U.S. Withdrawal From UNFCCC Spells Financial and Symbolic Hit to Article 6
President Trump’s withdrawal from the United Nations Framework Convention on Climate Change (UNFCCC) via executive action on Wednesday could create funding challenges for the build out of the international carbon market under the Paris Agreement, sources told OPIS Thursday.
It could also carry a “political and moral signal for countries that remain committed,” Climate Action Center for Excellence Director Dr. Alexandra Soezer said.
“Many of the countries most engaged in Article 6 take the view that their [emissions reduction target] and implementation should be framed in light of historical responsibility and supported by predictable international partnership,” Soezer continued. “A perceived U.S. retreat risks weakening confidence and solidarity at a critical moment, particularly for developing countries.”
The U.S. was set to contribute €7.2 million ($8.4 million) to the UNFCCC’s Trust Fund for the Core Budget in 2025, which totaled $39.8 million in 2025, according to a Nov. 10 UNFCCC document. The U.S. had paid just over $230,000 as of that date.
While the U.S. has already put in motion plans to pull out of the Paris Agreement, which will be finalized on Jan. 20, the climate accord and its functions, including the market created by Article 6, draws funding from the UNFCCC.
Unless other parties or philanthropies make up the funding shortfall, a smaller budget “would mean slowing down the institutional capacity to develop the documentation and market design elements,” said Climate Principles Managing Director Eve Tamme. “In the case of the Paris Agreement Crediting Mechanism, think of less capacity to approve new methodologies, for example.”
The PACM refers to the market created by Article 6.4 of the Paris Agreement. Article 6.2, which describes the means by which countries can trade credits bilaterally, is less reliant on UNFCCC funding.
Uncertain funding for PACM and domestically focused policies “will push the market towards Article 6.2,” CEO and senior partner of Resilient LLP Lisa DeMarco said. “That is one of the logical outcomes of increased national determination and less reliance on international bodies.”
PACM was designed to be funded via UNFCCC and, in part, through fees and shares of proceeds related to the registration of projects and issuance of credits.
But the mechanism has not yet begun to operate. It has finalized just one project methodology. Only a fraction of eligible projects have begun to transition from the Clean Development Mechanism of the Kyoto Protocol.
The Article 6.4 Supervisory Body was already facing a budget shortfall. At the UN Climate Change Conference, or COP30, in November, parties agreed to make available $26.8 million from the CDM Trust Fund.
The UNFCCC is an international treaty that was signed by 154 countries in 1992. Membership has since grown to 197. The U.S. would be the first country to withdraw from it.
Trump’s withdrawal of the U.S. from the UNFCCC was part of a broader executive action that would sever ties with 66 international organizations. Just under half were governed by the UN. Trump also withdrew U.S. support for the Intergovernmental Panel on Climate Change and several bodies overseeing international commerce, including the International Trade Center, the UN Conference on Trade and Development, UN Energy, UN Oceans and UN Water.
“All of these are really relevant to trade in carbon and carbon-related commodities,” DeMarco said. “We seem to be moving in the U.S. from ‘world trade’ legally governed by international laws, agreements and treaties to ‘world take’ contrary to applicable laws.”
Several firms and legal experts, including Resilient, have cast doubt on the legality of withdrawing from a treaty that was ratified by Congress. The Supreme Court has declined to rule on a similar case in the past.
“[I]t is very likely to end up before SCOTUS,” Resilient Associate DT Vollmer wrote in a brief on Thursday. “However, should the next U.S. administration wish to rejoin the UNFCCC, it may be extremely difficult to do so without the two-thirds ‘advice and consent’ majority of the Senate.”
Reporting by Henry Kronk, hkronk@opisnet.com; Editing by Jeremy Rakes, jrakes@opisnet.com