You’re out of free articles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Sign In or Create an Account.
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Welcome to Heatmap
Thank you for registering with Heatmap. Climate change is one of the greatest challenges of our lives, a force reshaping our economy, our politics, and our culture. We hope to be your trusted, friendly, and insightful guide to that transformation. Please enjoy your free articles. You can check your profile here .
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Subscribe to get unlimited Access
Hey, you are out of free articles but you are only a few clicks away from full access. Subscribe below and take advantage of our introductory offer.
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Create Your Account
Please Enter Your Password
Forgot your password?
Please enter the email address you use for your account so we can send you a link to reset your password:
If you want to donate to fight climate change, what’s the best way to spend your money?
For the past five years, Giving Green has been trying to find out. Each year, the nonprofit recommends a set of nonprofits that are trying to solve the climate problem effectively and efficiently, and get the world closer to decarbonization.
Giving Green, in other words, is somewhat like the climate-specific version of Givewell, an uber-utilitarian group that identifies which global charities maximize the number of lives saved per dollar spent. But it’s much more difficult— or at least much less clear — to identify which nonprofits might best fight climate change than it is which nonprofits might save the most lives through targeted interventions.
Climate change is a globe-spanning sociotechnical problem, a political quandary baked into humanity’s largest-scale engineering systems. Even when a government or technology has seemingly pushed the world forward, it can be unclear why the improvement happened, or whether, in the long run, it will make a meaningful difference. The Paris Agreement, after all, has been around for nearly a decade, the European Union’s cap-and-trade scheme for nearly two. Yet academics, experts, and politicians can (and do) disagree about whether either policy has ultimately helped — and even why they happened in the first place.
To resolve this problem, Giving Green reviews the historical record to identify philanthropic strategies that seem like they have a good shot of leading to emissions reductions. This year, it has focused on eight, including next-generation geothermal, decarbonizing aviation and marine shipping, advancing nuclear energy, and speeding the energy transition in low- and middle-income countries. Then it looks for groups that are working on those problems in time-proven ways.
I spoke with Daniel Stein, Giving Green’s director, earlier this week. Our interview has been edited and condensed for readability.
What is Giving Green’s goal with these recommendations?
The main goal — the problem we are trying to solve — is that we believe that there are lots of people who want to do something about climate, and there’s a lot of money that’s paralyzed by indecision and sits on the sidelines. So we provide a comprehensively researched guide with a systematic approach to try and determine where the high leverage points are in climate philanthropy — and by high-leverage, I’m thinking most greenhouse gas reductions per dollar.
We focus in on what we call philanthropic strategies, specific things that people could be doing. Then we find organizations working on those strategies that are doing a great job and promote them.
Can you tell me about a few of the organizations that you have chosen?
We have some that we’ve recommended for a few years, such as Clean Air Task Force. Last year, one of our big pushes was geothermal energy, and so we’ve recommended Project Innerspace, who are a big advocate for geothermal and work a lot with both private industry and the government.
Another big area of focus for us over the past few years has been heavy industry. The case for philanthropic support for heavy industry is really, really clear. Depending on what estimate you use, heavy industry accounts for roughly a quarter of carbon emissions, but something like less than 5% of philanthropic spending. There’s very little policy teeth almost anywhere in the world on industry, and basically nothing in the U.S., but there are pathways to solving it. We kind of know how to make green steel and green aluminum, and at least have ideas on concrete and plastic. There’s a lot nonprofits can do to pave the way forward in terms of: What does policy look like? How do we get from where we are today — where we kind of know the technology but no one’s using it — to a place where there’s actually supply and demand in the future? So our top recommendations for that is an organization called Industrious Labs in the U.S. and an organization called Future Cleantech Architects in Europe.
Over the past five years, I feel like I’ve seen your mission evolve and your strategies evolve. At the beginning, you recommended giving to a mix of high-end research and policy-development groups, and then also to more grassroots, movement-type groups. But over time, your set of recommendations have become much more focused on groups that are like CATF, that are providing nonpartisan, highly expert information and analysis.
