2026 Policy Forecasts: Energy & Industrials
Welcome to Capstone’s annual forecast of unappreciated policy and regulatory themes companies, investors, and, industries should expect to play out over the course of the year in the energy & industrials sector.
Energy’s Pragmatic Turn: Power, Pipelines, and the Affordability Dilemma
Capstone expects the Trump administration to continue backing investment in conventional energy in 2026, including expanded federal oil and gas leasing and pipeline development to support growing data center demand. Energy affordability concerns ahead of the midterm elections are likely to push states toward regulatory support for natural gas infrastructure over climate-driven policies, benefiting gas utilities, while liquefied natural gas producers should gain from federal permitting decisions and trade agreements.
The Clean Fuels Turning Point: How New Policies Will Reshape Biofuels Economics
Capstone believes clean fuel margins will expand, driven by the likely release of 45Z proposed rules and the finalization of the 2026-27 Renewable Fuel Standard (RFS). We expect incentives from state-level programs to benefit credit prices, starting with the January 31st release of market performance data under the new California Low Carbon Fuel Standard (LCFS). Clean jet fuel will gain momentum in states amid federal uncertainty.
Data Center Squeeze: The Coming Political Debate Over Data Center Development
Capstone believes tension between states, electric utilities, and the Trump administration over data center development, affordability, and grid reliability will define policy debates in 2026, creating uncertainty for project development across energy and digital infrastructure. However, certain states, such as Texas and Pennsylvania, will improve regulatory certainty through new rate structures, with utilities likely to benefit.
The Coming Volatility: Why Affordability Concerns and an Evolving Policy Landscape will Shake Up Environmental Commodity Markets
Capstone believes the approach of the midterm elections will dampen appetite for aggressive policy action across both compliance and voluntary carbon markets in 2026. California allowance prices should find support from Cap-and-Invest rulemaking despite federal legal challenges, while energy affordability concerns are likely to push states toward less stringent Renewable Portfolio Standards, weighing on compliance Renewable Energy Certificate (REC) prices.
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The Environmental Services Industry’s Moment: PFAS, Water Utilities, and Other Coming Developments
Capstone believes that despite the Trump administration’s deregulatory agenda, environmental policy development will intensify in 2026. The US Environmental Protection Agency (EPA) will continue to enact PFAS regulations, with new plans on wastewater discharges. In addition, amendments to Biden-era refrigerant regulations indicate temporary headwinds for companies such as Solstice Advanced Materials Inc. (SOLS).
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Europe’s Hard Choice: The Continent’s Climate and Competitiveness Dilemma
Capstone expects Europe’s energy transition agenda in 2026 to be shaped by tighter grid capacity, mounting fiscal constraints, and increasingly complex regulatory trade-offs. As the EU seeks to balance climate leadership with industrial competitiveness—against a backdrop of US protectionism and low-cost Chinese cleantech exports—we expect priorities to shift away from headline renewable build-out toward assets with secure grid access, system flexibility, and strong regulatory alignment.
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