The regulatory landscape for commodity trading is continually evolving. As of 2025, major shifts – from U.S. climate policy reversals to stricter EU emissions rules and changes in national subsidies – are reshaping market dynamics. President Donald Trump’s new administration in the United States is implementing markedly different energy and climate policies than his predecessor. In Europe, the automotive sector faces tighter emission targets and a fast-rising electric vehicle (EV) market share, while countries like Austria are rolling back certain climate subsidies. This updated overview preserves the original blog’s structure and tone, but refreshes all information to reflect 2025 realities. We’ll explore the latest regulatory changes and their impact on commodities markets, and outline strategies AFS Commodities suggests for navigating these shifts.

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U.S. Climate & Energy Policy under Trump

President Trump signs executive orders at his January 2025 inauguration, including one to withdraw the U.S. from the Paris Climate Agreement.

In January 2025, President Donald Trump returned to office and swiftly reversed key U.S. climate policies. Paris Agreement Reversal: On his first day, Trump signed an executive order initiating the withdrawal of the United States from the Paris Climate Agreementapnews.com. This marks the second U.S. exit from the global accord – a fulfillment of his campaign promise to undo the country’s renewed Paris commitments. Trump argued that the agreement imposed unfair economic burdens, echoing his earlier description of Paris as a “rip-off”. The withdrawal, which distances the U.S. from international climate cooperation, came despite 2024 being the hottest year on record globally. Environmental groups warn that U.S. disengagement could exacerbate climate risks, even as other nations pledge to press on with emissions cuts.

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Fossil Fuel Initiatives

Aligned with his “America First” energy platform, President Trump declared a “national energy emergency” in early 2025 to boost domestic fuel production. This unprecedented declaration (no prior president ever declared a national emergency specifically for energy) is intended to fast-track fossil fuel projects. Federal agencies have been directed to identify ways to use emergency powers – such as easing environmental regulations, expediting permits via eminent domain, and invoking the Defense Production Act – all to increase output of oil, natural gas, coal, and biofuels. Notably, the emergency order even calls for waivers allowing higher ethanol blends in gasoline to be sold year-round, a boost for corn-based ethanol and renewable fuel credits. At the same time, solar and wind energy were pointedly excluded from the order’s definition of “energy,” underscoring the administration’s focus on fossil fuels.

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Regulatory Rollbacks

The Trump administration has moved to roll back or reconsider various Biden-era climate regulations. This includes reviewing power plant emission rules and vehicle standards to favor traditional energy sectors. For example, White House officials indicated plans to suspend certain environmental restrictions that impeded coal mining or oil drilling. There are also signals that federal support for electric vehicles may be pulled back. (In fact, industry observers expect Trump to try to cancel aggressive EV mandates proposed under the previous administration, which would affect automakers and battery producers.) While many of these changes will take time to implement through agencies or courts, the direction is clear: U.S. policy in 2025 has pivoted toward promoting fossil fuel development and away from stringent climate goals.
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Implications

For commodity traders, the U.S. reversal on Paris and fossil-friendly stance present a mixed bag. Easing of oil and gas regulations could mean increased supply and potentially lower input costs in those markets. Indeed, U.S. oil production is on pace for record highsgettyimages.com, and the administration aims to “export American energy all over the world”, which may create new trading flows. However, reduced federal focus on decarbonization may also spur regional and private-sector initiatives to fill the gap. Companies with long-term carbon-neutral pledges or exposure to global markets will likely continue buying offsets and renewable energy credits (RECs) to satisfy stakeholders despite the federal pullback. And on a global scale, the U.S. retreat could strengthen Europe and China’s resolve to press ahead with carbon border adjustments or renewable investments, potentially affecting cross-border trade. In short, traders should be vigilant: U.S. policy volatility can lead to price swings (e.g. on carbon credits, biofuel RINs, or oil futures) and requires adaptive strategies.

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EU Auto Sector: Tighter Emissions Targets and EV Boom

Electric postal vans charging in France. EV adoption continues to rise across the EU as stricter fleet emissions targets take effect.

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Stricter CO₂ Standards

The European Union entered 2025 enforcing tougher CO₂ emission standards for cars and vans. Under the EU’s Corporate Average Fuel Economy (CAFE) regulation, new passenger car fleets must now average no more than 93.6 grams of CO₂ per kilometer. This effectively requires a 15% reduction in emissions per kilometer from the baseline set at the beginning of the decade, in line with the EU’s “Fit for 55” climate law. Automakers that fail to meet their 2025 targets face hefty fines of €95 per excess gram of CO₂ per km per vehicle. These penalties can run into the billions: estimates suggest the industry could be liable for €10–15 billion in fines if the EV sales share doesn’t rise enough. The regulation is slated to tighten further by 2030 (a 55% CO₂ reduction compared to 2021 levels, roughly 49.5 g/km on average), on the road to a de facto ban on new combustion car sales by 2035. Despite pushback from some member states seeking delays or leniency, Brussels has held firm on these targets as of 2025. Instead of waiving fines, the EU is encouraging nations to offer consumer incentives for EVs and even considering using tariffs on imported Chinese EVs to fund those incentives.