I think that’s right, but it is not necessarily that we have just changed our mind on what works. I think different moments in time call for different approaches. And in those heady years leading up to the Inflation Reduction Act — where there was hope for a Democratic trifecta, and then it happened — there was a major opportunity for a left-driven, all-of-government push on climate. That was what we thought these grassroots groups were in a good position to push forward.
I think when you look back, you see groups like Sunrise having a really powerful influence. Obviously people disagree on what forces got the IRA to happen. But I really do think that you can draw a direct line from this progressive advocacy to the Democrats believing that they had to do something about climate to please their base.
But our view is that that moment has passed. Especially post-IRA, this opportunity for a more progressive-led legislative process has ended. Even if the Democrats were still in control, I think you weren’t going to get big bills like the IRA. We moved to a point where we need to focus on the wonky details of implementing these bills and then passing more technical, focused policy in the future. Our view is that in the U.S., the big opportunities have shifted to what we would call the “insider” groups. But I think that could change again, and it could change based on geography.
Are there any big climate strategies nobody is working on right now — where you identified a place where money could be spent, but you couldn’t find a nonprofit focused on it?
One of our high-level strategies is solar radiation management. That was something that was new for us this year. And within that, we would look at very specific substrategies. Should we be funding research? Should we be funding governance? And within those little sub-elements, we occasionally found stuff where we were like, wow, we really wish there was a group working on this, but we didn’t find anything.
But one of the nice things about having a [grant-making] fund this year, for the first time ever, is that we could help get things started that didn’t exist before. We’re super excited about industry, and so much industry is happening in developing countries. But when you ask, Who is focused on reducing steel emissions in Indonesia?, there were very few organizations. We made a grant to an organization called Climate Catalyst — they were already working on steel in India, and we helped them expand into emissions reduction in Indonesia.
I think some people might see your list and go, Wow, these are a bunch of high-end research and elite advocacy organizations, but what’s actually going to solve the climate crisis is local organizing.How would you reply to that?
I think that’s a reasonable point. We are open to all of these things, and we have considered them, and I think there is a time and place for grassroots approaches and activism. But looking at the historical research and our own research, I believe that the approaches that work on this are ones where the activism is tied to clear policy demands — that are good policies, that can have big, systematic decreases in emissions and seem to have some sort of feasible pathway to success.
What I’ve seen in a lot of grassroots movements in recent years are things like throwing soup at paintings, or blocking streets, which have not had this direct policy connection, and we are pretty skeptical of those approaches. But if grassroots approaches came on our radar that have a super viable theory of change to altering policy, we are very open.
This is the fifth year you’ve put out recommendations like this, right? What have you learned or changed your mind about during that time?
One of the things that’s really crystallized in our mind is that we really think the big levers are in systems. And that can mean a lot of things, but to us, it really means three things — it means policy, technology, and markets.
To solve the climate crisis, you need to change the rules of the game, such that everyday actors — people making decisions, businesses — everybody changes their behavior because some technology got cheaper, or some policy changed. We really use that to focus ourselves to think about, What are the big changes that need to happen, and how do we work backward to the actions that get us there?
So I think that might be why you see some of these more insider, techno-analysis-driven approaches. Because when you step back and you think, alright, we need this market to change in this way, or we need this technology to develop that doesn’t currently exist, and you think about how you get there, a lot of times you need advocacy to change policy, and you need research to make that policy change possible.
This year, Giving Green has recommended six top groups fighting climate change. They are:
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
At least in the short term, developers looking to build quickly have just a few sites to choose from.
Donald Trump aims to spur the biggest nuclear development boom this side of the 21st century. The big question: Will it work?
Trump signed a fleet of executive orders on Friday seeking to quadruple U.S. nuclear capacity, expanding generation from 100 gigawatts today to 400 gigawatts by 2050. To that end, he also set a near-term goal to start construction on 10 new conventional reactors by 2030 — that is, within the next five years.
