The USAID Funding Freeze Deals Major Blow to Climate Finance

The abrupt freeze of USAID funding has sent shockwaves through the development world, jeopardizing billions of dollars for climate adaptation and resilience programs. As the US retreats from its climate commitments and other major donors scale back, the world is left wondering – who will step in to fill the gap? 

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The US Agency for International Development (USAID) has long been a cornerstone of international development assistance. On January 20, amid a flurry of executive orders, the agency’s status as the largest bilateral donor in the world was abruptly revoked via a 90-day funding freeze. USAID’s future now hangs in the balance.

The ripple effects of this measure have already been profound. The agency was forced to cease all activities and issue stop-work orders to nearly all funding recipients. USAID websites have gone completely dark, employees have been locked out of their email accounts and barred from accessing their offices. The Trump administration has already begun to cancel hundreds of contracts and grants, leaving people around the world uncertain about the future. 

While a federal judge ordered a reversal to the funding freeze on existing programs late last week, any new funding is still being blocked. These developments have heightened the growing uncertainty over international climate commitments and could jeopardize efforts to secure financial support for the countries on the frontlines of the climate crisis.

The Funding Freeze Fallout

As the main vehicle for US foreign development assistance, USAID is a major provider of climate-related funding. In 2024 alone, the agency allocated close to half a billion dollars to climate programs directed towards clean energy, sustainable landscapes and climate adaptation.

Key programs that played a vital role in mitigation and adaptation have gone dark, and threaten to be completely shut down as investigations into the agency’s efficiency are conducted. 

Among the programs affected is SERVIR, which helps countries predict weather-related threats like droughts or flooding via satellite data. In 1991, a catastrophic Category 5 cyclone struck Bangladesh, killing 138,000 people. In contrast, when a Category 4 cyclone developed in the same area in 2023, SERVIR’s early-warning system alerted people of the imminent danger, giving them enough time to take shelter. This time, only 145 people lost their lives. 

The Climate Finance and Development Accelerator, aimed at mobilizing $2.5 billion through private partnerships, and the Climate and Gender Equity Fund, which helps women-led businesses access climate finance, were also affected.

The abrupt halt of these programs is not just a financial setback – it threatens global resilience and undermines long-term development goals, particularly for the most climate-vulnerable nations.

A Symptom of a Wider Trend

The USAID funding freeze is not an isolated action. It comes amid a broader movement to shift away from multilateral cooperation and scale back US climate policies. Since his inauguration, Donald Trump has pulled out of the Paris Agreement and cut funding to the UNFCCC – the US provides a fifth of the convention’s budget. All climate-related information has been completely purged from the State Department’s website, and a recent executive order even reintroduced single-use plastic – including plastic straws – signaling an open disregard for environmental concerns.

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These measures bring greater uncertainty to a climate finance landscape already fraught with turmoil. Experts estimate that at least $2 trillion need to be mobilized annually to meet the Paris Agreement goals. However, major donors like France and Germany have been drastically reducing their development budgets in recent years. With 10% of global climate finance coming from the US, the road to bridging the funding gap will be even steeper under the new administration. 

At COP29 last year, a new climate finance goal was set to mobilize at least $300 billion annually for developing countries. Aimed at helping these countries adapt to protect themselves from climate shocks, this goal is largely dependent on high-income countries paying their fair share. In closing the conference, the Executive Director of the UNFCCC Simon Stiell called the goal “an insurance policy for humanity, amid worsening climate impacts hitting every country.” He also added that, “like any insurance policy – it only works if premiums are paid in full, and on time.”

With COP30 on the horizon, the risk of this goal unraveling before it even takes effect is now growing. The USAID funding freeze, combined with growing uncertainty from other major donors, is undermining its potential success. Without renewed commitment from high-income countries, trust in climate financing agreements will only continue to erode, leaving vulnerable nations increasingly uncertain about their ability to combat a crisis they did not create. 

Uncertainty Lies Ahead

Only time will tell whether USAID will survive ongoing attacks by the Trump administration. Three lawsuits have already been filed by aid groups and more are expected in the coming weeks. However, the government has made its feelings on the global climate agenda very clear, and it seems unlikely that any of these programs will be reinstated following the agency’s review without significant policy shifts.

The consequences of these measures will be far-reaching – not just for low-income countries but also for the US. The irony of these executive orders being signed as wildfires burned through Los Angeles should not be lost on anyone. Climate change does not respect borders. It is a man-made problem, and every country has a collective responsibility to tackle it. As the biggest polluter in the world, the US should undoubtedly be shouldering a greater part of that burden than most.

The decision to pull back from global climate action ultimately places lives, economies, and future security at risk. The rollback of climate finance commitments only undermines progress at a time when urgent action is needed more than ever. The world will be watching closely as the US navigates the fallout from these decisions – and as other countries struggle to fill the void left in its wake.

Featured image: Paddy O’Sullivan/Unsplash.