Can Donald Trump Really Upend Global Climate Financing?
President Trump’s second term presents a significant test for climate action worldwide amid his administration’s retreat from international commitments, rollbacks on domestic green policies and emphasis on fossil fuel expansion. Will other global players step up to fill the void, or will the world lose crucial momentum in the fight against climate change? The answer will shape not just the next decade, but the fate of future generations.
As Donald Trump embarks on his second term as President of the United States, the global community faces renewed uncertainty regarding climate financing. His administration’s policies are poised to reshape the landscape of international climate efforts, with significant implications for both developed and developing nations. The world has seen this before – during Trump’s first term (2017-2021), his administration withdrew from key environmental agreements, weakened domestic regulations, and deprioritized global climate financing.
However, this time, the stakes are even higher. The world is already facing severe climate-related disasters, and global efforts to address climate change require consistent and increasing financial commitments.
A Retreat from International Commitments
One of the administration’s first major actions in its new term was its renewed rejection of the Paris Agreement, a landmark global accord adopted in 2015 under the United Nations Framework Convention on Climate Change (UNFCCC). The agreement aims to limit global warming to well below 2°C above pre-industrial levels, ideally targeting 1.5°C, to prevent catastrophic climate impacts. Countries set their own emission reduction targets, known as Nationally Determined Contributions (NDCs), and are expected to strengthen them over time.
Trump’s previous decision to pull the US out of the Paris Agreement in 2017 already weakened global confidence in climate diplomacy. Though President Biden rejoined in 2021, another withdrawal under Trump’s second term undermines the credibility of long-term climate commitments, particularly from major economies. The US had pledged $3 billion to the Green Climate Fund (GCF)– an international fund that helps developing nations adapt to climate change and transition to cleaner energy. Under Trump’s leadership, these payments were halted, and a second withdrawal further reduces the likelihood of future US contributions.
The financial void left by the US has ripple effects across developing economies that rely on such funding to finance their climate adaptation projects. Nations in Africa, South Asia, and low-lying Pacific Island states, which are already facing disproportionate climate risks, may struggle to implement key mitigation strategies due to the loss of financial support.
Domestic Policy Shifts and Global Repercussions
Trump’s domestic energy policy centres around ‘energy dominance,’ a doctrine focused on maximizing US oil, coal, and gas production while reducing reliance on foreign energy sources. His administration has already rolled back various climate-friendly policies, including subsidies for renewable energy and tax incentives for electric vehicles.
The revocation of the US International Climate Finance Plan, which had previously outlined commitments for funding global clean energy transitions, further cements the administration’s stance against climate-related international aid. While other major economies, such as the European Union and China, continue their push for green financing, the absence of the US as a leader significantly weakens collective momentum.
One of the greatest risks posed by these shifts is the potential for a domino effect– where other major emitters, including Brazil, India and Indonesia, reduce their climate ambitions, arguing that if the US, the world’s largest economy, is not prioritizing climate finance, they should not have to bear a disproportionate burden. This weakens global resolve and could significantly hinder progress toward emission reduction goals.
Despite federal disengagement, various non-governmental entities – ranging from private sector investors to philanthropic organizations – are stepping in to fill the void. Major financial institutions such as BlackRock and Goldman Sachs have increased investments in green technology, with trillions of dollars earmarked for sustainable development. Tech giants like Google, Microsoft, and Apple have also pledged to become carbon neutral, and in some cases, carbon negative, by investing in renewable energy projects.
Additionally, alliances such as the Global Energy Alliance for People and Planet have been mobilizing funds to support clean energy transitions in emerging economies. However, while these efforts are significant, they may not fully compensate for the absence of government-led climate finance. Government policies often set the direction for private capital flows – without strong federal incentives or regulations, private investors may hesitate to commit large-scale funding.
International Perception and Policy Realignments
With the US shifting away from climate leadership, other countries are recalibrating their strategies. The European Union has doubled down on its Green Deal, an ambitious economic framework aiming to make the EU carbon-neutral by 2050. China, which has been increasing its green investments, has taken on a more proactive role in global climate finance, funding renewable energy infrastructure through its Belt and Road Initiative (BRI). However, there is scepticism about whether these nations alone can maintain the financial momentum needed to meet global climate targets.
In regions like Southeast Asia and Latin America, where the US has historically played a leading role in financing clean energy projects, uncertainty over future funding is forcing governments to explore alternative partnerships. Countries such as Indonesia and Argentina have hinted at reconsidering their participation in international climate agreements, questioning the fairness of upholding stringent climate commitments when the US has withdrawn.
The absence of US climate finance creates both challenges and opportunities. On the one hand, it forces other nations and international institutions to rethink their strategies and find alternative funding mechanisms. Multilateral development banks such as the World Bank and the International Monetary Fund (IMF) may need to step up their climate finance efforts. On the other hand, the private sector may see this as an opportunity to take a more prominent role in global climate investment.
At the national level, US states and cities may continue to play an outsized role in climate action. During Trump’s first term, states like California, New York, and Massachusetts defied federal policy by implementing their own ambitious climate goals. With renewed federal opposition to climate financing, it is likely that regional leaders will once again take independent action. On a global scale, innovative financing mechanisms such as green bonds (financial instruments that raise capital specifically for climate-related projects) and carbon pricing mechanisms (which put a price on carbon emissions to encourage reductions) may become more critical in bridging the gap left by the US withdrawal. Additionally, public-private partnerships (PPPs)– where governments collaborate with businesses to fund sustainable initiatives – could emerge as a key solution.
