If Trump thinks we’ve reached peak aid, it’s not looking good for climate finance

The aid industry will never be the same after Trump’s freeze on USAID spending, writes Chris Wright. While this will undoubtedly leave critical short-term gaps, some hope it might also lead to longer-term reform

After pulling out of the World Health Organisation (WHO) and the Paris Climate Agreement, President Trump last week announced a 90-day freeze on all USAid spending, thus taking the world’s biggest aid budget off the table.

According to the recent OECD assessment, more than $223bn (£177bn) was spent on foreign aid in 2023 and the US slice made up just over 30 per cent of that global pie. Its almost $65bn contribution was $26bn more than what second-placed Germany gave, and more than triple the UK aid budget. That’s until its undisputed position atop the world’s aid pyramid crumbled, as the money stopped flowing and a “stop work” order shut the doors on health clinics around the world.

On day one of the freeze, a USAID worker in southern Africa estimated to Wired magazine that more than “300 babies that wouldn’t have had HIV, now do”. This week, the WHO head confirmed that HIV treatment centres and other health facilities across 50 countries had stopped delivering care. The freeze has caused undeniable havoc because the US had become a much more generous donor under President Biden and many other countries have struggled to maintain aid budgets of late, partly due to the rising debt burdens that have continued to suffer since Covid, creating a unique dependency spiral.

Under Trump’s first term, the US was still the biggest global aid donor. But under Biden, annual contributions increased significantly. According to my analysis of OECD data, the average annual aid contribution under Biden was 47 per cent higher than during Trump’s first term. This is also having environmental impacts, especially for endangered species.

USAID delivered $375.4m in funding for environmental and conservation protection in 2023 and had set a forward budget of just under $366m in December last year. While other elements of global aid spending had shifted under the Biden era, this level of giving had been relatively stable over time and had been a source of long-term funding for many global conservation groups in critically endangered biodiversity hotspots.

The USAID freeze is also having environmental impacts, especially for endangered species around the world (AFP/Getty)

This includes critical funds for wildlife rangers across central Africa, Kenya and Indonesia. Their programmes would include initiatives that directly protected gorillas in the Congo basin and orangutans in Indonesia, as well as environmental surveys that let us know if critical species are at risk. Some of it would also go into alternative livelihood programmes for communities and individuals, who, under the current uncertainty, might now look to poaching as a means to feed their families in the short or longer term.

When it comes to climate finance, the US was undoubtedly the most important player, in what could be a critical year for the UN system. Under Biden, total US climate finance had increased sixfold, from $1.5bn in 2021 to $9.5bn in fiscal year 2023. This was estimated to top out at $11bn last year. But if Trump has put all of USAID’s money on ice, and pulled out of the Paris Climate Agreement entirely, I would bet that this chunk of the global climate financing pie is well and truly off the table, for the next four years at least.

This is a massive hole in the entire UN climate system, which was built on the premise that the biggest historical polluters should do the most, and pay the most, to support those most impacted. This was true under Biden but this was also expected to grow, as negotiations around a new trillion-dollar climate finance target reached boiling point last year in Azerbaijan. Now, countries like Zimbabwe are left wondering where their energy transition support might come from. Others like Indonesia are beginning to baulk at their commitments, while European powers try to fill a critical void.

For climate finance, there is still potential. Key donors like Japan, Canada, Korea and many Nordic states have traditionally set multi-year climate financing goals and are up for renewal this year. However, the gap left by the US will be incredibly challenging, not only to fill but to build on. The global aid industry looks like it’s at an inflexion point. The UK, France, Germany and Greece all decreased their aid contributions in 2023, and the Netherlands, Norway and Sweden have all announced significant cuts going forward. What we might imagine as the traditionally foreign aid relationships between the West and “the rest” have shifted significantly.

This creates a massive strategic opportunity for a country like China. The economic superpower already boasts an incredibly influential global trade, aid and investment footprint. Considering its position as the world’s leading renewable energy exporter, this may lead to some positive outcomes for the climate. However, what is also true is the aid industry will never be the same. While this will undoubtedly leave critical short-term climate and healthcare gaps, some hope it might also lead to longer-term reform. In the wake of the USAID freeze, dozens of important aid contracts have already been cancelled but many, such as the 11 contracts for Deloitte, might rightly be scrutinised.

Others hope this moment might refocus efforts towards a more equitable world, not one balancing between aid dependence and ongoing debt burdens. As Rwandan global health researcher Alice Bayingana told me this week, “If we are to fight for something in this moment, it should not be for the reinstatement of USAID but a massive coalition for debt cancellation.”

Bayingana once worked on programmes funded by USAID and hopes this moment might enable a new imagination of what aid and development could be: “We need something that moves past USAID. It needs to be something that better supports countries to battle their multiple challenges across climate, debt and health.”