Global Climate Action at Crossroads: Challenges, Setbacks, and the Path Forward

Evidence of climate change is undeniable, from rising sea levels to widespread desertification. Transitioning to a net-zero world represents one of humanity’s most pressing and complex challenges. Scientific consensus indicates that to prevent the most severe impacts of climate change and ensure a livable planet, global temperature increases must remain below 1.5°C above pre-industrial levels.

The Earth is already approximately 1.2°C warmer than it was in the late 1800s, and greenhouse gas emissions continue to rise. To achieve the 1.5°C target established in the Paris Agreement, global emissions must be reduced by 45% by 2030 and reach net zero by 2050. This ambitious goal demands a profound transformation in energy production, consumption, and mobility. The energy sector, which contributes approximately 75% of global greenhouse gas emissions, plays a pivotal role in addressing climate change.

Transitioning from fossil fuels such as coal, oil, and gas to renewable energy sources like wind and solar power offers a pathway to significantly reduce emissions. As of June 2024, 107 countries— representing about 82% of global greenhouse gas emissions—have adopted net-zero commitments through laws, national climate action plans, or high-level policy declarations. Furthermore, over 9,000 companies, 1,000 cities, 1,000 educational institutions, and 600 financial institutions have joined the global “Race to Zero” campaign, pledging to cut emissions in half by 2030.

The International Energy Agency (IEA) projects that achieving net-zero emissions by 2050 will require clean energy investments to triple to $4 trillion annually by 2030. These investments are expected to generate millions of jobs, drive global economic growth, and deliver universal access to electricity and clean cooking technologies within the decade. However, these efforts face significant challenges. The withdrawal of major U.S. banks from net-zero alliances, the failure to meet critical commitments at COP29, and the abandonment of financing for loss and damage have raised alarm over the global commitment to combating climate change.

These setbacks threaten the progress needed to meet ambitious climate goals and underscore the urgency of renewed global cooperation.

U.S. Banks Withdraw from Net-Zero Alliance

The inauguration of Donald Trump as the 47th President of the United States has triggered a political backlash against climate-focused initiatives. Six major U.S. banks have withdrawn from the global Net Zero Banking Alliance (NZBA), a UNbacked coalition aimed at aligning financial institutions with the Paris Agreement’s net-zero goals.

The latest exit, on January 7, was announced by JP Morgan, which joined Citigroup, Bank of America, Morgan Stanley, Wells Fargo, and Goldman Sachs in leaving the alliance. All six banks departed within weeks of each other, beginning in December 2024. Analysts attribute these withdrawals to mounting political pressure, as the banks appear to preempt anticipated criticism from conservative policymakers under the Trump administration. In a statement to S&P Global, JP Morgan said, “We will continue to work independently to advance the interests of our firm, our shareholders, and our clients while focusing on pragmatic solutions to further low-carbon technologies and energy security.”

The statement also emphasized the bank’s ongoing support for clients engaged in energy transition and decarbonization efforts. Despite these assurances, the banks have faced growing opposition from Republican-led states and Congress members. Critics argue that climate-focused financial initiatives unfairly disadvantage the fossil fuel industry and clash with conservative values. In December 2024, 26 states filed lawsuits against major asset managers, accusing them of undermining the U.S. coal sector.

Simultaneously, Republican lawmakers, who now control both houses of Congress, have raised antitrust concerns over U.S. banks’ participation in climate-focused alliances like the NZBA. The departure of these six major financial institutions leaves only three smaller U.S. banks within the NZBA, which was established in 2021 to rally financial sector support for decarbonizing the global economy. While the alliance retains 141 member banks, including Europe’s largest financial institutions, the exits have cast uncertainty over the role of the U.S. financial sector in addressing climate change.

Nevertheless, advocates remain optimistic about the alliance’s global impact. “While the exit of these major banks raises questions about the future of climate action in the financial sector, the remaining NZBA members control approximately 40% of global banking assets, or $64 trillion,” said Toby Kwan, a senior manager at the Carbon Trust, in an interview with The Guardian. “Their collective influence remains significant and can drive progress toward a net-zero economy.”

