Analysts warn of a greater impact for the US and the world after the North American country's second withdrawal from the Paris climate pact, one of President Donald Trump's first measures upon returning to the White House.
A second withdrawal of the United States from the world's main climate pact will have a greater impact – in the North American country itself and on the world – than the country's first withdrawal in 2017, analysts and diplomats told Reuters.
One of the first measures of President Donald Trump upon returning to office on Monday was to abandon the Paris Agreement as part of its plans to stop US climate action.
The impact will be to increase the likelihood that global warming will intensify, curb US climate financing internationally and leave investors scrambling to navigate the divergence between European and US green standards.
This US withdrawal will take effect in one year, faster than the 3.5-year withdrawal period when Trump first left the Paris agreement in 2017.
Since then, climate change has become more extreme.
Last year was the hottest on the planet and the first in which the global average temperature exceeded 1.5 degrees Celsius (2.7 degrees Fahrenheit) of warming, the limit that countries must try to keep below which they commit to comply with the Paris Agreement.
“We are looking at an increase of more than 1.5 degrees Celsius, which is becoming very, very likely,” said law professor Christina Voigt at the University of Oslo.
“Which, of course, highlights that much more ambitious global action on climate change is needed,” he said.
Paris Pact Plans
Today's climate, measured over decades, is 1.3°C warmer than pre-industrial times and is on track for at least 2.7°C warming this century. While dangerous, it is less severe than the 4°C projected before countries negotiated the 2015 Paris Agreement.
Each country's commitment to the Paris goal is voluntary. However, Trump is expected to scrap the US national emissions reduction plan and potentially also Biden-era tax credits for CO2 reduction projects.
All of this “will further jeopardize achieving the temperature goals of the Paris Agreement,” said Michael Gerrard, a law professor at Columbia Law School.
“That obviously has an impact on others. I mean, why should others continue to pick up the pieces if one of the key players once again leaves the room?” said Paul Watkinson, a former French climate negotiator who worked on the Accord. of Paris 2015.
Some US states have said they will continue climate action.
Regardless of politics, the favorable economy fueled a clean energy boom during Trump's first term, with Republican stronghold Texas leading a record expansion of solar and wind energy in the United States in 2020, US government data shows.
But Trump has already taken steps to try to prevent a repeat of that, suspending offshore wind leases on Monday and revoking incentives for Biden's electric vehicle purchases.
The United States today produces about 13% of global CO2 emissions, but is responsible for most of the CO2 released into the atmosphere since the Industrial Revolution.
End of climate finance
As part of exiting the Paris Agreement, Trump on Monday ordered an immediate halt to all U.S. funding promised at U.N. climate talks.
That will cost the poorest nations at least $11 billion — the U.S. government's record financial contribution delivered in 2024 to help them confront climate change.
Collectively, governments across rich countries provided $116 billion in climate finance for developing nations in 2022, the latest available OECD data shows.
That doesn't include the huge climate-related government funding that Biden launched domestically, whose future under Trump is uncertain.
Total US climate spending (counting domestic and international spending, from private and public sources) increased to $175 billion annually during 2021-2022, boosted greatly by the Biden-era Inflation Reduction Act. 2022, according to the nonprofit research group Climate Policy Initiative.
The United States is also responsible for funding about 21% of the core budget of the U.N. climate secretariat, the body leading global climate change negotiations, which faces a funding gap.
Lost opportunities
The We Mean Business Coalition, which is backed by Amazon and Meta, said Trump's disruption of the American business environment could boost green investment elsewhere.
It could “open the door for other major economies to attract greater investment and talent,” the nonprofit group said.
Three investors told Reuters that the transition to green energy, including in the United States, will go ahead anyway.
One impact of leaving Paris will be to prevent US companies from selling carbon credits in a UN-backed carbon market that could be valued at more than $10 billion by 2030, according to financial information provider MSCI.
While they will no longer be able to make money by selling excess credits, American companies will be able to buy them voluntarily.
U.S. airlines, for example, could still buy them to meet U.N. aviation climate goals, said Owen Hewlett, technical director at the company Gold Standard, which sets standards for the carbon market.
The withdrawal from Paris is also a problem for banks and fund managers, caught between the United States' retreat on climate and pressure from Europe to meet their climate goals more quickly.
“U.S.-based asset managers with European clients will have to be like a two-headed Janus,” said Mark Campanale, founder of the nonprofit Carbon Tracker Initiative. “Will they risk losing European customers to keep American politicians happy? I doubt it.”
US banks have already abandoned a banking sector climate coalition following Republican criticism.
That does not exempt them or other multinational companies from the need to comply with strict future European standards on sustainability reporting.
Given the patchwork of global climate policies, companies are likely to maintain their climate efforts but adopt green silencing tactics, he said.
That means, according to Campanale: “Do it, but don't make it public.”