[Global Focus] Trump’s 'Paris Agreement Withdrawal'... Global Climate Response Steps Backward

Concerns are emerging that global climate action may regress following the return of U.S. President Donald Trump, who has claimed that "climate change is a hoax," to the White House. Climate action is a form of global "team play," and as the United States?the world's second-largest carbon emitter and a superpower?backs away from environmental regulations, countries and companies that have been cautious so far may follow the U.S. lead one after another.

President Trump signed an executive order to withdraw from the Paris Agreement on climate change on the 20th of last month (local time), immediately after his inauguration. Denying the climate crisis and viewing clean energy negatively, Trump had already declared withdrawal from the Paris Agreement during his first term in 2017, citing interference with business activities. During this election campaign, he criticized the Biden administration's clean energy policies and called the "Green New Deal" the "Green New Scam." In his inaugural speech, he declared a "national energy emergency" while chanting "drill, baby, drill," asserting that the U.S. would open a new era of oil and gas exploration.

The Paris Agreement is an international accord adopted at the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change held in Paris, France, in 2015. It was signed and adopted by 195 countries worldwide. The agreement aims to keep the global average temperature rise well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the increase to 1.5 degrees Celsius. It also targets achieving carbon neutrality (net zero) by 2050.

The United States joined the Paris Agreement in 2016 under former President Barack Obama but officially withdrew in November 2020 after President Trump declared withdrawal during his first term in 2017. The U.S. rejoined shortly after President Joe Biden took office in 2021. It takes about a year for the withdrawal executive order to be formalized.

While the U.S. withdrawal cannot reverse the global trend toward climate change action, there are analyses that the pace of climate response may slow down. According to the European Union (EU), as of 2023, the U.S. emits 596 million tons of greenhouse gases (in CO2 equivalent), accounting for 11% of global emissions. The Paris Agreement is based on voluntary participation without legal binding force, and if the U.S. withdraws, other major carbon-emitting countries may lose motivation to reduce carbon emissions.

Harjeet Singh Satha, director of the Climate Foundation Sampada, criticized the withdrawal executive order, saying, "It weakens the collective fight against climate change at a time when unity and urgency are more important than ever," and added, "This decision will be most harsh on developing countries."

British broadcaster BBC reported, "This withdrawal could cause significant damage to global efforts to limit emissions as climate change falls down government priority lists," and noted, "Countries like Argentina may follow in the U.S.'s footsteps."

Although there have not yet been successive declarations of withdrawal from the Paris Agreement, signs of policy backsliding are emerging in the European Union (EU), which had been leading climate change efforts. With the EU economy in recession, President Trump’s return and his pledge to overturn Biden administration climate policies and impose tariffs on the EU have raised concerns. There is worry that if only the EU strengthens environmental regulations, it will lose corporate competitiveness and face increased economic burdens.

Polish Prime Minister Donald Tusk urged a critical review of the "Green Deal" legislation targeting carbon neutrality by 2025 during a speech at the European Parliament on the 22nd of last month. He argued that some environmental regulations introduced by the EU over the past five years have led to extremely high energy prices for consumers and businesses today, resulting in reduced competitiveness compared to the U.S. and China.

According to the political media outlet Politico, Jordan Bardella, leader of France's far-right National Rally (RN), recently announced plans to request cooperation from Manfred Weber, leader of the center-right European People's Party (EPP), to block the EU's climate change policies.

Bloomberg reported that the French government is considering submitting a proposal to the European Commission to reduce the scope of the Corporate Sustainability Reporting Directive (CSRD), which strengthens corporate Environmental, Social, and Governance (ESG) responsibilities. Politico reported that the French government is urging an indefinite delay of the Corporate Sustainability Due Diligence Directive (CSDDD), which requires companies to conduct human rights and environmental due diligence, and a two-year delay of the CSRD. In December last year, the German government sent a letter to Ursula von der Leyen, President of the European Commission, requesting a reduction in the scope and reporting items of the CSRD and a two-year postponement of its implementation, citing corporate burdens. Earlier, former Italian Prime Minister Mario Draghi, former President of the European Central Bank (ECB), identified the CSRD and CSDDD as the main causes of regulatory burdens in an advisory report on the "future competitiveness of the EU." The European Commission plans to continue discussions on the CSRD regulations until the 26th of this month. Bloomberg reported that options to limit the scope are being considered.

Bloomberg pointed out, "The retreat of ESG promotion in Europe is intertwined with the new political reality in the U.S., where President Trump is dismantling Biden-era climate policies, increasing fossil fuel production, and pledging tariffs on traditional allied products."

Some countries are also seriously considering withdrawal from the Paris Agreement following the U.S. reports have emerged that Javier Milei, the President of Argentina, known as the "Trump of Argentina," is considering withdrawing from the Paris Agreement like the U.S. In fact, he hinted at withdrawal in a speech at the World Economic Forum (WEF, Davos Forum) annual meeting last month, portraying climate crisis responses negatively.

Reuters Yonhap News

Companies are no longer prioritizing climate as a top issue. Ahead of President Trump's inauguration, Wall Street banks massively exited the climate action front. This is because climate action is complex and practically challenging, and under the Trump administration, those who stand out may face backlash.

Among global financial firms leading climate action, BlackRock sent a letter to clients last month announcing its decision to withdraw from the Net Zero Asset Managers Initiative (NZAMI). NZAMI is a group of asset managers supporting the goal of achieving net zero by 2050 by exercising influence such as voting rights at corporate shareholder meetings. It has about 325 member firms managing assets worth $57.5 trillion (approximately 84,439 trillion KRW).

Since BlackRock declared in 2020 that "climate risk is investment risk," it has become a target of intense attacks by U.S. conservative politicians. They criticized BlackRock for imposing "woke" policies, meaning awareness of progressive agendas. BlackRock has been sued in 11 U.S. states, mainly for its negative stance on investments in fossil fuel companies.

Previously, starting with Goldman Sachs in December last year, Wells Fargo, Citigroup, Bank of America (BoA), Morgan Stanley, and JPMorgan Chase also withdrew from the Net Zero Banking Alliance (NZBA).

Hortense Bio, Head of Sustainable Investment Research at Morningstar Sustainalytics, said that although BlackRock held out for a long time, the pressure became too great with President Trump's inauguration, adding, "(BlackRock) will not be the last financial institution to stop the net zero initiative."

Bloomberg explained, "As President Trump heads to the White House, Wall Street is preparing for more attacks on climate finance," reflecting Wall Street's desire to protect itself from Republican pressure.