US climate policy: clear conditions for renewable energies

After weeks of uncertainty, the US government recently provided clarity on renewable energies and environmental technologies: The Treasury Guidance on the implementation of the Executive Order of July 7, 2025, published on August 15, is much more investor-friendly than feared. For environmental stocks, this means clear guidelines and conditions and therefore new momentum – and new opportunities.

Political uncertainty as a negative factor

The first half of 2025 was anything but quiet for environmental stocks. After Liberation Day and the associated volatility, the discussions surrounding the new US tax reform (“One Big Beautiful Bill”) were the main driver. The various proposals from Congress caused many U-turns with corresponding market reactions in equities. There were a total of five proposals from the Senate and House of Representatives. Each of them had more or less a completely different interpretation of the clean tech tax credits from the Inflation Reduction Act than the previous proposal.

All in all, the end product of the “One Big Beautiful Bill” is in line with our assessments. Details of the approved package can be found in this article.

However, on July 7, US President Donald Trump issued an executive order to “end government subsidies for ‘unreliable’ and ‘foreign-controlled’ energy sources – particularly wind and solar energy.” Just when everyone was expecting an end to the politically driven campaign against renewables, the next hammer came down. Many market participants were expecting a significant deterioration in the support conditions for renewable energies – in particular due to the possible retroactive application of new rules or a shortening of the safe harbor periods.

Treasury Guidance brings relief

However, the Treasury Guidance published on August 15 gives the all-clear: the feared cuts have not materialized. Here are the most important points:

• No retroactive effect: Projects that were started before September 2, 2025 will retain their previous funding conditions.
• 4-year safe harbor remains in place: New projects will continue to have 4 years to become operational. This means that the tax incentives for projects are valid until 2030.
• 5% rule remains in place for small projects < 1.5MW: In the past, in order to receive tax credits, 5% of the total project had to have already been spent. This rule remains in place – which is particularly positive for companies such as Sunrun, Enphase or SolarEdge.
• Utility-scale projects must fulfill the “physical work test” – which is standard in practice anyway. In the past, this test went hand in hand with the 5% rule mentioned above. This is now no longer applicable – a relief for the entire segment.

Overall, a better than expected result. The guidance creates planning certainty until at least 2030 – a decisive factor for long-term investments.

Market reaction: relief and price gains

The reaction on the stock markets was not long in coming: shares in residential solar companies such as Sunrun rose sharply on the day of the announcement – as did component manufacturers such as Shoals Technologies and Nextracker. The sector experienced a kind of “relief rally” after weeks of expecting the worst.

Particularly noteworthy: the guidance not only strengthens short-term visibility, but also the medium-term perspective for many developers and manufacturers. Projects that start in 2025 or 2026 can now calculate with stable framework conditions until 2030.

Conclusion: tailwind with restrictions

Despite the overall positive news, certain uncertainties remain. For example, the implementation of the so-called FEOC regulations (“Foreign Entity of Concern”) is still open. These could impose new requirements on the origin of components from 2026 – particularly with regard to China. The FEOC regulation is popular with Democrats and Republicans, so depending on how it is structured and how strict it is, this is still the last political “wild card” in the segment. However, many companies have already relocated their value chains to the USA.

The bottom line remains: US climate policy under Trump is less restrictive than feared – at least as far as tax incentives are concerned. It is true that you can find comments or posts from the US President on an almost daily basis in which he makes negative statements about renewable energies. What counts for environmental stocks, however, is the finalized “One Big Beautiful Bill” and the executive order, and these show that even if the rhetoric remains negative, the legal framework is better than expected.

 

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