Energy & Environmental Policy Predictions in 2026

If we consider 2025 to be a year of undoing and sharp change in direction at the federal level, then we can look forward to 2026 shaped less by new headline-grabbing legislation and more by the consequences of decisions already on the books. Energy and environmental issues have always been shaped by hard-to-comprehend issue areas (such as changes to power plants and wonky emissions reduction schemes). However, this year the consumer will feel the impact of an aging grid on their pocketbook, making it a priority issue even if elected officials are not necessarily prepared to react with policies to address rising energy prices in the short-term.

Below you’ll find eight predictions for 2026 as they relate to energy and environment policy:

(1) Data centers and AI energy consumption will drive the energy conversation. There is no denying that AI use will necessitate a dramatic uptick in energy use. Lawmakers are pushing permitting reform and grid modernization as a national security concern, meaning that almost any time the AI race comes up, energy demand will be directly linked as a policy need.

(2) Affordability now includes energy prices. The rise of AI and the need for more data centers is bringing technology use and the energy needed for it to Americans’ backyards. Members of Congress will need to have a position on how they plan to bring down energy costs, although few polices could immediately fix this issue.  Regardless, it will require lawmakers to get smarter on the issue and propel leaders in energy to the forefront as they put together a policy platform for their caucus to lean on.

(3) The effects of IRA rollbacks will be more obvious. Under the One Big Beautiful Bill Act, the Republican-led reconciliation bill passed last year, Congress rolled back or tightened many of the clean energy tax credits within the Inflation Reduction Act. We will begin to see the impacts of this year on how much renewable energy deployment is planned and if the limited credits will reduce energy deployment.

(4) Permitting reform will be seen as must-pass legislation. While we’ve heard this before, this Congress has a greater sense of urgency than in past years. Industry is mostly aligned in needing energy-agnostic changes, and many Democrats are willing to make changes to NEPA to get more transmission built. However, figuring out the details and ensuring that the language favors all energy development will be crucial to getting to a deal.

(5) Water policy will grow in influence. The Colorado River negotiations and industry use will drive the importance of water infrastructure and quality. While 2026 will likely not be the year that urgency around water policy grows, we expect many more elected officials to gain a more nuanced understanding and begin establishing policy proposals on water use.

(6) State-federal policy tensions will only grow. Many of the most dynamic climate and energy policy debates are playing out at the state level. From tax incentives to zoning decisions to energy reporting, the federal government has little control over these energy decisions. Federal actions will increasingly need to align or contend with state actions, which could lead to federal preemption debates or coordinated frameworks based on how controversial the decisions are.

(7) Carbon credits could have a resurgence. Under the Biden administration, there was a big push to drive companies towards more aggressive corporate sustainability goals. Despite a pivot away from this, parts of the Trump administration still remain interested in capitalizing on private sector investment in carbon credit schemes to fund environmental work. Whether or not these different initiatives move forward, it shows that Republicans are still open to environmental issues with private sector backing.

(8) Environmental decisions will continue to play out in the courts. With an upcoming rule reversing the endangerment finding and other rules impacting energy and the environment, environmental groups are gearing up to continue using the courts as a way to slow down the administration’s goals. Even with more administration-friendly judges, litigation will slow down the process and be a go-to tool for those opposed to these actions.

Not even a month into the new year, and 2026 is marked by tough energy decisions (Venezuelan oil, critical minerals in Greenland, the grid handling the winter storm). Keeping an eye on the end goal will be critical as countless hurdles and distractions will continue to pop up in this space.