The uneven US state-level impacts of different climate policies

Concerns that the Trump administration would abandon climate policies were confirmed within hours of returning to office. The president began the process of withdrawing from the Paris Agreement, paused Biden-era clean energy funding, and vowed to expand future gas and oil exploration. But whether these policies will be fully realised remains unclear.

What you will learn:

• Individual states are preparing to legally challenge the Paris withdrawal and pursue net zero policies without federal support. Oil producers appear unwilling to increase supply due to current oil price weakness. And Trump’s climate spending freeze is proving to be legally and politically complex at the state-level. Therefore, when assessing the economic impacts of this policy shift, a lot hinges on Trump’s ability to overcome these obstacles and the extent to which future governments, both in the US and globally, align with this broader climate policy approach.
• Oxford Economics’ Cities & Regions Climate Service helps organisations navigate this uncertainty by modelling a range of climate pathways and the associated subnational economic impacts. One possible route is a Delayed Transition, where US and global mitigation efforts are initially delayed before being ramped up post-2030. In this case, US GDP would be 6% below baseline by 2050.
• The magnitude of the state-level impacts would vary considerably under a Delayed Transition. GDP in the southern states of Texas and Louisiana would underperform by wider margins of 8% and 9%, respectively, reflecting the structural challenges that the region’s large oil and gas sectors face in the transition. Midwest states, including North Dakota and Indiana, are also very vulnerable in this scenario given their reliance on energy-intensive manufacturing subsectors. By contrast, service-dominated eastern states, such as New York, would be among the more resilient economies over our forecast period, albeit with GDP levels still slightly below our baseline.

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