The interim goal on its own is, on its face, extremely ambitious. There have only been three reactors completed this century: Watts Bar Unit 2, which had a complicated, multi-decade development timeline and finally entered operation in 2016; and Vogtle Units 3 and 4, which started construction in 2009 and came online in 2023 and 2024, respectively.
Part of the reason those three facilities took so long is the convoluted permitting process nuclear hopefuls must navigate. (Chris Gadomski, lead nuclear analyst at BloombergNEF, called it a “gauntlet.”) It can take almost a decade for a new nuclear project to receive what’s called a “combined operating license” from the Nuclear Regulatory Commission, the federal body charged with overseeing civilian nuclear technology and power plant operations. The orders seek to simplify and accelerate the NRC’s licensing procedure, giving the body 18 months to issue new rules and guidance designed to shorten the timeline for new applications to 18 months at the longest, and for continuing operations to just a year.
In the even nearer term, however, “If you want to build nuclear fast in this country, you would go to sites that are already licensed or already have infrastructure,” Brett Rampal, senior director of nuclear and power strategy at Veriten, told Heatmap. Many of these sites received NRC approval in the 2000 and 2010s but languished due to poor market conditions (the rise of cheap natural gas), the nuclear industry’s own instability (Westinghouse, a major contractor, went bankrupt in 2017), or some combination of both.
But even then the process is complicated, as Adam Stein, director of the nuclear energy innovation program of the Breakthrough Institute, told Heatmap. “Several of the sites with licenses for AP1000 [reactors] theoretically could start construction fairly quickly without major license changes,” he said. “However, that’s not likely to happen.”
The AP1000 is a 1-gigawatt pressurized water reactor made by Westinghouse, and it’s currently pumping out electrons at the Vogtle site in Georgia. There are hopes that it can become a standard design that is built over and over again at scale.
But even on an already-licensed site, any new project would be starting from scratch with its supply chain and workforce. And just because the site has a license now doesn’t mean its developers are done with the licensing process. “The licenses for those sites were issued for a design that was essentially what Vogtle started out as,” Stein explained. Vogtle subsequently underwent almost 200 license amendments, and it’s probable that a new build would want to incorporate many of these design changes into their license, as well. “That takes time,” Stein said.
Duke Energy, which serves over 8 million customers largely in the Southeast, has active combined operating licenses for AP1000s at sites in Florida and in South Carolina. The company told South Carolina utilities regulators in April that its W.S. Lee site in the state “offers the best opportunity to deploy large light-water reactors in the Carolinas” — but that, at least at the time, “the conceptual deployment timeline from when a definitive “go forward” decision is made is about 13 to 14 years.” (Emphasis mine.)
The spokesperson noted that the combined operating license at the site “gives us optionality in the future to construct and operate two Westinghouse AP1000 units at the site,” and that “we will have an opportunity to update state Commissions in the Carolinas on our progress regarding the potential for future new nuclear investments later this year.” The spokesperson gave no specific indication that the company’s timeline for building a new plant had changed due to the executive orders.
As for the Florida site, the spokesperson said, “We currently have no nuclear planned for Duke Energy Florida per our 10-year site plan, although advanced nuclear overall is still a longer-term option.”
What about “advanced nuclear”? Several advanced nuclear projects have either applied for or gotten construction permits. Kairos Power received construction permits for demonstration reactors, while X-Energy, the Tennessee Valley Authority, and TerraPower have applied for construction permits for advanced reactors. These companies are pursuing a different pathway than the combined operating license application process and will need to apply for operation licenses as well. Two advanced reactor designs by NuScale have received approval from the NRC to date, including one that’s fresh as of Thursday, but there are no current plans to deploy either anywhere.