The Trump administration’s expected rollback of climate regulations, scaling back of climate-risk disclosures, and prioritization of fossil fuel production have intensified concerns among environmental advocates. “If Wall Street banks continue to cave to climate denialism and fail to honor their climate commitments, it will isolate the U.S. on the global stage, with devastating consequences for the global economy, financial markets, and vulnerable communities,” warned Ben Cushing, Campaign Director at the Sierra Club, in a public statement. He called for regulators, shareholders, and clients — including state and local leaders — to hold financial institutions accountable.

Convened by the UN Environment Programme Finance Initiative and bank-led, the NZBA commits its members to align their lending, investment, and capital markets activities with the Paris Agreement’s goal of achieving net-zero emissions by 2050. The recent departures underscore a growing divide in the financial sector as it navigates the intersection of political pressure and the global push for decarbonization.

Failure to Push for Sharper Cuts in Climate Pollution

On the opening day of COP29, the United States had planned to unveil a multinational initiative urging accelerated action to reduce greenhouse gas emissions. According to two diplomats and a draft press release obtained by POLITICO, this announcement was poised to mark a significant moment in global climate diplomacy. However, the proposal was never introduced, reflecting a notable shift in U.S. climate engagement. While it remains unclear whether Donald Trump’s election influenced the decision to abandon the initiative, his longstanding dismissal of climate change as a “hoax” raises questions.

Trump has consistently argued that climate policies undermine U.S. economic competitiveness while disproportionately benefiting countries like China. A State Department spokesperson told POLITICO, “As part of our bilateral climate diplomacy, the U.S. has worked with partners and allies over the past year to encourage ambitious 2035 [national climate plans], highlighting the importance of keeping 1.5 degrees within reach.” The draft press release revealed that the U.S. and a coalition of partner nations intended to announce a commitment to “ambitious” carbon reduction targets for 2035, with a call for other countries to adopt similar goals.

While the initiative would have been non-binding, such declarations often play a pivotal role in signaling to businesses the urgency of clean energy investments and setting benchmarks for global climate action. In December 2024, under mounting pressure from climate advocacy groups, President Joe Biden unveiled a new U.S. climate target: a 61–66% reduction in economy-wide net greenhouse gas emissions by 2035, compared to 2005 levels.

“It keeps the United States on a straight line or steeper path to achieve net-zero greenhouse gas emissions, economy-wide, by no later than 2050,” the White House announced. The target was formally submitted to the United Nations Climate Change Secretariat as the country’s updated Nationally Determined Contribution (NDC) under the Paris Agreement. However, Trump’s November 2024 electoral victory has cast doubt on the longevity of this target. Trump has pledged to withdraw the United States from the Paris Agreement, a cornerstone of international climate cooperation.

Additionally, conservative factions have encouraged him to take even more drastic action by exiting the 1992 U.N. Framework Convention on Climate Change, which provides the foundation for annual climate negotiations. Reports suggest draft executive orders to this effect have already been prepared for Trump to sign upon his return to the White House. The absence of a robust U.S. presence at COP29 signals a potential setback for global climate leadership.

A U.S.-led push for sharper emission reductions could have amplified international momentum, reassuring both governments and businesses of the need to accelerate decarbonization efforts. Instead, the uncertainty surrounding the U.S. climate agenda threatens to erode the progress achieved under the Biden administration, undermining global confidence in meeting the Paris Agreement’s 1.5°C goal. Environmental advocates and international allies now face the challenge of filling the void left by the United States.

The retreat of the world’s second-largest emitter from its climate commitments could slow progress on global emission reductions, complicate international negotiations, and embolden other nations to weaken their climate targets. The outcome underscores the critical need for sustained global cooperation to tackle the worsening climate crisis.

