A WORD ON

Valérie DEMEURE
Head of ESG Research
OFI INVEST ASSET MANAGEMENT

Known for his climate scepticism, Donald Trump has a very different take on the climate transition than his predecessor, Joe Biden.
Valérie Demeure, Head of ESG Research at Ofi Invest Asset Management, details the risks to the climate transition raised by Donald Trump’s return to the presidency, on 20 January 2025.

As a climate sceptic, Donald Trump reiterated during his inauguration speech his intention to once again pull the United States out of the Paris Agreement on climate⁽¹⁾, signed by Barack Obama in 2015, and to rescind the environmental regulations passed under the administration of Joe Biden. Trump claims that such regulations would be “harmful” to the US economy, the oil & gas industry in particular.

Meanwhile, US commercial banks, insurance companies, and asset managers have taken some distance from initiatives to combat climate change, and the US Federal Reserve has announced it is pulling out of a central bank regulatory group on climate change⁽²⁾.

With output of 17.8 million barrels each day⁽³⁾, the United States is the world’s top producer of oil and gas and the second largest emitter of greenhouse gases (GHGs). As a reminder, the US drills for shale oil and gas, “non-conventional” sources that require cutting edge technologies for extraction from rocks in which they are embedded.

An article by Novethic last 6 November cited the Carbon Brief website⁽⁴⁾ to the effect that Donald Trump’s policies could lead to an increase of 4 billion tonnes of CO2-equivalent by 2030 – equal to the annual combined emissions of the European Union and Japan, or the combined emissions of the 140 least-emitting countries.

Keep in mind that, during his first term, from 2017 to 2021, Donald Trump had rescinded more than 160 environmental standards issued under the administration of Barack Obama and that he had pulled the US out of the Paris Agreement on the climate, a decision that was reversed in 2021 by Joe Biden.

This time, Trump has promised to go further, in pulling the US out of the UN Framework Convention on Climate Change (UNFCCC). This decision could encourage other countries to do likewise or at rein in their ambitions, with new climate plans due out next year.

The risks to climate diplomacy would be even greater, as the European Union’s capacity to resist is much weaker than in 2017. The EU is in the process of unwinding its Green Deal⁽⁵⁾. This is based on the Draghi report, which challenges the regulations adopted in recent years under the Green Deal for strengthening transparency in sustainability and steering green capital (SFDR, CSRD, CSDDD⁽⁶⁾).

Moreover, Trump has publicly raised the possibility revoking the US’s commitment to the World Climate Fund. During Trump’s campaign, Project 2025 also called for the US to pull out of the World Bank and the International Monetary Fund (IMF) – two bodies in which the US is the largest shareholder – and to end financial contributions to them. The US also pays one fifth of the UNFCCC’s budget.

• 2024 was the warmest year ever recorded⁽⁷⁾. Similar to the work of the IPCC⁽⁸⁾ and with figures that correspond to forecasts on a global scale, the fourth National Climate Assessment (2018) found that by 2100 average temperatures in the US would be likely to rise by at least 4.4°C under a scenario of GHG emissions similar to current emissions and by about 1.4°C if immediate and rapid reductions were implemented. The US is hit regularly by hurricanes from the Atlantic and Gulf of Mexico and severe drought in the southwest. The recent fires in California⁽⁹⁾ caused by extreme weather events are a clear consequence of climate change.
• The costs of doing nothing are showing up in legal risks and the exploding cost of climate change for insurance companies. More and more legal actions are being taken accusing governments of failing to take action against climate change. The latest one was before the UN’s International Court of Justice (ICJ), which for two weeks in December 2024 heard from scientists, non-governmental organisations, and numerous countries suffering from the effects of climate imbalance – 96 of them, including Vanuatu, the Cook Islands, the Marshall Islands, Solomon Islands, Ivory Coast, and Vietnam – and 11 international organisations. Under the threat of flooding and greater “natural” risks, the Pacific Island Students Fighting Climate Change appealed to the ICJ, which must now determine the obligations⁽¹⁰⁾ that, under international law, fall on governments for protecting the climate system and “other components of the environment” against anthropic GHG emissions for current and future generations⁽¹¹⁾.
• A study in npj Climate and Atmospheric Science⁽¹²⁾, a new Nature Research journal, shows that the cost of measures to limit the consequences of the sudden melting of the icecaps (regarded as a tipping point) would be four times greater than the costs of attempting to limit the damage before reaching this tipping point.
• Despite broad determination, countries are moving forth individually. While the US may look like a climate change laggard on the international scene, on the local scale it has taken cutting-edge action and achieved symbolic victories that have captured the world’s attention – from the first urban plan to adapt to climate change by the city of Portland in 1993 to the August 2023 legal victory by 16 young environmental activists against the conservative state of Montana, which wanted to ban the analysis of GHG emissions and their consequences on the climate.
• A segment of US voters has joined the climate battle. In 2023, a study by Yale University showed that just 16% of Americans did not believe in climate change, or about 49 million persons. This survey showed that more people on the west and east costs agreed that climate change was a problem, correlating with the high proportion of Democratic voters in these regions.
• There is powerful economic momentum in the global transition, in which the US has taken part and from which it has benefited. The development of green energies and battery factories, for example, has created value and jobs. These are benefits that local American officials will not be willing to give up.

It remains to be seen if the climate transition will be able to count on the pragmatism of Donald Trump during his second term.

Completed on 22/01/2025