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EV Adoption Trends

The pressure of emissions compliance has accelerated the electric vehicle boom in Europe. EV sales have climbed steadily – from about 13.5% of new cars in 2022 to 13.6% in 2024, and they are projected to leap toward (or above) 20% in 2025. In fact, new research suggests the 2025 rules could spur a 65% increase in EU EV sales in 2025 compared to the previous year. Automakers are racing to introduce affordable EV models (e.g. €25k offerings from Renault, Fiat, VW, Hyundai) to broaden the market. Government support is also pivotal – European industry groups are urging more subsidies and charging infrastructure to ensure consumers embrace EVs en masse. Even with these efforts, the gap remains challenging: experts note EV share must roughly double from current levels to meet the fleet targets, and some manufacturers may still fall short. If EV uptake disappoints, automakers might need to purchase compliance credits (for example, pooling with other manufacturers or buying emissions credits from EV-only companies) to avoid fines. The bottom line is that EU regulations have effectively tightened, not relaxed, in 2025 – forcing a rapid shift toward low-emission vehicles.

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Market Implications

For commodity and energy traders, Europe’s continued push for electrification has several effects. Demand for battery metals (lithium, nickel, cobalt) remains strong as EV production surges – creating opportunities but also volatility in those markets. Oil demand growth in Europe is stunted as transport electrifies; diesel and gasoline traders may see slower volumes or need to find new markets. Meanwhile, electricity and carbon credit markets are gaining prominence. Power generators anticipate higher consumption from EV charging and are securing renewable energy sources, partly via Power Purchase Agreements (corporations signed a record 46 GW of clean energy PPAs globally in 2023, with Europe a major contributor). Additionally, Europe’s strict emissions caps mean EU carbon allowance (EUA) prices remain elevated as industries compete to decarbonize – automotive firms might indirectly participate by investing in renewable energy certificates or offset projects to claim carbon neutrality for their manufacturing. Traders should adjust strategies to these trends: for instance, hedging exposure to carbon prices and exploring EV-related commodities can be as important as managing traditional fuel positions in this new landscape.

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Global Carbon Markets and Renewable Trends in 2025

Carbon Pricing Expansion

Despite mixed signals from individual countries, the overall trend in carbon markets is one of growth. By 2024, 24% of global greenhouse gas emissions were covered by a carbon pricing mechanism, up from only 15% in 2021. Governments worldwide have implemented 75 carbon pricing instruments (either emissions trading systems or carbon taxes), and revenues from carbon pricing hit a record $104 billion in 2023. Notably, large emerging economies like China (with its national ETS), and new programs such as Mexico’s pilot carbon market, are contributing to broader coverage. This means commodity traders are increasingly dealing with embedded carbon costs in fuel and power markets. Even as the U.S. federal government retreats from carbon pricing, states like California continue with cap-and-trade, and the EU is forging ahead with its Carbon Border Adjustment Mechanism (CBAM) to levy import fees on carbon-intensive products. The net effect is a more complex trading environment where carbon prices influence everything from coal vs. gas power spreads to the attractiveness of importing aluminum or cement into Europe. AFS Commodities advises that businesses engaged in international trade monitor and engage with carbon markets – for instance, hedging carbon allowances, participating in offset projects, or procuring green certificates – to manage compliance costs and even uncover new profit centers.

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Renewable Energy Certificates (RECs) and PPAs

Corporate sustainability commitments remain a powerful driver in energy markets. Across 2024, companies purchased more clean energy than ever – global corporate power purchase agreements reached 46 GW in 2023, a new record – reflecting robust demand for renewable energy credits and projects. This trend is expected to continue in 2025 as firms chase net-zero targets and energy price stability. Even in regions with weaker policy pushes, many multinationals are voluntarily aligning with global climate goals. This means REC markets (both compliance and voluntary) are thriving, offering traders opportunities in sourcing and selling green certificates linked to wind, solar, and other renewable generation. In the U.S., the Inflation Reduction Act of 2022 spurred a wave of renewable investments that will come online in 2025–2026, flooding more RECs into the market. Conversely, any softening of governmental support (like possible cuts to subsidies) could slightly reduce future supply, which might increase REC prices. Traders should be adept at navigating REC arbitrage between regions and standards – for example, selling credits from low-cost renewable regions to entities in high-cost areas seeking to offset their footprints. The key point: sustainability is now a market force of its own, relatively independent of short-term political shifts, and commodity traders can leverage this by integrating renewable products into their portfolios.

