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Will the U.S. see a tidal wave of environmental regulations after 2020?

What happened?

While the Trump administration has called for a ~30% cut, the Democrat-led U.S. Congress has decided to raise the budget of the Environmental Protection Agency (EPA). This does not mean, however, that the agency can go about its business as usual. Over the course of his first term, President Trump has managed to roll back or weaken no less than 83 environmental regulations (most of which actually relate to public health and safety) in favor of businesses in, among others, the energy and chemical industry. Moreover, the EPA’s leadership, as appointed by Trump, has greatly reduced enforcement efforts; throughout 2018, the agency issued the lowest number of penalties of the past 20 years. As such, the EPA is one of the branches of U.S. government that is most affected by the election of President Trump. However, this also means that, in case the 2020 elections are won by a Democrat, a great number of environmental regulations and norms are likely to be re-introduced. This would create problems for some industries and opportunities for others.

What does this mean?

Current polls that place Trump well behind major Democratic candidates lack predictive power, but it certainly seems that structural changes in American demographics are working against Trump’s chances of re-election. The number of non-college-educated whites (i.e. Trump’s base) is dropping slowly and he thus faces an uphill battle to win in key states. All Democratic candidates are outspoken “climate-believers” and would give the EPA much more leeway to, again, take on greenhouse gas emissions and to, for instance, combat air- and water pollution (unless the Supreme Court gets in its way). Even more so, one can easily imagine how Trump’s efforts to stall measures may have led to a heap of (new and more stringent) policy proposals that would be introduced as soon as possible (e.g. norms for so-called PFAS).

What’s next?

The potential tidal wave of environmental regulations could seriously hurt, for example, oil, gas and automotive industries, as well as producers of air conditioners (when they still use hydrofluorocarbons). At the same time, as in the case of mercury emissions from coal-fired power plants, most businesses are already ahead of existing norms as they understand that they could easily lose their (societal) “license to operate” if they fail to protect the environment (i.e. all too polluting industries will no longer be accepted by citizens, nor by investors). For these businesses, and providers of (technological) solutions (e.g. air quality sensors and emissions control solutions), clear rules are nevertheless helpful, as they provide a planning horizon for investments. For other businesses, e.g. open-pit mining, complying with new rules may be much more difficult as solutions are not as readily available.