Policy and governance dynamics shaping energy transition, legal accountability, and systemic climate risk

The U.S. climate governance and energy transition landscape in 2028 remains deeply unsettled, with federal legal fragmentation continuing to undermine regulatory stability and investor confidence—a legacy of the 2026 repeal of the EPA’s Endangerment Finding. Yet, decisive scientific breakthroughs and innovative governance experiments at subnational and international levels are reshaping the terrain, offering new pathways toward justice-driven, systemic climate risk management and a resilient energy future.

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Persistent Federal Legal Fragmentation Fuels Climate Governance Instability

The void left by the EPA Endangerment Finding repeal remains the central fault line in federal climate governance:

• Judicial fragmentation and regulatory patchworks persist. Courts are divided over the EPA’s residual authority to regulate greenhouse gases, producing inconsistent enforcement regimes that vary widely across jurisdictions. This legal incoherence continues to deter corporate compliance and stall vital decarbonization investments. As noted by climate governance experts, “Without a unified legal foundation, the U.S. remains mired in regulatory uncertainty that impedes meaningful climate action.”

• Congressional probes expose political interference. Senators Bennet and Whitehouse’s investigations revealed suppression of scientific evidence and procedural irregularities during the repeal, framing it as a profound failure of governance. However, entrenched partisan divisions hamper legislative momentum to restore science-based protections.

• State-level divergence intensifies governance fragmentation. Progressive states like California press forward with ambitious climate policies, while others, including New York under Governor Hochul, face retrenchments amid fiscal and political headwinds. Conservative states increasingly enact preemption laws curbing local climate initiatives, further complicating the national patchwork and underscoring the urgent need for federal harmonization.

• Local governments grapple with capacity and alignment challenges. A recent audit of Portland’s climate programs revealed gaps in strategic coherence and transparency, highlighting that even climate-forward cities face difficulties translating commitments into measurable outcomes — underscoring the critical need for capacity building and community engagement.

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Scientific Breakthroughs Bolster the Case for Restoring Federal MRV and Enforcement

Recent advances in climate science and monitoring technologies strengthen the imperatives for reinstating robust federal climate authority and transparent, enforceable measurement, reporting, and verification (MRV) systems:

• Next-generation space-based CO₂ flux monitoring revolutionizes emissions transparency. NASA’s STRIVE and EDGE satellite missions now provide near-real-time, ultra-high-resolution carbon flux data down to individual plant scales. This unprecedented granularity enables regulators, investors, and civil society to rigorously verify emissions claims, detect discrepancies, and hold polluters accountable. The fusion of Earth observation with granular lifecycle assessments (LCA) — as highlighted in recent studies — reveals that prior emissions accounting often underestimated indirect and embodied carbon impacts, particularly in electricity systems.

• Mechanistic characterization of marine heatwaves advances understanding of systemic ecological risks. New frameworks dissect the dynamics of marine heatwaves (MHWs), which exacerbate oceanic tipping points linked to fish biomass declines and Gulf Stream destabilization. These findings underscore the urgency of integrating oceanic systemic risks into climate risk governance and adaptation strategies.

• Granular heat-stress and mortality data expose worsening equity gaps. Enhanced epidemiological studies show heat-related mortality rising sharply, especially among marginalized and frontline communities, while cold-related deaths decrease. This trend demands equity-centered public health and adaptation policies.

• New research links climate change to increased drowning risk. Studies reveal that climate-driven flooding, storms, and heat waves elevate drowning hazards, particularly for vulnerable populations, calling for integrated climate-health risk assessments and targeted interventions.

• Calls for global assessment of avoidable versus inevitable climate risks gain traction. The Grantham Research Institute advocates for comprehensive risk differentiation to prioritize policy and investment toward preventable hazards, enhancing governance efficiency.

• Carbon cycle recalibrations challenge mitigation targets. Newly discovered ancient carbon releases from African peatlands and lakes, alongside evidence that the Amazon rainforest shifted to a net carbon source since 2023, signal the need to urgently recalibrate global carbon budgets, raising the stakes for mitigation efforts.

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Intensifying Energy Transition Pressures Demand Risk-Adaptive Planning

The U.S. energy transition faces mounting systemic and policy challenges that require nuanced, risk-adaptive governance:

• AI data center proliferation strains electricity grids and complicates emissions accounting. Over 5,200 AI data centers nationwide are driving surging electricity demand. Municipalities respond divergently: New York City has imposed moratoria on new data center permits citing infrastructure and climate concerns, while Utah promotes growth-friendly policies to capture economic benefits. Satellite-based land-use monitoring now enables real-time oversight of these developments and their environmental impacts.

