Carbon markets were on the ballot this past election both directly and indirectly. In Washington State, voters were given the direct opportunity to repeal their newly established Cap-and-Invest program. They voted “no” on the repeal and Washington State is expected to link with California’s Cap-and-Trade program in the coming years.
 
Indirectly, the federal election was going to have secondary impacts on state-driven carbon and renewable energy credit markets given the widely differing views of both Presidential candidates. For example, potential policies under the incoming Trump Administration could temper the growth of renewable energy or electric vehicle sales, likely leading to a slower decline in emissions which then would require State level cap-and-trade and low carbon fuels standard markets to do more of the work without federal tailwinds.

At a global scale the new Trump administration is expected to take action that will remove the US from both the Paris Agreement and the Article 6/UN international carbon market. These actions will have a greater impact on the global carbon market than they will on local markets here at home.

In the days following the election, prices in the three largest US carbon markets (California, Washington, and RGGI) all pushed higher. Washington prices jumped because voters struck down the initiative to cancel the program. California and RGGI price movement likely moved up on the expectation that emissions declines could slow down under a second Trump Administration. Consequently, tying directly to the impact of the election, we would speculate traders viewed Trump’s win as bullish for both programs. Trump has expressed desire to roll-back incentives for electric vehicles and also expressed a negative sentiment toward offshore wind energy as well. Any policy on these fronts may drive emissions higher in California and RGGI states respectively, resulting in greater allowance demand over time.

Should Trump end up putting focus on state-driven carbon initiatives, like California’s, legal experts have said that the federal government would have very limited options to seek to preempt the program, nearly all of which would require an act of Congress. As a reminder, the Federal Clean Air Act provides authority to the states to regulate emissions sources more stringently than the federal government. It is more likely the Trump administration will seek to relax EPA tailpipe standards and withdraw California’s existing waiver to enforce its own GHG and ZEV standards (sure to draw legal challenge if attempted).

We think it is more likely the Trump administration will seek to relax EPA tailpipe standards and withdraw California’s existing waiver to enforce its own GHG and ZEV standards (sure to draw legal challenge if attempted). If successful, such action would in theory lead to greater emissions, more demand, and presumably, higher prices from state driven clean fuels and cap-and-trade programs.

Separate from the policy consequences, what is clear from the election is a renewed focus on affordability. Carbon prices are unlikely to be immune from conversations on both sides of the aisle about how to reduce cost of living for everyday Americans. Democrats in the California legislature recently opened the 2025/2026 sessions with emphasis on affordability as it relates to climate programs. Gavin Newsom, the governor of California, has also placed emphasis on affordability in recent talking points, with one of his statements after the election speaking to using auction revenues from  the cap and trade program to support California consumers of electric vehicles if federal tax credits are eliminated stating "we’re going to make it more affordable for people to drive vehicles that don’t pollute.” 

While local programs may see indirect bullish tailwinds from a Trump agenda, the Global carbon market faces a slightly different prospect. The Trump administration’s hostility to the Paris Agreement would likely weaken US engagement in climate issues internationally. The credibility of climate commitments under the UNFCCC will likely wane if the US, the world's largest economy, is no longer a party to them. The “Article 6” market – an international carbon market under the Paris Agreement expected to scale significantly in the coming years – may face reduced political support and international cooperation. In sum, this could diminish investor confidence and undermine collaborative climate action. Our hope is, despite actions the US may take, the international community continues to progress towards its goals under the Paris Agreement and the Article 6 markets continue to scale.

In conclusion, the outcome of the recent elections has highlighted the complex and evolving nature of carbon markets, both domestically and globally. While federal actions under the new administration may shift the trajectory of US-based carbon programs, the resilience of state-driven initiatives remains a key factor in shaping emissions reductions and market dynamics. On the global stage, however, the potential retreat from international climate agreements like the Paris Agreement and the Article 6 market could dampen global efforts and investor confidence. Yet, the hope remains that international cooperation will persevere, ensuring progress in tackling climate change despite shifting political landscapes.