Since January 2025, the US government has dismantled key parts of the national climate framework. In the midterm elections on November 3, 2026, Democrats won control of both houses of Congress. Past rollbacks remain in place for now. However, the balance of power shifts ahead of 2028.
This article explains what was cut, what can change, and what it means for carbon markets.
Key Takeaways
Climate agreements, regulations, and science programs were drastically cut after 2025.
Democrats control Congress, but presidential vetoes block new climate laws.
Budgets, oversight, and permitting reform are realistic leverage points until 2028.
Carbon markets continue growing globally, regardless of federal policy in Washington.
What Washington Has Rolled Back Since 2025
International Agreements: The withdrawal from the Paris Agreement took effect on January 27, 2026. The administration also announced withdrawal from 66 international bodies. These include the United Nations Framework Convention on Climate Change (UNFCCC) and the Intergovernmental Panel on Climate Change (IPCC).
Climate Law: On February 12, 2026, the Environmental Protection Agency (EPA) repealed the Endangerment Finding. This 2009 ruling classified greenhouse gases as a health threat. It formed the legal basis for federal climate regulations. States and environmental groups are suing to overturn the repeal.
Emissions Data: The EPA plans to end the Greenhouse Gas Reporting Program for most sectors. This program tracks about 90 percent of US emissions.
Climate Science: The team writing the National Climate Assessment was dismissed. A report from the Department of Energy questioned human impact on climate change. The proposed 2026 budget also called to close the Mauna Loa Observatory. This site has recorded carbon dioxide levels since 1958.
Fossil Fuels and Wind Energy: A July 2025 law mandates over 30 offshore oil and gas lease sales. In December 2025, the administration halted five offshore wind projects.
Clean Energy: Most tax credits under the Inflation Reduction Act were reduced. However, the 45Q tax credit for carbon capture remained. It provides up to $180 per ton for Direct Air Capture (DAC), a technology that filters carbon dioxide directly out of ambient air. Funding for DAC hubs in Louisiana and Texas was also preserved.
What Can Change Before 2028
The new Congress convenes in January 2027. Sweeping climate legislation remains unlikely. The president holds veto power, and high national debt limits spending. Realistic focus areas include:
Budget Power: Democrats plan to condition agency funding on the release of withheld climate funds.
Permitting Reform: Bipartisan Senate proposals aim to limit lawsuits to 150 days and speed up grid building. Democrats can now negotiate stronger environmental safeguards.
Oversight: Congressional committees can hold hearings and issue subpoenas regarding reallocated climate funds.
State Actions: Democrats won full government control in states like Wisconsin and Pennsylvania.
Administration supporters argue that policy rollbacks reduce costs and boost energy security. For long-term direction, the 2028 presidential election will be decisive.
What This Means for Carbon Markets
Washington is only one part of the picture.
Carbon markets trade credits representing emissions avoided or removed. Compliance markets are government-mandated systems, such as the European Union Emissions Trading System (EU ETS). Voluntary markets allow companies to buy credits to meet self-set climate goals.
The Rest of the World Continues Expanding
Over 190 parties remain in the Paris Agreement, including China, India, and the EU.
The World Bank tracks 87 carbon pricing instruments globally in 2026. These cover nearly 29 percent of global emissions. They generated over $107 billion in 2025.
The EU targets a 90 percent net emissions reduction by 2040. Up to 5 percent of this target can come from international carbon credits under Article 6 of the Paris Agreement starting in 2036.
On January 1, 2026, the EU Carbon Border Adjustment Mechanism (CBAM) took effect. CBAM is a tariff on carbon-intensive imports like steel, cement, and aluminum based on production emissions.
US States and Corporations Stay the Course
California extended its carbon market to 2045. In 2026, it linked systems with Québec and Washington State.
US technology, cloud, AI, and fintech companies drive demand for durable carbon removal. Durable removal stores carbon dioxide safely for centuries.
Microsoft accounts for 79 percent of contracted removal volumes since 2020.
Meta, Alphabet, Amazon, and JPMorgan Chase are among the top 20 corporate buyers.
Frontier, a buyer coalition, secured $915 million in new commitments.
The first quarter of 2026 saw 2.3 million tons contracted, making it the strongest Q1 on record.
Corporate climate commitments continue to grow. Companies with targets validated by the Science Based Targets initiative (SBTi) - an organization helping companies set science-aligned emission goals - increased 40 percent in 2025. Targets reached nearly 12,000 by October 2026. Net-zero targets create long-term demand for carbon removal.
A Structural Trend
Market mechanisms price emissions and direct private capital toward cost-effective reductions and removals.
US federal policy can slow specific domestic projects. However, it does not control global carbon prices or corporate strategies.
Planet2050 Methodology: How Political Risk Is Evaluated
Planet2050 provides early-stage capital to climate projects. In return, it secures discounted credits, marketing rights, or equity returns.
Alongside technical due diligence, Planet2050 evaluates four key criteria:
Subsidy Independence: Is the project viable without relying on single government subsidies?
Verification: Are credits certified under recognized, independent standards?
Buyer Diversity: Is demand spread across compliance and voluntary markets globally?
Portfolio Diversification: Are projects distributed across countries and tech types, from nature-based solutions to DAC?
Projects meeting these criteria generate carbon assets backed by physical outcomes and contracts. Their value remains resilient against domestic political shifts.
Conclusion
Since 2025, Washington withdrew from international climate agreements and repealed key federal regulations. The new congressional majority cannot reverse these rollbacks alone. However, it gains leverage over budgets, oversight, and permitting.
A major policy shift depends on the 2028 election.
Meanwhile, global demand continues to drive carbon markets forward. Projects independent of single government decisions remain best positioned to thrive.
_____
Want to understand how policy shifts shape carbon markets and carbon removal investing?
Subscribe to the Planet2050 newsletter and follow Planet2050 toward its direct listing. We make verified carbon credits accessible to retail and institutional investors.
Sources
Jones Day: EPA Finalizes Repeal of Greenhouse Gas Endangerment Finding
CemNet: 45Q Tax Credit Preserved
Atlantic Council: Four Ways the Midterms Can Reshape US Energy Policy
TIME, Simmone Shah: What Experts Believe the Democratic Blue Wave Means for Climate Action (November 4, 2026)