(Bloomberg) -- President Donald Trump's decision to exit the Paris Agreement and renege on the US International Climate Finance Plan puts in jeopardy much-needed financial assistance to help developing countries adapt to a warmer planet and curb carbon emissions.
The moves, announced within hours of Trump taking office Monday, also risk derailing the commitment that all countries made at COP29 in November to triple annual climate finance to $300 billion by 2035.
Former President Joe Biden introduced the US climate finance plan four years ago, signaling the nation's resumption of international funding that was halted or cut during Trump's first term in office. The US contributed about $11 billion to climate finance in 2024, according to the Biden administration. That's among the largest from individual countries, but is dominated by costly loans, not grants.
The amount pales in comparison to more than $1 trillion needed for emerging economies annually and the US has faced consistent criticism for not providing its fair share as the world's largest historical emitter of greenhouse gases. "The US was not a climate finance leader in the first place," said Laetitia Pettinotti, research fellow at ODI Global.Biden's plan promised $60 million over three years to support "climate-smart infrastructure" in emerging markets, as well as $50 million over five years from the US International Development Finance Corporation, a federal agency. Trump said on Monday that the plan, along with other climate agreements, "steer American taxpayer dollars to countries that do not require, or merit, financial assistance."
His reversal of Biden's policies will be felt globally. The US is one of the biggest shareholders in most multilateral development banks, including the World Bank and Inter-American Development Bank, which are expected to contribute significantly toward the $300 billion in annual climate finance by 2035. With Trump in charge, these organizations might not be able to increase their climate spending as quickly as needed.
"The question now is: who steps up?" said Bob Ward, a director at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science. Countries are due to deliver more ambitious national climate plans this year under the Paris Agreement, and "if we want strong [commitments], the money needs to be there," he said.
The US withdrawal leaves opportunities for China, the European Union or the UK to step in. "We've been here before, and the door remains open" for other nations to play a bigger role, Simon Stiell, executive secretary of the United Nations' climate body, said at the World Economic Forum in Davos. He argued that the energy transition is "unstoppable" with $2 trillion invested last year in clean energy generation, double what was spent on fossil fuels.
Trump's past efforts to stifle international climate cash flows from the US had limited success. While he was able to block new US disbursements to the UN's Green Climate Fund, other funding continued to be funneled through different accounts. Some of the assistance flows through international programs that aren't specifically earmarked for climate, making them more durable. Even some congressional Republicans fought to preserve the spending.
"There are some champions in Congress who might continue to want international climate finance, at least in some way, shape or form," said Jake Schmidt, senior strategic director of international climate for the Natural Resources Defense Council, a New York-based nonprofit.
In practice, Trump's opposition could simply mean more hoops to jump through to get money moving. "It's not the end of the world, it's just a pain in the ass," said Sean Kidney, chief executive officer of the Climate Bonds Initiative.
This time around, diplomats, international development bureaucrats and other government officials are also better prepared to deal with disruption caused by Trump's climate skepticism. COP29's $300 billion pledge was made after Trump won the US election, with the hope that a future administration will fill the gaps just as Biden tried to do after Trump's first term.
The biggest damage, LSE's Ward said, is symbolic. "Here we have the world's richest country turning its back on the poorer countries that are also dealing with the worst fallout from climate change," he said. "This will be hugely damaging to multilateral climate processes."
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--With assistance from Jennifer A Dlouhy, Ishika Mookerjee and Sheryl Tian Tong Lee.
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