On June 1, 2017, Donald Trump, in his first term as US President, announced that the United States would withdraw from the 2015 Paris Agreement on climate change, stating that the agreement would undermine the US economy and put it at a "permanent disadvantage." Among the first thing, that President Joe Biden did shortly after assuming office in January 2021 was signing an executive order to rejoin the agreement. The United States formally rejoined the Paris Agreement on February 19, 2021.
The withdrawal here back then lasted just 107 days and, in the short term, did impact (not remarkably) the future of global climate change action and financial aid to developing countries. With Donald Trump winning the election for the second time and returning as the 47th President of the United States, global climate change action may get a jolt and can have consequences for the developing world in tackling the climate emergency.
As he assumes office, President Trump will be greeted by an ambitious set of policies to decarbonise the American economy, thanks to the outgoing President Joe Biden. President Biden's term saw the landmark Inflation Reduction Act, which, according to Goldman Sachs, will generate over $3 trillion in public and private investments in clean technologies by 2030.
Trump, in his previous tenure, had openly advocated for fossil fuels, and during his campaign this year, his mantra had been "Drill baby, Drill," nudging the oil industry. On various occasions, he has mocked climate science and electric vehicles. Will there be a complete reversal on the climate change front and related policies? Only time will tell once President Trump assumes office. Still, going by history and the election campaign, there is consensus that climate change and energy policies will be a big focus in his second term. His stance could affect the global climate change negotiations, which could slow down in the medium term and hurt the developing world, including India.
Slowing Climate Action In The Developing World
Similar to 2017, if Trump takes an isolationist stance on the Paris Agreement, the move can undermine the collective resolve of other nations, potentially slowing the pace of commitments to curb emissions. COP26 and COP27 in Glasgow and Sharm El-Sheikh, respectively, saw the finalisation of the 'Rulebook' for the Paris Agreement. This Rulebook outlines the mechanisms for carbon markets, transparency, and accountability in emissions reductions, allowing countries to trade carbon credits in a regulated manner.
A Trump-led U.S. could disengage from these carbon market mechanisms, potentially reducing demand and investment in carbon trading globally. This may deter countries and corporations from making robust commitments to offset and reduce emissions. The decision in 2017 also impacted the carbon emission space and the carbon price.
India has led the efforts at previous COPs to call out the developed world to provide at least $1 trillion per year from 2025 to take a proactive stance towards fulfilling their climate finance commitments.
A key outcome of COP27 was the establishment of a "Loss and Damage" fund to help vulnerable nations cope with the impacts of climate change. Trump's stance of the US being disadvantaged through such agreements might deprioritise financing commitments, hindering the fund's effectiveness. The reluctance of one of the largest developed economies to contribute would put additional strain on other developed nations to meet the funding gap, risking the success of this vital aspect of climate equity and justice.
COP27 also saw a renewed emphasis on climate adaptation and resilience for nations most vulnerable to climate change. For India, a country both highly vulnerable to climate impacts and heavily reliant on international climate finance for adaptation, this could mean reduced access to crucial resources, potentially slowing down projects to build climate-resilient infrastructure.
Energy Cooperation
On the energy front, given Trump's support for the fossil fuel industry, including coal, oil, and natural gas, it could open up new avenues for India, particularly in importing Liquefied Natural Gas (LNG), helping it diversify and reduce dependence on conflict-torn Middle East suppliers.
"In the energy sector, Trump's push for US energy independence could favor fossil fuel companies as he aims to reduce reliance on foreign energy sources. With deregulation in energy production and a focus on boosting domestic oil and gas output, the sector stands to benefit from a more favorable environment," says Raj Patel, CMO, MintCFD.
While global climate agreements may take a back seat, the Trump administration may still support bilateral technological and energy cooperation to counter China. Given the boom in India's renewable energy sector and its target to hit 500 GW of renewable energy by 2030, the new Trump administration could view the Indian clean energy market as a profitable sector for American businesses.
"However, a Trump victory might also result in more energy cooperation, especially given India's expanding energy requirements. The details of Trump's policy and India's response will determine the overall effect," says Pravesh Gour, Senior Technical Analyst at Swastika Investmart.
The positives for India in the short and medium term could be that Trump's unpredictability could push India to press the pedal on self-reliance in the sector and build domestic capabilities to minimise the impact of any unfavourable US policy. On the climate front, keeping aside the funding part for the developing world, Trump's stance could give India more flexibility in balancing growth and sustainability.
