“America First” and Trump’s rollback for climate finance

Protest in front of the White House in Washington D.C.. Creator: Mackenzie Nelson. This image is licensed under Creative Commons License

Donald Trump’s announcement on 1 June 2017 that the United States will withdraw from the Paris Climate Treaty will have severe implications for international climate finance. Since then, many actors in the United States have stepped up and publicly committed to efforts on the sub-national and local level to try to uphold American contributions to international climate change mitigation and adaptation efforts – like the city of Seattle which is considering pledging some financial support to the Green Climate Fund (GCF). This would make Seattle only the second city globally, after Paris pledged US$ 1.3 million to the GCF during the COP21, and could be an example also for other large US metropoles, a number of which like Seattle are also part of the C40 cities climate leadership group. U.S. foundations have also pledged financial support. For example, Bloomberg Philanthropies have announced to provide up to US$ 15 million to fill the financing gap at the UN climate secretariat. Unfortunately, such activism will not make up for the failure of the Trump administration to make good on its international climate finance obligation.

Even if the declaration is actually old news and without much additional consequence, the shortchanging of international climate finance by the Trump White House will be hard to ignore. The announcement of  America’s intent to withdraw from the Paris Agreement is formalizing what the Trump administration had already indicated with its FY 2018 budget request weeks earlier: that under this administration, there will be no US financial support to developing countries to help them in realizing their climate ambitions.

In all honesty, the outcome for American international climate finance contributions would most likely have been the same, even if the Trump administration had decided to stick with the agreement. Or as White House Budget director Mulvaney said in mid-March with respect to both international and domestic climate funding: “We’re not spending money on that anymore. We consider that to be a waste of your money to go out and do that.” Case in point is the Environmental Protection Agency (EPA).

The Trump budget proposal wants to cut funding for the Clean Power Plan, international climate change programs, climate change research and partnership programs, and related efforts. While the Trump’s White House FY 2018 budget proposal will likely change in order to gain approval by the US Congress, it is unlikely that a Republican majority in both houses will restore international climate finance commitments.

There will be a net loss in climate finance support

To recall, many developing countries had clearly indicated what they can achieve with domestic efforts alone, and how much of their ambition was conditional on international climate finance support by developed countries, when they first submitted their Intended Nationally Designated Contributions (INDCs) in the lead-up to the Paris climate summit. For example, just to implement the INDCs of the 48 poorest developing countries could cost as much as US$93 billion per year, with a significant share to pay for their implementation expected to come from international sources.

And a key country like India has made all of its INDC implementation costs, a reported US$2.5 trillion over 15 years, fully conditional on international finance support. Thus, the United States’ refusal under Trump to fulfill financial obligations under the UNFCCC toward the agreed US$ 100 billion per year by 2020, the financial baseline under which climate finance support was to be ratcheted up under the Paris Agreement, will undoubtedly have a cooling effect on the ability of developing country Parties to raise their emission reduction commitments in the next few years.

Obama’s last minute transfer of $500 Million

While core elements of the Paris Agreement implementation, such as writing the technical rule-book, can move forward without the Trump Administration over the next few years (presumably until a follow-up, more enlightened US administration recommits to the Paris Agreement), there will be a net loss in climate finance support – especially, since other OECD countries won’t be willing to make up the US financing shortfall while increasing their own financial contributions at the same time as would be needed. One can only hope that the US actions won’t produce additional blatantly unapologetic copy cat climate finance renegades among developed countries.

The accounting methods of prior US financial contributions in support of climate change actions globally might have been questioned (such as whether loans and guarantees under a US export credit agency should be counted toward the fulfillment of American climate finance obligations), but they will now be absent all-together in the international climate negotiations. The FY18 budget by the White House eliminates the Global Climate Change Initiative (GCCI) entirely , which provided US$10 million in support of the UNFCCC and the Intergovernmental Panel on Climate Change in last year’s budget – a sum that while nominally small, nevertheless means tremendous financial shortfalls to secure the ongoing work of both bodies.

On the campaign trail, Trump had already promised to cancel all US payments to “UN climate change programs” and his FY18 budget zeros out any support for the Green Climate Fund (GCF), which is considered instrumental for the Paris Agreement implementation. Despite the US$ 3 billion signed contribution agreement by the Obama Administration to the GCF, this action makes the USA technically the largest single country contributor to the US$10.3 billion pledged to the GCF, of which the previous administration could only deliver US$1 billion – including a last minute US$500 million wire-transfer to the GCF on President Obama’s way out.

Radical cuts climate-change related financing

While the Global Environment Facility (GEF) will continue to receive US money as the only multilateral environment fund under Trump’s budget, contributions would be reduced by 30 percent versus fiscal 2017 levels. Trump’s budget proposal is also cutting American support to multilateral development banks (MDBs) by a quarter, which are significant players in global climate finance with $25 billion in 2015 alone. In the past, the Overseas Private Investment Corporation, which the Trump FY 2018 budget no longer supports, issued US$ 1 billion per year in loans, guarantees and insurance to mobilize private sector investments in renewable energy.

Probably most shocking is that all other clean energy programs under the US Agency for International Development (USAID) and the State Department, a significant chunk of the American bilateral climate assistance, are also completely defunded and sustainable development activities, such as for biodiversity and sustainable landscapes, are reduced to the point of extinction. By some calculations, the cut in related development assistance could be US$ 2.9 billion for FY 2018.

If one looks for any hopeful news coming out of the United States on climate-change related financing, it is surprisingly with respect to shareholder actions of US-based investment firms like BlackStar or Vanguard. They are flexing their muscle and demanding climate change financial accountability of their long-term investment portfolios from the corporations in which they invest. Their latest victory: the world’s largest oil company, US giant Exxon Mobil – which is incidentally the old stomping ground of Secretary of State Rex Tillerson, who reportedly fought and lost the battle in the Trump administration for the United States to remain in the Paris Agreement.

Consequences for German climate finance

The U.S. withdrawal will also impact on German climate finance. American representative are likely to play a more problematic role on the Board of the GCF and other multilateral initiatives that Germany contributes to. What is even more worrisome is that the shortfall in funding makes the implementation of the Paris Agreement in developing countries more difficult and could burden future climate negotiations. This makes it even more crucial that the other developed countries – including Germany – fully deliver on their fianncial commitments and further expand their climate finance.

Liane Schalatek und Nora Löhle, Heinrich-Böll-Foundation North America

Read full article: With or without the Paris Agreement –Trump won’t have the last word on US climate policy