Climate Rollbacks and the Incentives They Create
Anya Dalal
When the sky turns orange in California, young people notice first, like how it did in 2020. We watch sports practices get cancelled because of extreme heat or poor air quality from fires, and see families evacuate with only minutes’ notice. For the California Association of Youth Commissions (CAYC), climate policy is not abstract, and daily life is shaped by government decisions.
That is why we are alarmed by the Trump administration’s rollback of the federal framework that has allowed regulation of greenhouse gas emissions since 2009.
In 2009, the U.S. Environmental Protection Agency issued the Endangerment Finding, a formal determination that greenhouse gases threaten public health and welfare. That decision became the legal and scientific foundation for regulating climate pollution under the Clean Air Act. Undermining it is not simply “rolling back a rule.” It’s trying to remove the legal backbone regulating greenhouse emissions, affecting vehicle standards, industrial emissions limits, and other national climate safeguards.
California has already become a live-action demonstration of what “public health and welfare” means in the climate era. In 2024 alone, more than 1 million acres burned statewide, following 325,000 acres the year before, underscoring how volatile fire seasons have become. Extreme heat disrupts classrooms, particularly in communities with inadequate infrastructure; roughly one in five California schools lacks air conditioning. Asthma affects 7.4% of California children and remains a leading cause of missed school days, with air pollution worsening the risk. “Inheriting the environment’ is appearing first in young people’s bodies, schools, and routines.
California often innovatively leads the US in clean energy policy, but it cannot shield itself from federal decisions that reshape national markets. Greenhouse gases do not stop at state lines, and vehicle and energy systems respond to national standards. When federal authority weakens, even leading states face lawsuits, patchwork policies, and uphill battles that fall short of the scale of the problem. California can be the vanguard, but it cannot be the whole army.
California’s economic leadership also shapes this conversation. Electricity demand is surging because of digital infrastructure, especially large-scale computing and data centers. Energy-intensive industries benefit when power is plentiful and cheap, and fossil-fuel generation is often framed as a “quick” way to meet rising demand, even though it increases long-term climate and health costs that younger generations will bear.
Some readers may be skeptical of the idea that major technology and data center interests could benefit from weaker federal emissions regulations. We can’t claim to know private intent, but we can examine incentives. One place those incentives show up is in financial markets. To test whether investors perceived the policy shift as economically favorable to data-center operators, we conducted an event study on publicly traded data-center real estate investment trusts (REITs) around the announcement. Using daily returns, we estimated expected performance in a pre-event window (-120 to -21 trading days) and then measured “abnormal returns” in a short event window (-2 to +2 trading days). We progressively controlled for broader market and sector forces: first the overall market (SPY), then real estate (VNQ), and then utilities, fossil energy, and clean-energy baskets (XLU, XLE, ICLN). Even after controlling for broader market and sector forces, the data-center group showed a significant positive abnormal move on the announcement day, with cumulative abnormal returns remaining meaningfully positive. The equal-weight basket Cumulative Abnormal Return (CAR) Model below illustrates this clearly. The graph plots the group's cumulative abnormal performance relative to the event date (t = 0). The y axis shows cumulative abnormal return (performance unexplained by broader market and sector movements) while the x axis shows trading days relative to the announcement. The sharp upward jump at t=0 indicates that investors rapidly repriced these companies when the policy change was announced. The fact that the line remains meaningfully above zero even in the most conservative model (which controls for real estate and energy sector movements) suggests that the market perceived the announcement as economically favorable, specifically to data center operators.
Consistent with expectations, this reaction suggests that changes to emissions regulations can reshape incentives for energy-intensive digital infrastructure.
Young people do not get to choose the climate conditions in which they grow up, but we can speak when the legal tools meant to protect public health are dismantled. The 2009 framework existed because science, and ultimately the law, recognized a basic truth: climate pollution harms people. Weakening the authority to regulate it does not make that harm disappear. It shifts the costs forward in time and onto those least responsible for creating the problem.
California’s youth are ready to build an energy future that supports innovation without sacrificing breathable air, safe schools, or a livable climate. Many of us cannot vote yet. But we will inherit these decisions, and we intend to shape what comes next.