Too Little, Too Late

At COP29, wealthier nations pledged to increase climate finance for poorer countries, committing a record $300 billion annually to combat climate change. However, this agreement has been met with sharp criticism from the developing world, which views the pledge as woefully inadequate.

Negotiations in Baku, Azerbaijan, extended 33 hours beyond the summit’s scheduled conclusion, nearly collapsing before an agreement was reached. Despite intense and often contentious discussions, the final commitment fell far short of the $1.3 trillion per year requested by developing nations. The African Group of Negotiators labeled the pledge as “too little, too late,” while India’s representative dismissed it outright as “a paltry sum.” Ultimately, poorer nations, faced with limited options, refrained from blocking the deal despite their dissatisfaction.

“Rich countries own the responsibility for the failed outcome at COP29,” said Chiara Martinelli, Director at Climate Action Network (CAN) Europe. “The talk of tripling the $100 billion goal might sound impressive, but in reality, it falls far short. Adjusted for inflation and considering that much of this funding will come as unsustainable loans, this is not solidarity. It’s smoke and mirrors that betray the needs of those on the frontlines of the climate crisis.”

Martinelli also criticized the European Union, accusing it of a “troubling lack of action and ambition” at a critical moment, further undermining trust in global climate efforts. Martinelli also condemned the process, highlighting the lack of inclusion and accountability: “The voices of the most vulnerable have been sidelined, human rights and civil society participation ignored, and accountability swept under the rug. The package on mitigation, adaptation, and finance fails to deliver on the promises of the Paris Agreement, leaving the most vulnerable to pay the price for this inaction.”

The new pledge, formally called the New Collective Quantified Goal on Climate Finance (NCQG), sets a target to raise $1.3 trillion annually from both public and private sources by 2035. However, climate activists have expressed concerns about the heavy reliance on private investments. They warn that this approach risks prioritizing profit-driven ventures over critical needs such as adaptation and loss-and-damage funding, which are essential for addressing the specific vulnerabilities of developing nations. Activists argue that handing control to private actors could undermine the sovereignty of recipient countries, as investors may seek control over project selection and management.

“While all types of financial flows are needed to support developing countries’ fight against climate change, the inclusion of this ambiguous investment target is more about political PR than any serious change in policies or financial systems,” said Emilia Runeberg, International Climate Policy Coordinator at Climate Action Network Europe.

Simon Stiell, Executive Secretary of UN Climate Change, offered a more optimistic perspective. He emphasized the deal’s potential to sustain momentum for the clean energy transition. “This new finance goal is an insurance policy for humanity amid worsening climate impacts hitting every country,” Stiell said. “But like any insurance policy, it only works if premiums are paid in full and on time. Promises must be kept to protect billions of lives.” However, significant doubts remain over whether the ambitious financial targets can be achieved, particularly with the United States signaling it may not participate under the incoming Trump administration.

The U.S., as the world’s second-largest greenhouse gas emitter, has a critical role in climate finance. Its absence could severely undermine efforts to meet these targets and erode trust in global climate cooperation. While the NCQG reflects continued global coordination on climate finance, its limitations highlight a stark reality: the widening gap between pledges and the urgent needs of those most vulnerable to the impacts of climate change.

Without stronger commitments and more inclusive decision-making, the path to achieving the Paris Agreement’s goals remains fraught with uncertainty. Abandoned Loss and Damage Financing At COP28, an agreement was reached to establish a Loss and Damage Fund, offering a glimmer of hope for nations grappling with the devastating impacts of climate change.

By December 2023, $429 million had been pledged to the fund, with over half contributed by the European Union and $100 million from the UAE, the conference’s host. In stark contrast, contributions from the United States and Japan were minimal, fueling criticism from climate advocates who view the fund as severely underfunded. While sufficient to formally launch the fund, the commitment falls drastically short of enabling it to function effectively as a grant- or loan-making institution.