That hasn’t dampened excitement about advanced nuclear, including on sites with licenses for larger reactors. Virginia utility Dominion Energy is looking at new nuclear development at its North Anna site, which is licensed for a GE-Hitachi Economic Simplified Boiling Water Reactor, a large reactor which has received an NRC design certification but has not yet been deployed. But instead of conventional reactors, Dominion has a memorandum of understanding with Amazon to explore small modular reactor development.
Duke Energy, meanwhile, told Heatmap that the company “strongly supports the advancement and deployment of new nuclear technologies, including large reactors and small modular reactors, to meet the growing energy needs of our customers.”
There is one nuclear company that greeted the executive orders with fulsome excitement: The Nuclear Company. Unlike other newer entrants in the space, The Nuclear Company — which raised a $51 million Series A in April — aims to build six conventional reactors with “proven, licensed technology.”
“I feel like I’m Jack and Rose from the Titanic and my arms are out. I feel like we're flying finally,” Juliann Edwards, chief development officer at The Nuclear Company, told Heatmap. “I feel like we’ve been unleashed through these executive orders.”
As difficult and costly as it was to bring the new Vogtle reactors online, the process jumpstarted the previously dormant domestic nuclear industry. And The Nuclear Company thinks it would be a shame for this emergent expertise to go to waste.
The Nuclear Company has identified the first site where it plans to build, but it’s not yet public, Edwards told Heatmap, though she pointed to states such as Florida, South Carolina, North Carolina, Tennessee, and Alabama as places where the company could “hit the ground running,” given that they already have the necessary licenses in place.
And yet The Nuclear Company does not, itself, intend to design or operate these reactors. Instead it would run licensing, permitting, and construction, while also potentially serving as the facility’s long-term owner, depending on the regulatory structure of the local utilities and grid operators.
That still leaves the question of whether the market will end up valuing the power produced from all these new reactors at a level that will keep an operator in business. That’s not a given. In the 2010s, nuclear capacity fell in part because the market preferred natural gas to nuclear, since it was cheaper and could respond quickly to varying demand. “Why would you build a nuclear reactor when you got very cheap natural gas?” BNEF’s Gadomski, told Heatmap.
But the prospects of an artificial-intelligence-fueled data center boom, as well as the broader electrification of the economy, has begun to change this calculus, as utilities look to catch up to quickly rising electricity demand for the first time this century.
"I’m hoping that this environment doesn’t create too much uncertainty for folks, and I’m hoping it sends signals to get things going and that things will hopefully work out,” Rampal said. “I love my utilities, but they are 14 times bitten, 97 times shy.”
On a state legislative session, German Courts, and U.S. permitting personnel
Current conditions: The first named tropical storm of the year appears to be forming in the Pacific Ocean as Tropical Storm Alvin • Northern California braces for temperatures as high as 100 degrees Fahrenheit this weekend • It’s cloudy and cool in Manhattan, where Wednesday night the Court of International Trade threw out much of Trump’s tariff regime.
1. Texas anti-renewables bills won’t get crucial vote
A suite of bills in the Texas legislature that targeted the state’s booming renewable energy sector will not make it to the governor’s desk after the state’s House of Representatives declined to schedule votes on them before the Texas legislature’s biennial session ends on Monday, The Hill reported.
The Texas Senate had passed S.B. 819 in April, which would have mandated extra regulatory approval for large solar and wind projects, over and above what fossil fuels are required to seek. The Senate also passed S.B. 388, which would have essentially mandated that more than half of new generation in the state would be gas, and S.B. 715, which would have required existing wind and solar generation to have gas backup. Trade groups were “in freak-out mode,” my colleague Jael Holzman reported at the time, and the head of one renewables group testified that S.B. 819 alone would “kill” the industry.
2. D.C. energy veteran gets permitting gig
Emily Domenech, a former staffer for House Speakers Kevin McCarthy and Mike Johnson, will head the federal government’s Permitting Council, Politico reported Wednesday.
The Permitting Council was established as part of the Highway Bill in 2015 as the Federal Permitting Improvement Steering Council, and helps coordinate permitting for infrastructure projects that require multiple layers and stages of federal regulatory and environmental review.
