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US Withdrawal from UNFCCC: Impact on Economy and Climate Cooperation

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• 6 min read
US Withdrawal from UNFCCC: Impact on Economy and Climate Cooperation

This article is an automatically translated version of the original Japanese article. Please refer to the Japanese version for the most accurate information.

Subject of Investigation: Step Back from Climate Cooperation Will Hurt US Economy: Statement from UN Climate Chief on US (Link)

Summary

On January 7, 2026, the United States announced its renewed withdrawal from 66 international organizations, including the United Nations Framework Convention on Climate Change (UNFCCC) and the Intergovernmental Panel on Climate Change (IPCC), a key institution for climate science, by executive order of President Donald Trump. In response, Simon Stiell, UN Climate Chief, strongly condemned this move as a "monumental own goal" that would harm the US economy, jobs, and living standards. Concerns have been raised that this withdrawal will have widespread impacts on international climate action and the Voluntary Carbon Market (VCM).

Key Points

1. Renewed Withdrawal from International Climate Cooperation

The Trump administration announced its withdrawal from 66 international organizations, including the UNFCCC and IPCC, on January 7, 2026. This makes the United States the only country in the world to withdraw from the UNFCCC treaty. This latest withdrawal is based on an executive order issued in February 2025, reflecting President Trump's stance criticizing international agreements for not being properly balanced with the development of the US economy and energy sector.

2. Adverse Effects on the US Economy and Employment

Simon Stiell, UNFCCC Executive Secretary, warns that a step back from climate cooperation will adversely affect the US economy, jobs, and living standards. While other major economies are strengthening investments in clean energy and driving economic growth, the US going against this trend could lead to more expensive energy, food, transportation, and insurance costs. Furthermore, it is pointed out that as climate change disasters intensify, the US will suffer greater damage.

3. Impact on the Voluntary Carbon Market (VCM)

The shift in US policy introduces significant uncertainty into the VCM. A lack of government support for climate targets could lead companies to withdraw from investing in carbon offsets, potentially reducing demand for Carbon Credits. However, the VCM's resilience has been suggested by past experience due to its independent nature from government directives, and initiatives by subnational actors such as states, cities, and corporations could potentially underpin the market.

4. Loss of International Leadership and Diplomatic Isolation

This withdrawal signifies a complete abandonment of US leadership in international climate action. As a result, other countries such as China could take the lead in climate diplomacy, and the US will lose its voice regarding the management of international climate finance (e.g., the Green Climate Fund). Experts warn that US diplomatic isolation could hinder global Emission Reduction efforts and give other countries an excuse to delay their own actions.

Background and Context

US climate policy has fluctuated significantly with changes in administration. Since President George H.W. Bush signed the UNFCCC in 1992, it has undergone transitions such as President Bill Clinton's signing of the Kyoto Protocol (but not ratifying it), President George W. Bush's withdrawal from the Kyoto Protocol, President Barack Obama's commitment to the Paris Agreement, former President Donald Trump's withdrawal from the Paris Agreement, and President Joe Biden's rejoining.
The Trump administration has viewed climate change as a "hoax" and promoted an "energy dominance" policy focused on expanding fossil fuel production and easing environmental regulations. This withdrawal from the UNFCCC is one of his first executive orders of his second term, demonstrating consistency with his previous policies.

Detailed Analysis

Withdrawal from the UNFCCC automatically implies withdrawal from the Paris Agreement, as being a Party to the Paris Agreement requires being a Party to the UNFCCC. The United States ratified the UNFCCC in 1992, and this withdrawal will take effect one year after notification, according to the treaty's provisions. The legality of this unilateral withdrawal is debated among legal scholars.

Impact on Emission Reduction Targets (NDC)

This withdrawal will effectively nullify the US's NDC (Nationally Determined Contribution), making it difficult for the US to achieve international Emission Reduction targets. Historically, the US bears the greatest responsibility for global cumulative CO2 emissions (having emitted 542 billion tons of CO2 between 1850 and 2025, accounting for over 20% of global emissions), and its departure is estimated to potentially cause an additional 0.1°C rise in global warming.

Impact on Climate Finance Assistance (Climate Finance)

By withdrawing from the UNFCCC, the US will lose its seat and voice in international climate finance mechanisms such as the Green Climate Fund (GCF) and the Global Environment Facility (GEF). Under the previous Trump administration, international aid agencies were dismantled, and commitments to climate finance were withdrawn. This raises concerns that financial assistance to developing countries vulnerable to climate change will be reduced, widening the international funding gap at a time when its necessity is increasing.

Role of Subnational Actors and VCM Resilience

Despite the federal government's policy shift, many states, cities, and corporations, such as California and New York, continue their own climate actions. Over 4,000 mayors, governors, university presidents, and business leaders have signed the "We Are Still In" declaration, committing to achieve the Paris Agreement's Emission Reduction targets even without federal government intervention. The VCM is largely independent of government regulation, and investments may continue to be encouraged by corporate commitments to sustainability and existing incentives like the Inflation Reduction Act (IRA).

Reactions from Other Countries

Wopke Hoekstra, EU Commissioner for Climate, Net Zero, and Clean Growth, criticized that the UNFCCC underpins global climate action, and the US withdrawal would mean ceding leadership to other countries. California Governor Gavin Newsom described the Trump administration's non-participation in international conferences as "abominable," condemning it as handing over leadership to competitors like China.

VCM Resilience

The previous Trump administration's withdrawal from the Paris Agreement did not significantly hinder the growth of the VCM. Between 2016 and 2021, the VCM experienced significant expansion in both trading volume and the scope of projects funded. This was because companies voluntarily purchased offsets and continued to pursue Emission Reduction targets. Some experts view the current VCM as an opportunity for the market to improve towards more robust and transparent projects than before.

Conclusion

  • US Withdrawal from International Cooperation: In January 2026, the United States announced its renewed withdrawal from 66 international organizations, including the UNFCCC and IPCC, placing it in a position of diplomatic isolation in global climate action.
  • Economic Impact: The UNFCCC points out that this withdrawal will adversely affect the US economy, jobs, and living standards, leading to higher costs and intensifying climate disasters.
  • Impact on VCM: A lack of federal government support for climate action could diminish corporate demand for Carbon Credits in the VCM; however, the market's autonomy and the continuous efforts of subnational actors may provide a certain degree of resilience.
  • Loss of International Leadership: By abandoning its leadership in international climate action, the US will allow other countries, particularly China, to fill that void, and its influence over the governance of climate finance will decrease.
  • Lessons from the Past: Past experience with withdrawal from the Paris Agreement suggests that the VCM possesses resilience that is less affected by government policies, but this withdrawal from the UNFCCC could have broader implications.

References

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