Loss and damage refer to the wide-ranging and often irreversible consequences of climate change, including the loss of human lives, destruction of infrastructure, damage to property and crops, and the degradation of ecosystems. These impacts extend beyond economic losses to encompass cultural and social disruptions that cannot be easily quantified. The Loss and Damage Fund operates under the United Nations Framework Convention on Climate Change (UNFCCC), alongside other financial mechanisms such as the Global Environment Facility, the Green Climate Fund, and the Adaptation Fund.

The agreement also includes “innovative” financing tools, such as highly concessional loans, guarantees, equity investments, insurance mechanisms, and risk-sharing instruments. However, critics argue that the voluntary nature of contributions and the fund’s limited resources could result in fragmented, low-impact grants that are costly to administer. Alternatively, the fund may prioritize preparing loans for multilateral development banks or other lenders, raising concerns about the sustainability of such mechanisms.

Climate advocates warn that a small, highly concessional loan fund is unlikely to meet the scale of needs in vulnerable nations, particularly those already grappling with debt crises. Institutions like the International Development Association (IDA) of the World Bank face chronic funding shortfalls, raising doubts about whether the Loss and Damage Fund can achieve its intended goals.

Critics also caution against the reliance on mechanisms like equity investments and risk-sharing loans, which could saddle recipient nations with risky financial obligations reminiscent of past global debt crises. Insurance-based solutions, while potentially helpful, are unlikely to address the magnitude of climate-induced losses, especially as investors grow wary following the underperformance of financial instruments like World Bank-issued pandemic bonds.

Abandoned Loss and Damage Financing

The urgency of addressing loss and damage is underscored by the escalating impacts of climate change. The summer of 2023 was the hottest on record globally since 1850, with extreme weather events—hurricanes, storms, floods, and wildfires—becoming more frequent and severe. These disasters, largely driven by climate change, affect all nations but disproportionately devastate developing regions and small island states. Vulnerable nations face worsening humanitarian crises as extreme weather events exacerbate food insecurity, displace populations, and overwhelm public infrastructure.

According to the United Nations Office for the Coordination of Humanitarian Affairs, at least 12,000 people globally lost their lives in 2023 due to floods, wildfires, cyclones, storms, and landslides—a staggering 30% increase from 2022. These numbers illustrate the human toll of climate inaction and the urgent need for robust financing mechanisms to address loss and damage. Despite its shortcomings, the establishment of the Loss and Damage Fund represents a critical step toward acknowledging and addressing the unique vulnerabilities of climate-affected nations.

However, without significant scaling of contributions, particularly from high-emitting nations, and a focus on grants over loans, the fund risks falling short of its mission. Global leaders must ensure that financing mechanisms prioritize equity, accountability, and sustainability to support those on the frontlines of the climate crisis effectively. As the impacts of climate change intensify, the absence of adequate funding for loss and damage remains a glaring gap in global climate governance.

Without bold action to address this issue, the world risks exacerbating inequalities, deepening debt crises, and failing the communities most affected by a warming planet.

North Sea Oil Revival

In January, former U.S. President Donald Trump criticized the United Kingdom’s energy policy, urging the expansion of oil and gas extraction in the North Sea while condemning the nation’s reliance on wind energy.

“The UK is making a very big mistake. Open up the North Sea. Get rid of Windmills!” Trump stated on his social media platform, Truth Social. The North Sea, historically a global hub for offshore oil and gas production, has seen declining output since the early 2000s as the region shifted focus to renewable energy, particularly offshore wind. Trump’s remarks coincided with a report announcing the planned exit of Apache, a subsidiary of APA Corp, from North Sea operations by 2029. The company’s production in the area is projected to decline by 20% as early as 2025. The UK government, under Prime Minister Keir Starmer, has maintained its commitment to renewable energy, aiming to quadruple offshore wind capacity to 60 gigawatts by 2030.

This ambitious plan aligns with broader efforts to decarbonize the power grid and enhance air quality. To finance these initiatives, the government increased the windfall tax on North Sea oil and gas producers from 35% to 38%, extending the levy by an additional year. While the tax policy is intended to fund renewable projects, industry leaders warn that it could deter investment in the North Sea’s oil and gas sector. In response to these pressures, some oil companies have opted to sell assets or shift their focus to more promising basins worldwide.

