Energy Policy & Regulation

Few political leaders have embraced the energy transition with the fervor of California Governor Gavin Newsom. Under his leadership, the state set ambitious goals such as achieving 100 percent carbon-free electricity by 2045, making electric vehicles (EVs) account for a quarter of all new car sales, and drawing two-thirds of its power from clean sources by 2024. These milestones were held up as global models, showcasing California as a pioneer of the green economy. Newsom has proudly described this progress as evidence that environmental ambition and economic growth can go hand in hand.

However, California's energy transition is now facing mounting pressure, both economically and politically. The resurgence of President Donald Trump has brought a dramatic reversal of key climate policies, including the revocation of California’s authority to set its own vehicle emissions standards and its 2035 zero-emission vehicle mandate. Meanwhile, the economic appeal of fossil fuels over clean energy has widened, and U.S. and European oil majors are retreating from some of their more aggressive renewable targets. The shift is compounded by rising electricity prices, faltering EV sales, and growing public skepticism about whether green policies can deliver affordable energy.

Tesla's recent struggles in California underscore the shifting mood. Once a symbol of the state’s clean-tech dominance, Tesla saw its registrations drop 21 percent in Q2 2025 — the seventh straight quarterly decline. Consumer loyalty has eroded, and broader EV market share in the state has slipped from 22 percent to 18 percent. Simultaneously, the power grid is under new stress from surging data-center demand, leading to a renewed reliance on natural gas plants. High wholesale electricity prices, about double the national average, are fuelling frustration and making it harder to argue that environmental policies guarantee economic benefits.

As California contends with these challenges, its energy transition is evolving from a one-way push toward net zero into a more complex balancing act. Gas-fired plants are being kept online, permitting for transmission projects is being fast-tracked, and subsidies are being recalibrated — all signs of a quiet recalibration. This mirrors the long-standing strategy of the Gulf states, where energy policy has always been shaped by market realism and geopolitical caution. While California banked on unwavering political consensus and ever-falling clean-tech costs, the Gulf region assumed volatility in both politics and markets. That foresight is now proving prescient, as global energy policy enters a more pragmatic and contested phase.