Transition Finance Weekly - 3/27/2025

Credit Ratings Down, Energy Costs Up, States Take the Lead

New Poll: Overwhelming Majorities of Americans See Insurance Crisis Playing Out, Per Insurance Fairness Project

• A new poll from Data for Progress and the newly launched Insurance Fairness Project finds that an overwhelming majority (78%) of Americans are concerned about the rising price of insurance.

• Notably, majorities also identify insurance executives (85%) and climate-driven disasters (72%) as the top two reasons for the rising costs of insurance.

• The poll confirms that Americans are indeed aware of the increasingly salient insurance crisis, understand the financial danger of climate-driven disasters, and know that their elected officials — and insurance companies — aren’t doing enough to protect homeowners and renters.

1. Municipal Bond Markets Are Reacting to Climate Risk in Big Cities

And Trump’s plan to eliminate FEMA will make it worse.

• As climate disasters mount, credit rating agencies are sounding the alarm on climate change’s financial risks. S&P downgraded the Los Angeles Department of Water and Power, the largest municipal utility in the U.S., citing wildfire exposure. This was followed by an announcement that S&P would begin assessing wildfire risk on the creditworthiness of all California bond sellers.

• Research indicates that municipalities that are hit by major hurricanes see big declines in tax revenue and local service revenues, and a major increase in debt. All of this culminates in a 17% increase in default risk every year for the 10 years following a major hurricane.

• And it’s about to get even worse. The Trump administration’s plan to axe FEMA would mean that states will bear more of the cost of disaster response. Bonds have been an essential financial tool for cities to fund recovery, and with little to no federal support, cities and states will have to issue more of them. But after credit downgrades, who will buy them, and on what terms?

Arianna Skibell for Politico: “This may be the first time the decision [to downgrade a municipal bond issuer] was tied to future climate risks. Experts say the municipal market has long ignored the potential for a disaster to wipe out a city’s property tax base and force a bond default.”

2. Trump Presses the “Raise Everyone’s Energy Bill” Button

Because higher prices are what every American wants right now.

• Remember Trump’s campaign promise to cut energy costs in half for voters? He doesn’t, and it shows in his energy policies. His push to repeal the IRA could raise family energy bills by $184 a year nationwide and up to $800 a year in states like California. Energy Innovation's new report found that repealing the IRA could also:

  • Increase cumulative household energy costs by $32 billion by 2035

  • Cost 790,000 jobs by 2030

  • Decrease GDP by more than $160 billion by 2030

  • Release more than 530 million metric tons of carbon dioxide by 2035, equal to adding 116 million cars to the road.

• Trump’s energy playbook also includes attacking wind and solar (the cheapest energy sources), investing in coal (the dirtiest and most expensive), and encouraging expensive new methane gas infrastructure. This interference in both supply and demand has the potential to leave Americans on the hook for higher costs — and that’s even before accounting for Trump’s trade war, which will also mean higher electricity prices.

• The bottom line: Trump’s “cheap energy” vision isn’t about saving money or the economy. It’s about propping up failing fossil fuels and lining the pockets of industry donors and his own family — at people’s expense.

Jeff St. John for Canary Media: “Cutting off those tax credits would curtail that growth and leave the country more reliant on fossil-fueled power plants that would not only create planet-warming emissions and harmful local air pollution but cost U.S. consumers more money.”

3. Texas Republicans Give Oil and Gas Another Win

Texas Senate proposal threatens U.S. energy security and its economy.

• Texas is leading the nation in solar and battery installations (even outpacing California), but last week, the state Senate passed SB 388, a bill mandating that 50% of new electricity capacity come from sources other than battery storage – meaning gas. If passed, the bill would effectively penalize renewables and upend ERCOT’s competitive system that empowers investors to build whatever power plants will perform best and meet demand.

• In theory, this is a boon to oil and gas – but the industry doesn’t even have capacity to meet the mandate. While solar panels and batteries are mass-produced with growing global and domestic production capacity, gas turbines are made by highly specialized manufacturers, warning of a five-year equipment backlog. Fossil gas end users like NextEra Energy are saying that new gas plants are becoming far more expensive, nearly tripling in price, and can’t come online until 2030.

• So this law could severely curtail the state’s ability to build new critical energy infrastructure, avoid blackouts, and raise prices — all to satisfy the state’s ideological fossil fuel obsession.

SPOTLIGHT: States Are Stepping Up

• States are making sure that families don’t miss out on the benefits that remain from the IRA, with California, New Mexico, Maine, New York, and D.C. offering websites allowing residents to apply for rebates to make homes more energy efficient and lower energy costs.

• The cost savings can be significant. Low-income families can receive up to $22,000 in stacked rebates for home improvements like weatherization, heat pumps, and electric appliances. And even middle-income families can receive up to $19,000.

• While the federal government backpedals, states are proving they can help carry the clean energy transition forward and lower costs for families — a case study in good governance.