The North Sea’s oil production has declined significantly, dropping from a peak of 4.4 million barrels of oil equivalent per day (boed) in the early 2000s to approximately 1.3 million boed today. At the same time, offshore wind development in the region has faced mounting challenges, including rising construction costs, supply chain disruptions, and higher interest rates. These obstacles have led prominent developers, such as Ørsted, to scale back their investment plans.

Critics of the UK’s energy strategy argue that the approach jeopardizes energy security. Conservative Party shadow energy minister Claire Coutinho criticized Labour’s policies, stating, “No other major economy is shutting down its domestic oil and gas production… It’s totally mad.” Globally, the transition to renewable energy faces similar challenges. Despite $3.8 trillion in global renewable energy investments over the past decade, fossil fuel consumption has declined only marginally, from 82% to 81% of the global energy mix, according to Jeff Currie, Global Head of Commodities

Research at Goldman Sachs. ExxonMobil’s Global Outlook 2050 projects that oil and gas will continue to dominate the global energy mix, accounting for over half of the world’s energy supply by mid-century. Meanwhile, solar and wind energy are expected to contribute just 11% of the total energy supply, despite electricity demand surging by 80%. The report highlights the necessity of sustained investment across all energy sectors to address the natural production declines of 5-7% annually.

The global energy challenge is further compounded by rapid population growth. The United Nations projects that the world’s population will rise by nearly 2 billion people by 2050, from 8 billion to 9.7 billion, with a potential peak of 10.4 billion by the 2080s. Sub-Saharan Africa, where energy poverty remains pervasive, is expected to experience the most significant population growth, doubling its population by mid-century. This demographic shift will intensify energy demand in regions that are already struggling to achieve energy access for all.

According to the International Energy Agency (IEA), addressing these challenges requires bold milestones, such as halting approvals for new oil and gas field developments and ceasing coal mine expansions, measures it first outlined in 2021. The IEA envisions electric vehicles (EVs) accounting for 60% of global car sales by 2030, with solar and wind energy contributing nearly 70% of global electricity by 2050. However, this transition has coincided with a sharp decline in upstream oil and gas investment.

Evolving U.S. policies, particularly under Trump’s renewed advocacy for fossil fuels, could reverse this trend, potentially reshaping global energy markets. As debates over the North Sea’s future unfold, the region has become a microcosm of the broader global energy transition. Balancing the urgent need for decarbonization with the economic realities of energy security and affordability remains a significant challenge, with policy decisions made in key economies like the UK and the U.S. likely to have far-reaching implications for the planet’s energy future.

Conclusion

Global climate action stands at a crossroads, beset by political, economic, and financial hurdles that threaten to derail progress toward critical climate goals.

The withdrawal of major U.S. banks from climate alliances, coupled with the potential rollback of key policies under the Trump administration, casts a shadow over global efforts to combat the climate crisis. Meanwhile, international pledges for climate finance, though symbolically significant, remain woefully inadequate to meet the needs of vulnerable nations bearing the brunt of climate impacts. The reluctance of wealthier nations to honor their climate finance obligations exacerbates the challenge of limiting global warming to 1.5°C above pre-industrial levels.

As extreme weather events intensify, the cost of inaction grows—impacting lives, economies, and ecosystems worldwide. Despite these setbacks, the potential for meaningful progress still exists. Ongoing international cooperation, advancements in renewable energy technologies, and emerging financial mechanisms offer a foundation for driving the transition to a sustainable, low-carbon economy. However, achieving this vision demands bold leadership, unwavering political will, and a commitment to equity and accountability.

The global community must act decisively to bridge the gap between ambition and action. This includes scaling up investments in clean energy, delivering on loss and damage commitments, and prioritizing the voices of the most vulnerable. The stakes have never been higher, but with collective determination, the path to a just and resilient future remains within reach.