• Lifecycle emissions assessments reveal “hidden” carbon footprints. Comprehensive LCAs expose significant emissions from data center construction, operation, and refrigerant leakage—gaps not fully captured in current accounting frameworks. This calls for expanding MRV systems to include indirect emissions.

• Thermal degradation threatens renewable asset longevity. Rising ambient temperatures accelerate degradation of rooftop solar panels by up to 20%, undermining output and shortening lifespans. This vulnerability highlights the need for climate-resilient technology innovation and adaptive asset management.

• Fragmented regulations hinder energy storage and hydrogen integration. Despite battery storage capacity reaching 58 GWh, inconsistent state and local policies limit optimal siting and grid integration. Similarly, uneven hydrogen safety standards constrain its deployment in freight and transport sectors, complicating decarbonization pathways.

• Global industrial policies reshape wind energy markets. Emerging analyses reveal that industrial policies increasingly drive global wind turbine manufacturing and supply chain localization, impacting U.S. competitiveness and resilience.

• Risk-adaptive planning frameworks emerge as vital tools. Recent research applying dual-triangle frameworks quantifies internal trade-offs (e.g., cost vs. reliability) and external trade-offs (e.g., environmental impacts vs. social equity) in power system decarbonization, offering practical methodologies to guide balanced, systemic transition strategies.

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Justice-Centered Governance Innovations Fill Federal Voids and Advance Equity

In the continued absence of unified federal leadership, subnational and international actors are pioneering innovative justice-driven governance approaches:

• Climate superfunds and corporate liability regimes expand. Maine’s allocation of $308,000 from fossil fuel liability funds to Acadia National Park wetlands restoration exemplifies ecological remediation efforts. New York’s $1 billion emissions disclosure statute imposes stringent corporate transparency requirements, setting legal precedents for investor accountability.

• Frontline and Indigenous community empowerment deepens. Maryland’s deployment of enhanced climate-health data enables frontline communities as co-leads in adaptation planning, embedding equity into governance processes. California’s $1.4 billion investment in electric vehicle infrastructure prioritizes underserved neighborhoods, exemplifying justice in clean energy access.

• Municipal divergence reflects complex trade-offs. The contrast between New York City’s restrictive AI data center permitting and Utah’s growth-oriented policies illustrates tensions between economic development, climate goals, and local autonomy in fragmented governance contexts.

• International governance innovations offer replicable models.

  • The EU’s harmonized climate risk disclosure frameworks entered enforcement in 2028, exemplified by multimillion-euro fines against Crédit Agricole for reporting violations—signaling rising regulatory rigor.
  • South Africa’s science-based carbon budgeting integrates socioeconomic dimensions, providing a model for U.S. subnational and federal coordination.
  • Barbados’ green shipping corridors advance maritime decarbonization, essential for global supply chains.
  • The stainless steel sector’s contentious engagement with the EU’s Carbon Border Adjustment Mechanism highlights ongoing struggles balancing competitiveness and decarbonization.

• Education and infrastructure resilience initiatives build adaptive capacity. Illinois’ mandatory high school climate curriculum advances youth literacy and preparedness, while the International Coalition for Sustainable Infrastructure’s Resilience4Ports initiative enhances port resilience, informing green shipping corridor development.

• Loss and damage finance leadership by small island states grows. Vanuatu’s innovative funding frameworks improve equitable resource flows to vulnerable nations, advancing reparative justice and influencing global climate finance dialogues.

• Subnational carbon budgeting demonstrates tangible emissions reductions. Scotland’s Aberdeenshire Council reported over 4,000 tonnes of emissions saved in 2025/26 through targeted carbon budgets, illustrating practical climate governance efficacy at local levels.

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Climate Finance and Systemic Risk: Growing Sophistication Amid Persistent Vulnerabilities

The evolving climate finance ecosystem reflects both maturation and fragility:

• Record clean energy investments face setbacks from policy volatility. Following a historic $2.3 trillion peak through 2025, 2028 sees market turbulence triggered by DOE’s cancellation of $8 billion in clean energy funding and incentive rollbacks, prompting a $34 billion private-sector pullback.

• Anti-greenwashing and enhanced disclosure standards gain momentum. Financial institutions like NatWest report rising investor demand for transparency. The International Sustainability Standards Board’s S3 standard now incorporates natural capital and biodiversity into MRV, raising accountability benchmarks.

