TriplePundit • When U.S. States Speak on Climate Action, Companies Listen

Even as delegates from more than 180 countries meet at the United Nations COP30 climate talks in Brazil, climate action faces setbacks in the United States. President Donald Trump’s “American Energy Dominance” policy reserves federal support only for certain energy resources — including coal, oil, natural gas and nuclear energy, and excluding wind and solar. But even as the federal government breaks course with their prior plans to reduce emissions, U.S. states are still moving forward — and they can wield a powerful influence on corporate climate behavior.

The California Effect

In terms of climate action, California stands out for its powerful role in the global economy as well as in the United States, where it is the largest state by population. It’s also the fourth largest economy in the world — topped only by all of the U.S. combined, followed by China and Germany.

California’s influence on the U.S. auto industry alone is instructive. The state has been the national pacesetter for reducing vehicle emissions for almost 60 years, culminating in its instrumental role in the zero-emission vehicle movement of the 21st century.

Its massive economy also gives California sway over corporate climate policy. In an article for The Conversation published last week, Arizona State University Associate Professor Lily Hsueh — author of the new book “Corporations at Climate Crossroads” — credited California policymakers with motivating companies including Walmart to continue building toward climate solutions, while criticizing others like Wells Fargo that dialed back their commitments.

“These companies still face ongoing pressure from state and local governments, the European Union, customers and other sources to reduce their impact on the climate,” Hseuh explained. “They also see ways to gain a competitive advantage from investing in a cleaner future.”

Hsueh drew attention to California’s newest round of climate laws, including an extension of the cap-and-invest (formerly “cap-and-trade”) platform for reducing corporate greenhouse gas emissions. “They also lock in binding targets to reach net-zero greenhouse gas emissions by 2045. And they set clean-power levels that rival the Europe Union’s Green Deal and outpace most national governments,” she observed.

California is not alone

Although California is the single most powerful example, other U.S. states have combined their resources to help accelerate the pace of climate action. In 2005, for example, seven states in the Northeast launched the Regional Greenhouse Gas Initiative (RGGI), underscoring the ways climate action can create jobs and stir economic activity. The RGGI began holding auctions for carbon dioxide emissions allowances in 2008, leading to a 46 percent decline in emissions among the member states to date, while yielding more than $9 billion in revenue to fund energy-efficiency programs and other state-based initiatives.

Various analyses conducted over the years have underscored the follow-on value of the initiative, including savings in health costs related to cleaner air. The RGGI also estimates the program has fostered more than $20 billion in household savings on energy costs.

“RGGI participation has coincided with reduced costs for consumers, with average residential and commercial bills in RGGI states declining faster than the rest of the U.S.,” a July press statement from the initiative reads.

But the RGGI has not been immune to political shifts over the years. Founding member New Jersey, for example, was withdrawn from the agreement in 2012 by order of Republican Gov. Chris Christie, only to be restored by Democratic Gov. Phil Murphy in 2020. Another example is Pennsylvania, which joined the RGGI in 2022 but abruptly withdrew last week, a measure attributed to budget negotiations between Democratic Gov. Josh Shapiro and a state legislature divided between Republicans and Democrats.

Overall, though, the RGGI has grown from its original membership of Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York and Vermont to include Maryland, Massachusetts, and Rhode Island as well. The proceeds from the sale of emissions allowances have “directly benefited” more than 8 million households and 400,000 businesses in participating states to date, according to the initiative.

States reaffirm commitment to climate action

Outside of the Northeast and California, more than a dozen other states are also pursuing climate goals regardless of the abrupt shift in federal energy policy. In September, for example, Illinois Gov. JB Pritzker signed the new Climate and Equitable Jobs Act into law. The new law calls for phasing out carbon emissions from both the energy and transportation sectors, among other provisions.

At the start of this month, the U.S. Climate Alliance — a bipartisan coalition representing 24 states that account for 54 percent of the nation’s population — issued a new report underscoring the economic case for action. Together the Alliance’s member states have reduced net greenhouse gas emissions to 24 percent below a 2005 benchmark, while collective GDP increased by 34 percent, according to the report. The Alliance currently includes all of the RGGI members except New Hampshire, along with Pennsylvania and a dozen other states representing almost every region of the U.S. — from Michigan and North Caroline, to Wisconsin and New Mexico.

“Moreover, compared to the rest of the country, Alliance members are continuing to reduce emissions faster while employing more clean energy workers, achieving lower levels of harmful air pollutants, and executing more pre-disaster planning,” the report found. 

Money talks

Other U.S. states are contributing to the effort simply by virtue of longstanding economic policies that attract new manufacturing investments. The historically conservative, “red” states of Georgia and Tennessee, for example, have helped the Southeast region develop a strong reputation for supporting the vehicle electrification movement, while Louisiana and Alabama will play an instrumental part in supporting the next wave of innovative solar technology across the country, as hosts of two new factories under the purview of the U.S. firm First Solar.

Texas is a case unto itself. Despite a prominent role in the “anti-ESG” movement that’s critical of corporat environmental policies, Texas is a longtime leader among all 50 states in wind power generating capacity. And it’s right behind California for the No. 1 slot in solar capacity. In addition to attracting multiple solar manufacturers in recent years, Texas has also become a showcase for the economic value of energy storage systems in grids with high levels of wind and solar penetration.

Combined, all of this activity provides U.S. corporations with a strong platform for continuing to reduce emissions and use more renewable energy. As Hseuh of Arizona State University noted, for every Wells Fargo, there is a Walmart. Regardless of federal policy shifts, corporate climate leaders continue to invest in science based, data-driven solutions now as a matter of sound business practice, reducing their exposure to less effective, more costly “patchwork efforts” down the road.

Image credits: Raimundo Pacco for Cop30 Brasil Amazônia (press use only); the Office of California Gov. Gavin Newsom