Domenech also helped negotiate permitting reform provisions in the 2023 Fiscal Responsibility Act. More recently, she has been a senior vice president at the energy and environment public affairs firm Boundary Stone.
I spoke with Domenech last year after the presidential election for a story about how the clean energy industry could “learn to speak Republican.” In the past, she told me, “clean energy hasn’t focused on getting to know those representatives. When they’ve had ideas for bills or policies, they went to Democrats. They haven’t built a lot of personal relationships with members of Congress on the other side of the aisle.”
3. Climate lawsuit rejected, principle behind it affirmed
A Peruvian farmer’s lawsuit against the utility RWE for its contribution to the risk of glacial flooding was rejected by a German court, The New York Times reported Wednesday.
The farmer, Saúl Luciano Lliuya, had sued in Hamm Higher Regional Court, arguing that emissions from RWE increased glacial melting and threatened the inundation of his town of Huaraz.
RWE does not operate in Peru, but the suit argued that it was responsible for 0.5% of global emissions, and thus should be responsible for that portion of the cost of protecting the town from flooding, about $19,000. The judge dismissed the suit but “affirmed that German civil law could be used to hold companies accountable for the worldwide effects of their emissions,” the Times reported.
Lliuya’s lawyer hailed the decision, saying in a statement, “For the first time in history, a higher court in Europe has ruled that large emitters can be held responsible for the consequences of their greenhouse gas emissions.”
RWE warned that the decision could “have unforeseeable consequences for Germany as an industrial location, because ultimately claims could be asserted against any German company for damage caused by climate change anywhere in the world.”
4. Constitution revived
A fracking site in the Marcellus Shale. Spencer Platt/Getty Images
The Williams Companies is planning to start the process of permitting formerly dormant pipeline projects in New York state, the Wall Street Journal reported.
The two pipelines, the Constitution and Northeast Supply Enhancement, were canceled in 2020 and 2024, respectively, following intense environmental and local opposition.
The Northeast is adjacent to productive natural gas fields in the Marcellus Shale in Pennsylvania, but does not have fully built out infrastructure for shipping gas from Pennsylvania to New York and beyond. The Constitution pipeline would have run from Northeast Pennsylvania to Schoharie, New York, outside Albany. The Northeast Supply Enhancement would have augmented existing infrastructure that runs from Lancaster County, Pennsylvania through New Jersey, and would have included new pipelines under New York Bay to supply gas to New York City and Long Island.
The move to restart the projects comes after President Trump allowed work to restart on the Empire Wind 1 offshore wind project off the south coast of Long Island. While New York Governor Kathy Hochul never directly said there was quid pro quo for the pipeline, she did say in a statement at the time that she would “work with the Administration and private entities on new energy projects that meet the legal requirements under New York law.”
5. Fed scraps climate groups
The Federal Reserve has gotten rid of a number of working groups and internal organizations dedicated to climate change, Bloomberg reported Wednesday. These include the Supervision Climate Committee, founded in 2021, which the Fed said then would “further build the Federal Reserve’s capacity to understand the potential implications of climate change for financial institutions, infrastructure, and markets.” The other groups eliminated are the Financial Stability Climate Committee, the Climate Committee on Economic Activity, and the Climate Data Committee.
The central bank’s actions are part of a government wide push to de-emphasize climate change in policymaking and official communications. Days before President Trump’s second inauguration, the Fed said that it had withdrawn from the Network of Central Banks and Supervisors for Greening the Financial System. In a statement, the Fed said that the group had “increasingly broadened in scope, covering a wider range of issues that are outside of the Board's statutory mandate.”
The central bank will continue to “assess climate risk as part of its business-as-usual activities,” Bloomberg reported.
“Abruptly ending the energy tax credits would threaten America’s energy independence and the reliability of our grid - we urge the senate to enact legislation with a sensible wind down of 25D and 48e,” Tesla Energy’s Twitter account posted Wednesday night, in reference to tax credits for home purchases of solar and storage energy systems and investments in clean energy systems respectively. The post came hours after news broke that Tesla CEO Elon Musk would be leaving the Trump administration.
