Icra warns that developing nations face setbacks in climate funding due to the USA leaving the Paris Agreement

 The United States’ renewed exit from the Paris Agreement is expected to significantly impact climate finance for developing countries, potentially threatening both existing and future funding.

The US withdrawal will “negatively affect both existing and future climate finance commitments to developing nations” according to an Icra report. It added that the country, which saw its climate finance contributions double in 2024 compared to 2022, may now halt or delay disbursements, especially those tied to the upcoming New Collective Quantified Goal (NCQG) starting in 2025. The report also notes that while the US pledged more than 50 per cent of funding for the Green Climate Fund (GCF), over 65 per cent of these funds remain unreleased and are now at risk.

The Paris Agreement, adopted in December 2015, committed developed nations to mobilise USD 100 billion per year by 2020 continuing through 2025 to support both mitigation and adaptation in developing countries via mechanisms such as the GCF.

The US withdrawal is set to exacerbate a widening climate finance shortfall. UNEP’s Adaptation Gap Report 2023 estimates the annual adaptation finance gap for developing countries at USD 194-366 billion, compared to international public flows of just USD 21.3 billion in 2021.

The new executive order, which will take effect in January 2026, ends the US’s obligation to submit nationally determind contributions (NDCs), transparency reports, and contribute financial resources under the Paris framework. Consequences already include halted contributions to the UN “loss and damage” fund and the Just Energy Transition Partnership (JETP), potentially depriving countries like South Africa of over USD 1 billion in much-needed support.