Climate backsliding belies economic momentum

Rachel Solomon Williams, Executive Director at the Aldersgate Group, reflects on the US withdrawal from the Paris Agreement and why it won’t change the direction of travel on climate action.

Donald Trump’s decision to pull the United States out of the Paris Climate Agreement—for the second time—was a major blow to global climate action, and a challenge for all nations looking to accelerate emissions reductions. It defied the mounting evidence of a worsening climate emergency and further complicates efforts to tackle climate change in a politically polarised and economically uncertain era.

The Paris Agreement’s near-universal adoption symbolised a shared acknowledgment of the urgent need for climate action. By withdrawing, the United States—the world’s second-largest emitter—undermines the principle of shared responsibility and sends a discouraging signal, to both allies and businesses, about its commitment to international cooperation.

Globally, the case for climate action has never been clearer. Reports from the Intergovernmental Panel on Climate Change (IPCC) warn of catastrophic consequences without immediate action—more extreme weather, rising sea levels and disruptions to global supply chains. The economic toll of inaction is already apparent: rising insurance claims, operational disruptions, and the risk of losing competitive advantage in a rapidly evolving energy landscape. The ripple effects, from migration crises to geopolitical tensions, amplify these risks on a global scale.

It is also a well-rehearsed fact that the shift to renewable energy presents immense opportunities; businesses across the economy recognise this. Solar and wind technologies are now often more affordable than fossil fuels, offering a path to lower energy costs and reduced reliance on volatile fuel markets, as well as local environmental benefits such as improved air quality. Governments and businesses that embrace this transition can spur innovation, access new markets and secure long-term economic benefits.

Trump’s position push for fossil fuels and his “drill baby drill” rhetoric also reflect broader global trends. Across Europe, rising discontent with leaders perceived as failing to address inequality and job insecurity is fuelling populism and protectionism; the political consensus on climate change action is more fragile than it has been in 20 years.

So what happens now?

Despite the US withdrawal, the Paris Agreement’s framework remains intact, supported by most nations. Even at US federal level, the Inflation Reduction Act (IRA) may yet also hold out, at least to some degree. The IRA’s clean energy subsidies have disproportionately benefited Republican-led districts, making the law politically tricky to dismantle, despite the Republican majority within Congress. This ensures continued investment in renewable energy, even in the face of unsupportive federal leadership.

Paris is also backed by a substantial coalition of US subnational actors. The “We Are Still In” coalition, involving over 3,900 leaders across the country, exemplifies this decentralised commitment. Formed after Trump’s first withdrawal in 2017, it highlights the critical role of non-federal entities in driving meaningful progress. These entities include businesses, who have a vital part to play in shaping policy. By showing what works on the ground and advocating in favour of ambition, they can push governments to create a level playing field that unlocks opportunities for growth, as we have discovered over nearly 20 years at the Aldersgate Group.

We have already seen some step up to provide material support and fill the void left by the US government. Michael Bloomberg, alongside other climate investors, has announced a financial contribution that will provide 22 percent of the nearly $100 million budget previously provided by the Biden Administration. Bloomberg and other forward-thinking leaders recognise the direction of the market, and that the space left by the United States on green technology and climate leadership will be filled by their rivals. This puts them in a weaker position in the long term, with an economic reliance on declining energy sources that will ultimately become stranded assets. The importance to businesses of acting was further reinforced at this year’s World Economic Forum in Davos, where respondents to the Forum’s Global Risks Survey ranked environmental concerns as the top four long-term risks.

For the UK, Trump’s decision serves as a reminder of the need for strong, consistent leadership. The Labour government must resist populist pressures and stay committed to decarbonisation. By doing so, the UK can solidify its position as a global leader in the green transition, proving that economic growth and environmental responsibility can go hand in hand.

But the government’s messaging in the coming months, and its decisions in the forthcoming Spending Review, will be crucial. Trump’s victory demonstrates the importance of showing that people’s everyday concerns have been heard and addressed. Communication with the public must be two-way, with clarity on the benefits of protecting nature and the climate being paired with genuine active listening about how people experience change.

The Paris Agreement’s power lies in its vision for a sustainable future. While the US may falter in its commitment, the global momentum for climate action is unstoppable. The question is not if this transition will happen, but whether it can happen fast enough to mitigate the worst impacts of climate change while maximising its economic and social benefits.