We’re too enmeshed in the global financial system for decarbonization to work without us.
The United States is now staring down the barrel of what amounts to a full repeal of the Inflation Reduction Act’s energy tax credits and loan authorities. Not even the House Republicans who vocally defended the law, in the end, voted against President Trump’s “One Big, Beautiful Bill.” To be sure, there’s no final outcome yet — leading Republican senators don’t seem satisfied with the bill headed their way, and energy sector lobbyists are ready to push harder. But the fact that House Republicans were willing to walk away from billions of dollars of public spending for their districts and perhaps $1 trillion worth of economic growth is a flashing red sign that Trump’s politics have capsized the once-watertight argument that the IRA would be too important to American businesses and communities to be destroyed.
The Biden Administration touted the IRA as the United States’ marquee investment not just in reducing emissions and promoting economic development, but also in bringing back American manufacturing to compete against China in the market for advanced technologies. The Trump administration takes this apparent conflict with China seriously ― the threat of economic decoupling looms large ― but seems to have no desire to compete the way the Biden administration did. Rather than commit to the solar, wind, battery, grid, and electric vehicle investments that are laying the foundation for a manufacturing revival, the Trump administration has doubled down on the conjoined ideas that America should be self-sufficient and should play to its strengths: critical minerals, nuclear, natural gas, and even coal. Never mind that Trump’s tariff policy and his party’s deep cuts to energy-related spending will stop these plans, too, in their tracks. “Energy dominance” has always been a smokescreen ― of fossil fuels, by fossil fuels, for fossil fuels.
While Republicans attempt to shut down America’s entire scientific research apparatus, the rest of the world moves on. The demise of the Inflation Reduction Act would decisively surrender the global market for all types of commercialized clean energy sources (and nuclear energy, too) to Chinese companies. Chinese companies already dominate the input sectors for these technologies, whether it’s processing and refining mineral products such as polysilicon, gallium, and graphite, or producing infrastructure commodities such as steel and aluminum. The end of Biden’s climate and infrastructure laws will also leave the American car industry in the dust, as the rest of the world shifts gears toward purchasing more efficient and cheaper electric vehicles ― particularly Chinese brands such as BYD. (Ford’s CEO drives a Xiaomi electric vehicle and “doesn’t want to give it up.”) Consider it a sign of the times that Ethiopia recently banned the import of gas-powered vehicles. Electrification is in, combustion is burnt out.
It’s not just China that benefits. In November, the Net Zero Industrial Policy Lab at Johns Hopkins estimated that the repeal of the IRA leaves up to $80 billion in clean technology manufacturing investment opportunities for other countries to seize between now and 2032, the law’s intended sunset year. Those countries aren’t just the likely (read: wealthier) suspects such as Japan, South Korea, or the European Union. The abdication of U.S. leadership would also boost electric vehicle and battery manufacturing capacity in Morocco, Mexico, India, Indonesia, and elsewhere across Southeast Asia; solar power-related manufacturing further across Southeast Asia; and wind power-related manufacturing in Brazil, Mexico, South Africa, India, and Canada.
These countries won’t just benefit from investors looking to build outside the United States. A Trump-induced fall in American imports of these technologies and their inputs may also drive some degree of global disinflation, insofar as these countries can secure input goods no longer flowing into the American market at cheaper prices.The writing has been on the wall since the early Biden administration that failing to invest meant investing in failure. This is what the Trump administration is poised to do, to the detriment of American technological capabilities and standards of living.
Just because the United States might be dropping out of the race for global decarbonization, however, does not mean that the rest of the world can choose to ignore the United States in return. The Trump administration can still play spoiler with every other country’s efforts to decarbonize ― even China’s ― for one overarching reason: the mighty dollar. The United States may be hemorrhaging the political capital that coordinating the energy transition requires, but it still controls the currency of decarbonization itself.
