US exit from Paris Agreement begins to bite

The rationale behind the withdrawal, as outlined by the Trump Administration, centers on concerns over economic competitiveness and the allocation of resources to international climate finance.

The United States' decision to formally initiate its withdrawal from the Paris Agreement has sparked a wide range of reactions across the global climate community. Announced through an Executive Order in early 2025, the move reflects a shift in policy priorities, emphasizing economic considerations and national autonomy in climate-related decision-making. The implications of this have been somewhat overshadowed by the tariff related uncertainty that has gripped the global economy.

The Paris Agreement, established in 2015, is a landmark international treaty aimed at limiting global temperature rise to well below 2°C, with efforts to cap it at 1.5°C. As one of the largest emitters of greenhouse gases, the US has played a significant role in shaping and supporting global climate initiatives. Its departure from the Paris Agreement introduces new dynamics into international climate diplomacy.

The rationale behind the withdrawal, as outlined by the Trump Administration, centers on concerns over economic competitiveness and the allocation of resources to international climate finance. The Executive Order suggests that existing commitments may place undue pressure on domestic industries and taxpayers, prompting a reevaluation of the nation's role in global climate funding. This includes the revocation of the International Climate Finance Plan, signaling a strategic pivot in funding priorities.

One area of concern is the potential impact on the $100 billion annual climate finance goal pledged by developed nations. This fund is vital for supporting climate adaptation and mitigation efforts in developing countries, where financial needs are projected to rise significantly in the coming decades.

The New Collective Quantified Goal (NCQG), set to launch in 2025, aims to enhance this framework. While the US exit may influence the trajectory of these initiatives, it also presents an opportunity for other nations and private entities to reassess and reinforce their commitments.

Developed countries employ a mix of public and private funding mechanisms to support global climate action. Public funding, which includes grants and concessional finance from government agencies, has traditionally accounted for a substantial portion of climate finance. Simultaneously, private funding, often mobilized through public sector interventions, is increasingly contributing to multilateral climate funds.

US agencies such as USAID, the Department of Energy, and the Export-Import Bank have historically played key roles in financing climate-related projects in developing regions. These efforts have supported renewable energy development, infrastructure resilience, and capacity building. Between 2022 and 2024, the US had significantly increased its climate finance contributions, reaching approximately $11 billion in FY2024. The recent policy shift, however, may alter the pace and scale of future contributions.

Private sector involvement in climate finance has grown steadily, particularly within multilateral climate funds. The share of the private sector in these funds rose from 13% in 2016 to 37% in 2022.

The US has been a major donor to several key climate funds, including the Green Climate Fund (GCF), the Clean Technology Fund (CTF), the Global Environment Facility (GEF), The Adaptation Fund (AF), Least Developed Countries Fund (LDCF) etc. In fact, the US alone accounts for over 50% of the pledged funding to the GCF, followed by the UK, Germany, Japan and France.

The GCF, the world’s largest climate fund, is particularly vulnerable as it has received substantial pledges ($6 billion) from the US, although a portion of these commitments ($4 billion) remains outstanding. The evolving policy landscape may influence the Fund's capacity to support climate initiatives in vulnerable regions.

While the US withdrawal from the Paris Agreement represents a notable shift, it is important to view this development within the broader context of global climate efforts. The decision underscores the complexities of balancing national interests with international responsibilities. It also highlights the need for adaptive strategies that can accommodate changing political and economic landscapes.

To conclude, the US exit from the Paris Agreement is more than a political maneuver—it is a turning point in the global fight against climate change. It risks undermining financial commitments, slowing project implementation, and weakening international solidarity.

As the world deals with accentuating climate risks, the absence of a key player like the US could seriously dent the progress.

The international community now faces a pivotal moment. By fostering collaboration and innovation, nations can work together to sustain momentum in addressing climate challenges. Constructive dialogue and shared goals remain essential in navigating the climate path.