What the aid funding freeze means for climate change

As the Donald Trump administration’s 90-day freeze on U.S. foreign aid — which also affects other federal agencies beyond USAID — ripples through the development world, climate experts and NGOs are fearing the worst. The announcement has already led to thousands of layoffs across the sector. Climate experts tell Devex that anything with “climate” in the name is likely to be impacted. “If you’re an organization that is working on projects that are clearly focused on climate change, your project is probably in trouble,” said Ed Carr, U.S. center director of the Stockholm Environment Institute and former USAID and World Bank adviser. The Trump administration has already pulled out of the Paris Agreement, the most significant global effort to tackle climate change in history. He also issued an executive order to end clean energy-related tax breaks and instead invest in oil and gas. Carr said that the funding announcement alone has already had a huge impact. “If you go to LinkedIn and you look in the humanitarian sector and in the development sector, all you’re going to see are people looking for jobs,” said Carr. “Even if organizations suddenly have money again, they won’t have any staff. This initial pause was all the disruption that was needed.” Very little is known about what will happen next, but experts say this is a sign of what’s to come. So far, information previously on USAID’s climate page is gone and the two top staffers at ClimateLinks, a global portal for USAID staff, implementing partners, and anyone working on climate and development, have “open for work” banners on their LinkedIn profiles. “There’s just such a dearth of actual details, but it’s definitely a very early and very stark indication of where this administration is thinking on foreign assistance and climate finance,” said Clemence Landers, vice president and senior policy fellow at the Center for Global Development. Fragile states hit hardest For now, officials say small, fragile states are most at risk. Systems that help with disaster risk management like early warning systems could be disrupted, for example. One early warning system for famines is already offline due to the funding freeze, with company emails bouncing back. We are also likely to see climate-adjacent programs feel the brunt of this funding confusion, such as food insecurity and disaster relief, said Carr. “The U.S. is such an important provider of emergency assistance that if some country is hit by a drought or a flood or some natural disaster, there’s going to be a big bellowing hole in the international response,” said Landers. Fragile states are likely to feel the effects of this most significantly and most immediately, agreed one humanitarian official who works at an organization that receives a significant amount of USAID funding. The official requested anonymity due to the general fear that development and humanitarian officials have been feeling over the last week. “The U.S. government is mainly important in fragile states where we’re using humanitarian assistance for climate change,” they said. Long-term development projects interrupted For development projects, USAID tends to give longer-term grants that span over three to four years, according to Ritu Bharadwaj, principal researcher on the climate governance and finance team at the International Institute for Environment and Development, or IIED. The bigger and more ambitious the grant, the more the sudden lack of funds is felt. The freeze can halt money that has already been allocated to projects spanning many years. “Just because money has been allocated doesn’t mean we have it,” said the anonymous official. “If it had been smaller grants, like which the U.K. government does, for example, then maybe the impact may not be huge. If you’re giving a small amount, withdrawing is less bad,” Bharadwaj said. “But USAID is big. I can’t even begin to explain the level of impact this would create on the ground.” The countries that have the smallest domestic resources will feel this the hardest, not only because they rely so heavily on U.S. aid, but also because they have a much harder time attracting private investment. USAID ramped up its efforts to help countries prepare for climate impacts over the last eight years. It launched initiatives in climate-vulnerable countries in the Pacific Islands, the Caribbean, Pakistan, and the Horn of Africa, and supported flash flood guidance systems in 72 countries, along with early warning systems. In 2022, it committed an estimated $4.13 million in ODA to climate-related projects, fifth in the world after Japan, Germany, the EU, and France. What’s next? During the previous Trump administration, development organizations were able to shift climate programs into adjacent programming such as health or agriculture. This time, however, it might be more difficult. “It’s not going to be as easy to just tweak the language this time around,” said the humanitarian official. “There’s a much clearer plan to limit development aid as a whole. We can’t just fly climate under the radar as we did last time.” The official is already foreseeing that climate programs may not return in any form. “To the extent that we see the U.S. as a funding partner in the future, we’ll have to change our approach.” This organization is looking for other forms of funding such as philanthropies and private funding, but competition will be high and very few of them invest in adaptation, the official said. Some development experts say that this move will also reduce the U.S.’s relevance in world politics and leave much of the developing world open to China’s influence. “I’m not sure about China, but this will leave room for others to step up,” said the humanitarian official. “Aid money isn’t just altruistic. It is diplomacy, and it does wield soft power, so there will be a vacuum there that some countries could take advantage of.”