It’s hard to overstate how central the management of the U.S. dollar is to the management of global decarbonization. Let’s sketch out some of the key dynamics. First, the dollar is the world’s primary trade currency. Because most global trade is denominated and invoiced in dollars, fluctuations in the value of the dollar relative to the value of other currencies will affect the price of importing both essential commodities and capital goods in other countries. Any volatility in the prices of oil, critical minerals, food, or machinery ― including the inputs to energy systems ― is most likely measured in a currency that every other country needs to earn through trade or borrow from investors. Efforts to denominate commodity trade in other currencies, such as the Chinese renminbi, are not likely to scale up rapidly, however, thanks to the network effect of the dollar system: Market actors will only ditch the dollar if most of their counterparties do.
Second, then, the dollar is the world’s dominating financial currency. Countries seeking foreign investment must issue debt at rates and on terms that foreign investors, many of whom measure their returns in dollars, judge as safe relative to the returns on U.S. Treasury bonds, conventionally the world’s premier “safe asset.” How the U.S. Federal Reserve moves interest rates influences how every other central bank does; higher rates in the U.S. usually push up Treasury bond yields and, as other central banks also raise rates or stockpile dollars, make borrowing for investment and for refinancing debt more expensive across the whole world ― particularly for large-scale energy and adaptation infrastructure projects. The U.S. Federal Reserve also manages the dollar swap lines and repurchase (or “repo”) facilities that provide dollar liquidity to the rest of the world during a financial crisis, as in the Great Recession and the subsequent Eurozone financial crisis, or a sudden dollar cash shortage, as in 2019.
Finally, the United States maintains a comprehensive sanctions regime that operates through cross-border dollar payments systems and “clearing-house” facilities such as SWIFT, which processes interbank payments, and CHIPS, which handles over 90% of all dollar-denominated transactions globally. When the United States wants to cut target companies and whole countries out of the dollar financial system, it prevents SWIFT from processing targeted entities’ cross-border transactions and U.S.-based financial institutions from accepting them.
The Obama administration and first Trump administration used U.S. control over SWIFT and CHIPS to administer sanctions against Iran, and the Biden administration did the same to Russia. The U.S. Departments of Treasury and Commerce also administer what’s known as a “secondary sanctions” regime that imposes these financial penalties on unrelated third-parties that violate initial sanctions. And the Department of Commerce enforces export controls that restrict technology transfer to foreign targets. The Biden administration combined these authorities to limit the ability of both U.S. and foreign companies to export certain technologies to targeted Chinese companies.
Perhaps ironically, some of these dynamics don’t bite the way they used to during the Biden administration, when the dollar was expensive relative to other currencies. Trump’s inflationary and growth-destroying budget, trigger-happy tariffs, and neglect of the fracking sector have driven a sharp depreciation in the dollar and destabilized the market for U.S. Treasury debt. Some cuts to U.S. interest rates are likely given the elevated probability of a recession. All of these factors ― undeniably a bad look for the United States ― should support emerging market financial conditions by lowering the cost of commodity imports, raising the attractiveness of sovereign debt to foreign investors, and help stave off potential debt crises.
But easier global financial conditions in the short term do not diminish the threat the Trump administration continues to pose to global economic stability. The danger that the Trump administration expands the American sanctions regime implemented via the global dollar invoicing system and export controls remains undiminished. What’s more, the tension between the president and Federal Reserve Chair Jerome Powell should alert foreign central banks that their access to the American dollar liquidity facilities is ultimately contingent on the Federal Reserve’s independence from Trump’s influence. During the first Trump administration, the European Union and China alike started strategizing how to derisk their dependence on the dollar; U.S. policymakers should not be surprised if those governments are now dusting off those playbooks.
The dollar’s dominance is in part an effect of the gargantuan size of the U.S. consumer market. Trump’s tariff threats had governments across the world scrambling to cut deals with the United States to preserve their market access ― including by promising to purchase U.S. natural gas.
