The United States exits the Paris Agreement again – global consequences for climate policy, markets, and international cooperation
Written by Frode Skar Finance Journalist.
Background
As of Wednesday, the United States will officially withdraw once again from the Paris Agreement, the global climate accord designed to keep global warming well below 2 degrees Celsius. This marks the second time the US has left the agreement. President Donald Trump previously withdrew the country in 2020 during his first term, before the decision was reversed under President Joe Biden.
The renewed withdrawal represents more than a symbolic shift in climate policy. The United States is the world’s second-largest emitter of greenhouse gases, and its absence from the central framework of global climate coordination carries significant political, economic, and institutional consequences.
What has happened
Shortly after the start of Donald Trump’s second term, the administration announced that the US would once again exit the Paris Agreement. This time, the decision unfolds in a very different global context. During Trump’s first withdrawal, there was widespread expectation that a future administration would quickly rejoin the accord, which ultimately occurred.
The current situation is more uncertain. Beyond leaving the Paris Agreement, the Trump administration has also signalled a possible withdrawal from the United Nations Framework Convention on Climate Change (UNFCCC), the overarching treaty underpinning international climate agreements. Such a move would represent a deeper rupture with global climate governance than the previous withdrawal.
A structural break in global climate cooperation
Repeated US exits undermine the predictability that international climate cooperation depends on. The Paris Agreement is built around long-term commitments, trust among participating countries, and gradual strengthening of national targets. When one of the world’s largest emitters withdraws for a second time within a few years, the stability of the entire framework is called into question.
This creates a dangerous precedent. The absence of a major emitter increases the risk that other countries will scale back their own commitments, citing reduced collective responsibility. In effect, US withdrawal can create a permissive environment in which ambition weakens across the system.
Consequences for international institutions
The decision places additional strain on international norms and institutions developed over decades. Climate cooperation has been one of the few areas where broad global coordination has been possible despite geopolitical rivalry.
If the US not only leaves the Paris Agreement but also distances itself from the UNFCCC, the institutional infrastructure of global climate governance is weakened. This could result in fragmented efforts, reduced enforcement mechanisms, and greater reliance on regional or bilateral initiatives rather than coordinated global action.
Economic implications
The US exit carries clear economic consequences. Climate policy is closely tied to investment flows, capital allocation, and industrial strategy. The Paris Agreement has served as a long-term signal to markets supporting the transition toward low-carbon economies.
With the US stepping outside this framework, uncertainty increases around global regulatory conditions. This can affect energy markets, clean-technology investment, and long-term planning across industry and finance. At the same time, it may strengthen the relative position of regions such as the European Union and China, both of which have reiterated their commitment to climate targets.
Market reactions and investor assessments
Financial markets are closely monitoring the situation. For investors, political stability and regulatory consistency are essential. The repeated shifts in US climate policy increase perceived political risk, particularly for green and climate-linked investments within the United States.
Conversely, US absence may allow other actors to assume greater leadership. The EU and China have publicly signalled that they will continue adhering to climate commitments regardless of US policy changes. Over time, this could redirect global investment flows and influence technological leadership in energy and sustainability.
Risk and analysis
The most significant risk is the long-term erosion of trust. Effective climate cooperation depends on the perception that commitments are durable and reciprocal. A second US withdrawal reinforces concerns about political volatility and reliability.
There is also the heightened risk of missing global temperature targets. The world is already on a trajectory exceeding the 1.5-degree Celsius threshold. Without active participation from one of the largest emitters, the gap between stated goals and actual outcomes widens.
What this means going forward
The US withdrawal from the Paris Agreement marks a critical moment in global climate policy. In the short term, it weakens coordination and confidence among key international actors. Over the longer term, it may accelerate a more fragmented global order, where regional blocs take the lead—or where overall ambition declines.
For global markets and investors, the decision introduces higher political risk but also new strategic opportunities. How the international community responds to the US absence will shape both climate outcomes and the pace of economic transformation in the years ahead.
