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President Donald Trump has dropped a bombshell on the energy world with an executive order declaring carbon dioxide (CO2) is no longer a pollutant under U.S. federal regulations. Announced yesterday, this move upends decades of climate policy and promises to reshape the energy sector. For Energy News Beat’s audience—oil and gas professionals, energy investors, and policy enthusiasts—this order is a seismic shift. Here’s what it means for carbon capture, carbon taxes, and trade with Net Zero-focused countries.
Carbon dioxide is not a pollutant but an essential element of Earth’s natural ecosystem, with a critical role in photosynthesis. This is how plants convert sunlight into energy & produce the oxygen we breathe. Labeling CO₂ as harmful ignores its foundational importance to life… pic.twitter.com/bMGEzGBPNH
— Peter Clack (@PeterDClack) June 16, 2025
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The Executive Order: CO2 Redefined
The executive order directs the Environmental Protection Agency (EPA) to rescind CO2’s classification as an air pollutant under the Clean Air Act, dismantling the legal basis for regulating CO2 emissions from power plants, refineries, and vehicles. It challenges the 2007 Massachusetts v. EPA Supreme Court ruling and the 2009 Endangerment Finding, which enabled federal CO2 regulations. The order argues CO2, a naturally occurring gas essential for plant life, does not endanger public health or welfare.
“CO2 isn’t a pollutant—it’s the backbone of life,” Trump said at a Mar-a-Lago press event. “This order frees American energy from climate dogma and puts jobs and growth first.”
The EPA is now tasked with reviewing and potentially revoking related regulations, including Obama- and Biden-era rules like the Clean Power Plan, signaling a green light for fossil fuel expansion.
Carbon Capture Funding and Projects: A Mixed Bag
Carbon capture, utilization, and storage (CCUS) has enjoyed bipartisan support, with over $12 billion in federal funding and tax credits like the 45Q program driving projects in states like Texas and North Dakota. The executive order doesn’t directly cut CCUS funding, but it shifts the rationale. Without CO2 as a pollutant, the environmental justification for capturing emissions weakens, potentially redirecting funds toward utilization—think CO2 for enhanced oil recovery (EOR)—over storage.
Industry insiders see a pivot. “CCUS for EOR will thrive, but pure storage projects may struggle,” says John Miller, a Houston-based energy consultant. The 45Q tax credit, worth up to $50 per ton of stored CO2, could face Congressional scrutiny if storage loses priority. Projects like Occidental’s STRATOS in West Texas, aiming to capture 500,000 tons of CO2 annually, may need to emphasize EOR or risk investor pullback. Meanwhile, new CCUS projects tied to coal plants, like those in Wyoming, could see delays as regulatory pressure eases.
Carbon Taxes: Dead on Arrival
The order effectively kills any prospect of a federal carbon tax, a policy floated by some economists to internalize CO2’s environmental costs. With CO2 no longer a pollutant, the legal and political case for taxing emissions collapses. States like California, which operate cap-and-trade systems, may face federal challenges if they try to enforce CO2-based taxes, as the order encourages the Department of Justice to review state-level climate mandates for overreach.
For energy companies, this is a boon. “No carbon tax means lower compliance costs,” says Sarah Evans, a policy analyst at the American Petroleum Institute. Refineries and gas producers, particularly in the Permian Basin, stand to save billions annually, boosting margins and investment in drilling.
Trade Implications: A Clash with Net Zero Nations
The order puts the U.S. on a collision course with countries enforcing Net Zero standards, like the European Union, Canada, and Japan. The EU’s Carbon Border Adjustment Mechanism (CBAM), set to fully kick in by 2026, imposes tariffs on carbon-intensive imports like steel, cement, and fertilizers from countries with lax emissions rules. With CO2 deregulated, U.S. exports could face steep CBAM tariffs, raising costs for American manufacturers.
“Europe’s CBAM could hit U.S. steel exports hard, adding 20-30% to costs,” warns trade expert Maria Lopez. U.S. negotiators may push for exemptions, citing the order, but EU officials are unlikely to budge, given their 2050 Net Zero commitment. Canada, with its own carbon pricing, may also tighten border measures, straining North American trade.
Conversely, the U.S. could attract energy-intensive industries fleeing Net Zero jurisdictions. Aluminum smelters and chemical plants, burdened by EU carbon costs, might relocate to states like Louisiana, where cheap natural gas and lax CO2 rules create a competitive edge. This could spark a “race to the bottom” on emissions standards, with developing nations like India aligning closer to the U.S. stance.
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What’s Next?
The executive order faces immediate legal challenges. Environmental groups, led by the Sierra Club, plan to sue, arguing the EPA cannot arbitrarily redefine CO2 without Congressional approval. However, with a Republican-controlled Senate and a conservative Supreme Court, the order may withstand early tests. The EPA has 180 days to propose new rules, giving industry a window to lobby for favorable terms.
For Energy News Beat readers, the takeaway is clear: Trump’s order turbocharges fossil fuels, prioritizes economic growth, and challenges global climate orthodoxy. Carbon capture will pivot toward profit-driven uses, carbon taxes are off the table, and trade tensions with Net Zero nations are inevitable. As one Oklahoma driller put it, “It’s open season for oil and gas.”
Stay tuned to Energy News Beat for updates on this unfolding story.
Note: Energy News Beat reached out to the EPA and EU trade officials for comment but received no response by press time.
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