The view outside the U.S. seems to be that there is no easy replacement for the U.S. consumer. As the Australian Strategic Policy Institute put it, “US household spending in 2023 reached $19 trillion, double the level of the European Union and almost three times that of China. … there are no obvious markets to replace [U.S. consumers].” Indian journalist M. Rajshekhar notes that China, too, needs external markets to absorb its products, and that it cannot count on other Global South countries to let Chinese goods flood their markets. Americans are the motor that keeps the global economy spinning.
The inability to sell goods to the United States is a threat to decarbonization abroad not just because it gives Trump an avenue to hawk natural gas, but also because U.S. consumer spending provides the world with a source of the dollars with which decarbonization is financed in the first place. And to the extent that the IRA would have supported U.S. consumer demand for clean energy technologies and electric vehicles, its de facto repeal ― while a source of potential disinflation for Global South producers ― snuffs out a key demand signal for the production of inputs to those sectors across the Global South.
Where the Global South’s clean energy transition is concerned, natural gas unfortunately remains an important alternative to coal in the absence of widespread renewable energy deployment. The U.S. is the world’s largest exporter of liquified natural gas, the use of which has doubled since 2009 as global demand for the fuel rose sharply. Countries across Europe and Asia depend on U.S. gas for domestic power and industrial uses ― particularly after Russia’s invasion of Ukraine. Large energy importing countries like India increasingly rely on gas to meet energy demand spikes. Over the longer term, industry leaders expect LNG demand to rise 60% by 2040, particularly on the back of persistent Asian demand. Although planned U.S. LNG export capacity is already on track to double between now and 2028, the Trump administration is supporting the buildout of even more capacity to meet this expected global demand.
Becoming dependent on “molecules of U.S. freedom” for industrial growth and for transitioning off of coal may once have seemed like a smart decision across emerging markets, particularly when prices were lower. But it has now left dependent Global South countries uniquely vulnerable to energy import price and power market shocks caused by erratic U.S. policy and volatile (dollar-denominated) natural gas prices. Will the gas-dependent countries in Europe and Asia be able to access enough Chinese imports, invest sufficiently in local clean technology, and kick their LNG fix in time to meet their emissions reduction goals? Europe might; for the rest, this question is one worth following over the coming years.
The truth is that the United States has always had a unique opportunity to weaponize these aspects of dollar dominance in the interest of playing global spoilsport. As Chen Chris Gong, a researcher at the Potsdam Institute for Climate Impact Research, argues in her forthcoming (not yet peer-reviewed) paper on “The geoeconomics of transitioning to the post-fossil world,” Global South countries have an urgent reason to decarbonize built into their politics, whether their governments recognize it or not. So long as much of the Global South is dependent on imported fossil fuels for energy, “local people’s livelihood and firms’ survival are made vulnerable to compound cycles of dollar capital flow and cycles of basic commodity trade.” If the Global South cannot fully avoid the United States, their governments can at least sidestep it. Countries powered by clean energy, importing less fuel, and generating their own power are far more insulated from the dollar cycle and the dollar system, simple as that.
In contrast, as Gong highlights, the only incentives for the United States to pursue decarbonization come from the pressure of competing with China ― a competition that Republicans, for all their bluster, may not actually want to win ― or the pressure of mass consumer demand for a clean economy ― for which Democrats are not exactly fighting tooth and nail ― and the profits both promise. It’s darkly funny that the Inflation Reduction Act’s defenders are seizing on these exact reasons in their attempts to protect the law in the Senate when neither sufficiently moved House Republicans to reconsider.
For posterity, then, we should add another reason, even if it won’t convince Republicans to change tack: The looming repeal of the Inflation Reduction Act portends a future where Trump and his Republican party happily use their control over the global economy to drag the rest of the world down with the United States. “Energy dominance” may always have been formless bluster, but the United States’ financial dominance remains sharp enough to cut ― if not global emissions, then global standards of living.