Trump’s Move to Defend Domestic Energy Sparks Uncertainty in Cap-and-Trade Programs
In a bold move aimed at reasserting American energy independence, President Donald J. Trump issued an executive order directing the Department of Justice to review state-level climate laws that could restrict domestic energy production.
While the order directly names California’s cap-and-trade program, its ripple effects are already being felt across other state initiatives—including the Regional Greenhouse Gas Initiative (RGGI).
What Is RGGI?
The Regional Greenhouse Gas Initiative is a cooperative effort among 11 northeastern states focused on reducing carbon emissions through a cap-and-trade program targeting the electric power sector.
Utilities must purchase emissions allowances at auction, creating a market-based incentive to lower pollution.
Market Reaction: A Sharp Sell-Off
Following Trump’s executive order, RGGI December allowances dropped nearly 26% early Wednesday, marking a dramatic shift in a market already on edge.
Traders and participants reacted swiftly, pulling back in response to growing policy uncertainty.
The allowance market, often volatile, was further destabilized by this new federal scrutiny—compounded by ongoing U.S. tariffs and broader global economic tremors.
State Commitment vs. Federal Skepticism
RGGI states were quick to reaffirm their commitment to the program. But the long-term outlook remains murky.
While current emissions caps stay in place, future changes—like tightening emissions targets—could face new legal hurdles depending on how the Department of Justice interprets the executive order.
Despite this pushback, member states appear poised to stay the course. However, market confidence has been rattled.
Short-term sentiment has turned bearish, and even recent signs of optimism, including increased electricity demand forecasts and successful allowance auctions, haven’t been enough to stem the downturn.
Why It Matters
This development is about more than market mechanics.
It reflects a fundamental debate: Should states have the right to restrict fossil fuel use in the name of climate policy—or does that undermine national economic and energy security?
At American Fossil Energy, we believe the answer is clear. The United States should not cede energy policy to fragmented state agendas driven by ideology over practicality.
Cap-and-trade programs like RGGI may claim to cut emissions, but they also restrict reliable, affordable baseload energy sources like coal and natural gas—the very resources that have powered America’s prosperity.
Looking Forward
As the Trump administration doubles down on its America First energy vision, regulatory scrutiny of state-led climate programs will likely increase.
While legal interpretations and political debates play out, one thing is certain: energy policy should serve the national interest, not manipulate markets or punish producers.
We will continue to advocate for a balanced approach—one that supports innovation, respects states' roles, but ultimately prioritizes energy reliability, affordability, and American strength.
Because energy isn’t just an environmental issue. It’s an economic one. And it’s a national security one.
