What Trump’s climate rollbacks mean to India

As climate disasters such as raging wildfires and hurricanes cause widespread devastation, and extreme heat waves break records, the Donald Trump administration has taken a controversial step that could worsen the crisis.

By officially withdrawing the United States from the Paris Agreement, the Trump administration has signalled an undermining of efforts to reduce greenhouse gas emissions and slowing progress in the fight against climate change. This decision weakens international cooperation and raises concerns about the long-term environmental and economic consequences, as the absence of US leadership may encourage other nations to scale back their climate goals.

The US withdrawal from the Paris Agreement weakens global climate cooperation and may place a greater burden on developing nations like India. This change could limit climate finance for these countries, making implementing mitigation and adaptation efforts harder. Additionally, it may shrink the available emission space and increase emission costs for other nations, potentially affecting India’s economy. 

President Donald Trump also signed an executive order promoting plastic drinking straws, countering previous efforts to reduce single-use plastics and address waste. This move was part of his broader rollback of environmental policies, including his decision to withdraw the US from the Paris Climate Agreement for the second time early in his second term. Trump’s withdrawal looked like a sign to other nations that they could weaken their climate commitments. Some countries, especially in Europe, reinforced their dedication to the agreement, while global efforts to reduce emissions lost momentum due to the US stepping back.

The United States continues to be a key consumer and producer of coal despite the rise of renewable energy. While coal consumption and production have declined in recent years, they remain a significant source of electricity generation in the country. Despite the decline of coal consumption in the US, the new administration under President Donald Trump may reverse this trend. On his first day in office, Trump declared a national energy emergency and later announced that coal could be a fuel source for new power plants.

Despite record-breaking growth last year, the renewable energy sector now faces uncertainty. Trump’s policies have challenged clean energy, though experts believe growth will continue.

A major impact of the US exit from the Paris Agreement was the sudden halt in climate finance. This fund was intended to help developing nations adopt renewable energy, strengthen infrastructure, and adapt to climate change. While the US had committed $3 billion, only a tiny portion was delivered under Trump. The withdrawal of financial support also hindered global efforts in climate adaptation and emissions reduction, particularly in poorer countries that are most at risk. The Trump administration reversed over 100 environmental regulations, including vehicle fuel efficiency standards and power plant emissions limits.

One major rollback was loosening restrictions on coal-fired power plants, a major contributor to US greenhouse gas emissions. Trump justified these measures as efforts to revive the energy sector and create jobs in coal-producing regions. Under the Trump administration, US greenhouse gas emissions could increase by up to 36% above current policy projections by 2035. This shift may also lead to higher household energy costs and increased reliance on imported oil and gas.

The United States was expected to contribute to the Green Climate Fund (GCF), but with reduced funding, India may have to depend on countries like Europe and Japan for support. The GCF aids developing nations in cutting greenhouse gas emissions and enhancing climate resilience. Historically, the US has been a key donor, and its withdrawal could hinder technology transfers, delaying advancements in green hydrogen, battery storage, and other critical clean energy innovations in India.

The Avaana Sustainability Fund (ASF) is a USD 120 million venture capital fund that aims to invest in early-stage climate technology companies in India. US$ 24.5 million was invested in Avana as part of the GCF fund. The India E-mobility programme also received GCF funding; there are many more ongoing GCF-funded programs in India) Established under the United Nations Framework Convention on Climate Change (UNFCCC) in 2010. 

The US is the largest buyer of carbon credits, and its policy changes could drive prices down, affecting Indian companies that rely on exports or US demand for growth. 

Companies in emission-reducing sectors like waste management, transportation, renewables, energy efficiency, and reforestation stand to gain from climate action efforts. In India, carbon credits are mainly generated through afforestation, renewable energy, energy efficiency, sustainable agriculture, and carbon capture projects. Carbon credit sales help reduce greenhouse gas emissions in India while driving investment in clean technology and sustainable practices, fostering economic growth.

The Trump administration may impose tariffs on wind turbines and solar panels, further impacting India’s renewable energy sector. Trade barriers could slow progress by increasing technology and raw material costs, which many Indian companies depend on for their expansion and sustainability efforts. If the new administration cuts Inflation Reduction Act (IRA) incentives and raises import tariffs, Indian exports may face additional challenges.

As the module manufacturing sector becomes increasingly competitive, the risk of overcapacity by FY28 could pressure Indian manufacturers. In such a scenario, smaller players may struggle to survive. Since most of India’s module exports go to the US, expanding US domestic capacity driven by IRA incentives could further limit opportunities for Indian manufacturers.

Trump’s dismantling of USAID threatens billions in climate funding. USAID’s funding has supported one of Zimbabwe’s largest disaster relief programmes, helping smallholder farmers improve water stability through rain catchment systems and soil restoration. Without this funding, Zimbabwe will struggle to meet its Paris Agreement commitments, including renewable energy development and drought and flood protection investments. However, USAID’s renewable energy initiatives may endure as they do not rely on ongoing agency involvement.

India has actively advanced green hydrogen, battery technology and renewable energy initiatives. Without US support in technology transfer and investments, sustaining progress in these areas may become difficult.