Legal fight begins over fate of US carbon trading programs

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You might have missed this amid all the US tariff drama, but a recently announced executive order targets state climate laws, and carbon markets took a big hit.

In April US president Donald Trump ordered the attorney general to quickly halt the enforcement of various state climate laws. This included carbon cap and trade programs, and the price impact was significant.

In the regional greenhouse gas initiative, which is comprised of multiple Northeast states, carbon prices fell a staggering 21% over two days. 

RGGI, compared to the California market, is more reliant on power demand, which can make prices more vulnerable to the effects of macroeconomic downturns. So the volatility caused by Trump’s tariff announcements had an outsized effect on RGGI.

Over in California, prices fell 9% from already deflated levels. 

Both RGGI and California are awaiting key regulatory updates, and this legal fight might further complicate these processes. So, what comes next?

California governor Gavin Newsom said he would fight the executive order. He doubled down on cap and trade and said he would propose an extension deal for the program in the coming weeks.

California carbon traders said this level of support could be bullish for the program, if it manages to speed up the delayed regulatory process. 

We’ll keep an eye on carbon prices and let you know if that’s the case.