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Biofuels and Clean Fuels

Regulatory shifts are also influencing biofuel markets. In the U.S., the Trump administration’s push on ethanol (via emergency waivers allowing E15 fuel year-round) suggests a supportive stance for conventional biofuels. This could bolster the value of Renewable Identification Numbers (RINs) under the Renewable Fuel Standard, as higher ethanol blends will boost RIN demand for compliance. Meanwhile, the EU is moving toward advanced biofuels and synthetic fuels as part of its Fit for 55 package, mandating a certain percentage of advanced biofuels in transport by 2030. Additionally, sustainable aviation fuel (SAF) mandates are on the horizon in both Europe and possibly the U.S., opening a new frontier for biofuel trading. For traders, these developments mean that markets for things like biodiesel, ethanol, and feedstocks (e.g. used cooking oil, corn, soybean oil) will remain dynamic. Policy-driven demand (or lack thereof) can whipsaw prices – for instance, a sudden increase in blending mandates could tighten vegetable oil supplies and spike prices. AFS Commodities recommends keeping a close watch on fuel standard regulations and maintaining flexibility to switch between credits (like LCFS credits in California or biofuel certificates in Europe) to capitalize on regional discrepancies. In essence, carbon and clean fuel markets are increasingly global and interlinked, so a comprehensive view is essential for strategy.

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Strategic Recommendations for Businesses

In light of the above regulatory shifts, commodity market participants should adopt proactive strategies to navigate the uncertainty and capitalize on new opportunities:

• Stay Ahead of Policy Changes: 2025 has shown how quickly policies can flip – from the U.S. Paris exit to Austria’s subsidy cuts. Companies should invest in regulatory intelligence. This means tracking legislation (e.g. U.S. executive orders, EU directives) and even engaging with policymakers via industry groups. Early awareness allows for timely adjustments (such as re-routing supply chains to avoid carbon tariffs, or securing permits before rules tighten).
• Hedge Carbon and Energy Price Risks: With carbon pricing expanding and fossil fuel policies in flux, hedging is crucial. Businesses can use carbon futures and options (like EU ETS futures or California Carbon Allowances) to manage exposure to emission costs. Likewise, consider hedging oil and gas inputs, as prices may become more volatile with changes in drilling policy or OPEC+ responses to U.S. output growth. Diversified energy sourcing – pairing long-term renewable contracts with shorter-term conventional fuel hedges – can create a balanced risk profile.
• Leverage Market Mechanisms: Even when direct subsidies wane, market-based instruments often fill the gap. For example, if a country removes an EV incentive, automakers and power providers might roll out their own promotions or credit systems to entice consumers. Be prepared to participate in credit trading programs – whether it’s swapping EV credits, Low Carbon Fuel Standard (LCFS) credits, or renewable energy certificates. These mechanisms can turn compliance into a revenue stream. AFS Commodities has seen clients benefit by selling surplus credits or investing in projects that generate offsets, effectively turning regulation into opportunity.
• Align with Global Trends: Importantly, the long-term trajectory still points to decarbonization. Europe and Asia are full steam ahead on clean energy, and many U.S. states, cities, and corporations are too. Therefore, companies should avoid a purely short-term reaction (e.g. don’t rush to build a business model predicated only on deregulation that could reverse in four years). Instead, align strategies with the global low-carbon transition. This could mean upgrading infrastructure for efficiency, exploring green hydrogen or carbon capture where applicable, and integrating sustainability criteria into investment decisions. Such moves not only hedge against future regulatory crackdowns but can also enhance brand value and meet investor expectations in the ESG-conscious financing world.
• Consult Experts and Diversify: Finally, navigating these shifting sands is challenging – which is where expert intermediaries like AFS Commodities come in. Seek advice on complex compliance markets or use electronic platforms to trade environmental products efficiently. And consider diversifying your commodity portfolio. For instance, a utility fuel trader might start trading renewable power contracts or guarantees of origin, not just natural gas. Diversification can provide a buffer: when one segment (say coal) faces headwinds due to climate policy, another (say bioenergy or offsets) might be booming.

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The commodity trading sector in 2025 sits at the intersection of traditional energy needs and transformative climate policies. The return of President Trump has reintroduced regulatory uncertainty in the U.S., while Europe’s climate agenda forges ahead unabated, and other regions adjust in between. Businesses that thrive will be those that remain agile – anticipating regulatory shifts, adjusting strategies in real-time, and finding the upside in compliance markets. By updating internal practices and leveraging market-based solutions, companies can mitigate risks and even gain competitive advantages amid these changes. As always, AFS Commodities stands ready to assist market participants in understanding and responding to these regulatory developments, helping clients not just comply, but excel in the new landscape of commodity trading.