Trump’s policies and the PGM markets Part 3: Rolling back environmental commitments and ‘Drill, baby, drill!’

Notwithstanding the hyperbolic headlines, Trump’s rolling-back of the US’s environmental commitments and “green” incentives is expected to be modestly net positive for PGM demand. Slower US BEV adoption increases PGM demand; each 1% reduction in US BEV market share increases 2E PGM demand by 25 koz (Fig. 1), which should more than offset any platinum demand lost from the US’s hydrogen plans. This is the third Platinum Perspectives discussing the effects of Trump’s policies on PGM demand, with the first having addressed tariffs and the second considering the broader economic impacts.

Trump has long been a climate change sceptic and has once again withdrawn the US from the Paris Agreement. The president has enacted policies to encourage domestic oil and gas drilling while calling on OPEC to increase supply to reduce energy prices. Furthermore, Trump has halted environmental spending packages within the Inflation Reduction Act (IRA) and is positioning for a walking back of emission legislation. In our view, the US’s ability to meet its passenger vehicle emission reduction targets are tied to support measures from the IRA, which includes BEV purchase subsidies and investment support into critical infrastructure (such as charging or EV industrial capabilities). While it remains unclear what Trump is proposing in terms of emission standards, the Environmental Protection Agency’s (EPA) current legislation requires CO2 emission reductions of -56% for LDVs and -44% for LCVs respectively from 2026 and 2032 (Fig. 2).

Figure 1. Downside risk to BEV penetration supports PGMs

Figure 2. CO2 reduction targets of 44%-56% could be reduced

The EPA estimates that by 2032, US BEV market share will need to range between 30% and 56% for LDV and between 20% and 32% for LCV to meet emission targets (Fig. 6). PGM demand and particularly palladium would be a major beneficiary of reducing BEV support packages (Fig. 5). We note that, on average, the US has the highest per vehicle palladium loadings of any geography in the world due to consumer preference for large vehicles and pick-up trucks (Fig. 3). We estimate 2E PGM loadings average 5.6 grams per vehicle in the US with palladium accounting for ~80%. Accordingly, a 1% increase in ICE and ICE-hybrid light vehicle market share is equivalent to c.5 koz and c.20 koz higher platinum and palladium demand respectively. 

As well as the IRA being a key legislative tool enabling the EV market, curtailing it could also have negative consequences for ramping up the US’s hydrogen economy. Section 45V offers a clean hydrogen production credit of up to US$3/kg. We have long argued that the additionality, geographical and hourly correlation requirements of section 45V were too onerous and would constrain US green hydrogen growth versus other geographies (Fig. 7). Removing clean hydrogen credits will negatively impact our US electrolysis outlook where we currently expect ~5GW of PEM capacity by 2028f, equivalent to 44 koz of cumulative platinum demand (Fig. 8).   

Figure 3: US BEV adoption is lagging the global average due to consumers’ preference for large gasoline vehicles

Figure 4: North American vehicles have, on average, the highest average palladium loadings due to consumers preference for larger gasoline vehicles

Figure 5: North America accounts for a combined 20% of automotive 2E PGM demand, with consumption skewed towards palladium

Figure 6: Current legislation imputes that by 2032, annual BEV market share must be between 23% and 37% for combined light vehicles

Figure 7: The US is only likely to account for 5% of global electrolysis capacity by 2030f

Figure 8: Expected platinum demand from proton exchange membrane electrolysis in the US is modest

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