechanism provides another potent tool to prevent carbon leakage by multinational corporations.
This may just be the wedge the world needs to prevent one rogue nation from walking away from the climate battle. At the time of writing, the Magnificent Seven make up more than one-third of the value of the S&P 500. Three in five American families are invested in the stock market, and their pensions are almost exclusively betting on shares – mostly via index funds. Whatever threatens the market valuations of these seven companies also puts at risk the college and retirement savings of half of America, and the current US administration is highly attentive to the performance of the stock market. Perhaps this provides the EU just the leverage it needs to keep the battle against climate change on track.
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