• Carbon market expansion limited by U.S. regulatory ambiguity. While global bilateral carbon trading grows under the Paris Agreement, unresolved federal regulatory gaps restrict U.S. participation, constraining market liquidity and scale.

• Justice-centered loss and damage funds operationalize with improved equity. The Akosombo Loss and Damage Funding Program (AkoLAD) enhances resource flows to vulnerable countries with transparency and access, setting models for global finance mechanisms.

• Systemic financial climate risks attract heightened attention. A Digital Insurance survey reveals widespread anticipation among insurance professionals of escalating climate disaster frequency and severity, emphasizing the need to embed climate systemic risk in financial regulation to avert cascading economic crises.

• Innovative insurance models address cascading hazards. Insurtech startup Kettle, in partnership with RLI, launched wildfire-focused commercial property insurance products leveraging AI and deep learning. Holistic hazard insurance now covers interconnected risks, enabling cities and sovereigns to better manage compound disasters and accelerate recovery.

• Finance–research partnerships strengthen Global South resilience. Standard Bank’s investment in the University of South Africa’s climate research exemplifies private sector support for capacity building and adaptation innovation in vulnerable regions.

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Emerging Insights from Supply-Chain Climate Risk and Adaptation Assessments

Recent studies illuminate complex, cascading vulnerabilities in global supply chains:

• Disaster resilience across supply chains is fragile and interconnected. The Building Disaster Resilience across Canadian Business Supply Chains project shows how extreme weather, infrastructure failures, and cascading disruptions threaten continuity, necessitating multi-criteria adaptation assessments and cross-sector coordination.

• Emissions measurement and MRV frameworks require holistic rethinking. Critical analyses call for integrated accounting that captures indirect and systemic emissions, aligned with advances in satellite Earth observation and lifecycle assessment methodologies.

• Multi-criteria adaptation assessment practices offer practical governance tools. The Copenhagen Real World Lab’s DIRECTED project demonstrates how equity, feasibility, and systemic risk reduction can guide prioritization of adaptation actions, providing replicable models for local and regional governance.

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Governance Imperatives: Charting a Path to Stability, Justice, and Systemic Integration

Confronted with escalating systemic climate risks and energy transition challenges, urgent governance reforms are paramount:

• Restore science-based federal climate authority. Reinstating the EPA Endangerment Finding, resolving judicial contradictions, and repealing partisan preemption laws are essential to rebuild regulatory coherence, legal certainty, and investor confidence.

• Strengthen transparent, enforceable MRV and accountability systems. Leveraging next-generation Earth observation satellites and granular climate-health data will underpin robust emissions verification, market integrity, and enforcement.

• Embed justice and equity across all governance levels. Frontline, Indigenous, and marginalized communities must be empowered as co-leads in climate action to ensure equitable outcomes in finance, infrastructure, and adaptation.

• Adopt integrated, cross-sector risk-adaptive planning. Coordinated governance spanning energy, water, ecosystems, and infrastructure is critical to anticipate trade-offs and cascading vulnerabilities—especially in critical regions like the Colorado River Basin and Himalayan watersheds.

• Scale community-focused energy resilience solutions. Microgrids and advanced energy communities offer promising models for enhancing resilience, local empowerment, and equitable clean energy access.

• Expand international cooperation and knowledge exchange. Sharing and adapting best practices—from South Africa’s carbon budgeting and the EU’s disclosure harmonization to Barbados’ green shipping corridors and Vanuatu’s loss-and-damage finance—can bolster cohesive, just global climate governance architectures.

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Conclusion

As 2028 unfolds, the U.S. climate governance and energy transition landscape remain at a critical inflection point. The continued federal legal turmoil following the EPA Endangerment Finding repeal undermines the regulatory foundation essential to scaling an equitable, resilient energy transition. However, transformative scientific advancements in emissions monitoring, health risk data, and ecosystem tipping points sharpen the imperative for federal restoration and robust MRV systems.

Meanwhile, justice-centered subnational leadership, maturing climate finance mechanisms, and innovative international governance models provide vital pathways to fill federal voids and embed equity. Successfully navigating intensifying systemic climate risks and complex energy transition pressures demands urgent restoration of regulatory stability, embedding justice as a governance cornerstone, leveraging cutting-edge science, and fostering robust international collaboration. Only through such adaptive, justice-driven governance can society hope to confront the escalating climate crisis and secure a sustainable, equitable future.