US to exit to Paris Agreement

Newly inaugurated President Donald Trump signed an executive order to withdraw the U.S. from the Paris Agreement, a pact followed by most nations. The withdrawal is part of a new policy outlined by the White House as intended to "end Biden's policies of climate extremism." 

The Paris Agreement is a global treaty followed by most nations to fight climate change aimed at limiting climate change by keeping global warming well below 2°C above pre-industrial levels, with efforts to limit it to 1.5°C. 

The announcement may create increased regulatory uncertainty and potential reputational risks for private market firms, asset managers, and impact investors, challenging their sustainability strategies and ESG commitments.

Let's discuss the withdrawal of the U.S. from the Paris Agreement. 

Background on the exit of the U.S. from the Paris Agreement

The exit of the U.S. from the Paris Agreement was highly anticipated, as the Trump administration withdrew from this agreement in its previous term in 2017. After that, the U.S. formally rejoined the agreement in 2020 with Joe Biden's executive order to rejoin the accord. 

The latest withdrawal is likely to take effect within a year. Over 195 out of 198 countries are part of the Paris Agreement, and after the exit, the United States will join Iran, Libya, and Yemen as the only four countries that are not a part of the Paris Agreement. 

"I'm immediately withdrawing from the unfair, one-sided Paris climate accord rip-off," said  President Trump after announcing the exit. "The United States will not sabotage our own industries while China pollutes with impunity," he added.

Key aspects of exit from the Paris Agreement

• President Trump withdrew from the agreement, arguing it placed disproportionate restrictions on the United States while allowing major emitters like China greater flexibility in their climate commitments. He contended the accord's terms would disadvantage American businesses and economic interests.
• Given the increasing urgency of global climate challenges, this second withdrawal could carry greater consequences than the first. As one of the world's largest greenhouse gas emitters, U.S. participation is crucial for effective international climate action. Its absence from global climate agreements could undermine collective efforts to combat climate change.
• Alongside the withdrawal, President Trump stopped revoking all U.S. financial commitments to international climate initiatives, including aid promised to help developing nations reduce emissions and cope with climate impacts.

Feedback on the U.S. exit from the Paris Agreement

The Scientists, activists, and Democratic lawmakers, criticized the action, saying it will worsen the climate crisis and hurt American jobs. 

Gina McCarthy, former White House climate adviser “If they want to be tough on China, don’t punish U.S. automakers and hard-working Americans by handing our clean-car keys to the Chinese..The United States must continue to show leadership on the international stage if we want to have any say in how trillions of dollars in financial investments, policies and decisions are made.”

“The Paris Agreement remains as essential as ever... Walking away from the Paris Agreement won’t protect Americans from climate impacts, but it will hand China and the European Union a competitive edge in the booming clean energy economy” said Ani Dasgupta, President and CEO of the World Resources Institute. 

Bob Ward, policy and communications director at the Grantham Research Institute said “President Trump’s decision to withdraw once again the United States from the Paris Agreement is extremely disappointing... President Trump is surrendering his best chance to persuade [other countries] not to create this harm to the United States”

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