On January 20, 2025, the first day of the new administration, President Trump signed Executive Order 14162, titled "Putting America First in International Environmental Agreements." The order directs the US ambassador to the United Nations to submit formal written notice of withdrawal from the Paris Agreement. It also tells agencies to revoke or rescind any purported financial commitment made by the United States under the UN Framework Convention on Climate Change, and it rescinds the US International Climate Finance Plan.
This is the second time the United States has moved to leave the agreement. The first withdrawal, announced in 2017, took effect in November 2020 and was reversed in early 2021. The mechanics this time are faster because the treaty's three-year waiting period for new parties no longer applies, but they are not instant.
The one-year rule
The order states that the United States will consider the withdrawal effective immediately upon notification. The Paris Agreement itself is less flexible. Article 28 provides that a withdrawal takes effect one year after the depositary, the UN Secretary-General, receives notice. The Congressional Research Service has set out that sequence in its review of the process, and it means the United States remains a party, at least formally, through most of 2025 and into January 2026.
In practice this matters less for domestic energy policy than for the US position at international talks. A party that has given notice can still attend sessions and, until the exit takes effect, retains its formal rights. The United States also remains a party to the underlying UN Framework Convention, which the order does not leave.
What the order does and does not touch
The Paris Agreement contains no binding emissions caps, and US domestic energy rules are set by statute and agency regulation rather than by the treaty. The nationally determined contribution submitted by the outgoing administration in December 2024, which set a 2035 target, is now effectively without a sponsor in the executive branch. That target was among the earliest submissions in the third round of NDCs, which are due on February 10, 2025.
For power and fuel markets, the domestic levers are elsewhere. Emissions standards for power plants and vehicles, methane rules for oil and gas, and tax credits for clean generation are all governed by the Clean Air Act, appropriations and the tax code. Those instruments are now subject to separate reviews and legislative action. The withdrawal order is a signal of direction rather than a mechanism for changing those rules.
Climate finance is the direct channel
The most immediate effect is on finance. By rescinding the International Climate Finance Plan and ordering agencies to revoke financial commitments under the UNFCCC, the order withdraws the United States from a set of pledges that underpinned multilateral climate funds and bilateral energy transition programs. The scale of the change will become clearer as agencies act, but programs that relied on US contributions, including the Just Energy Transition Partnerships with South Africa, Indonesia and Vietnam, now face a funding question.
For emerging market power systems that were counting on concessional finance for grid upgrades and coal retirement, that matters more than the treaty status itself. Other donors may or may not fill gaps. Development banks, where the United States is a large shareholder, are a separate question that the order does not directly address.
Trade exposure is growing, not shrinking
US exporters face climate-linked trade measures regardless of US treaty status. The European Union's carbon border adjustment mechanism moves to its definitive phase in January 2026, when importers of steel, aluminium, cement, fertilizers, hydrogen and electricity will have to buy certificates tied to embedded emissions. The CBAM applies to goods by origin, not by whether the origin country is a Paris party. The United Kingdom has announced its own border mechanism from 2027.
For US LNG, the near-term exposure is different. The EU's methane regulation will require importers to show that fossil fuel supplies meet monitoring and reporting standards equivalent to EU rules, with obligations phasing in over the rest of the decade. US exporters have relied on federal methane rules as one way of showing equivalence. If federal methane rules are rolled back, the burden of demonstrating equivalence shifts toward company-level measurement and contractual reporting.
The 2017 precedent
The first withdrawal offers a partial guide. Between the 2017 announcement and the 2020 exit, US power sector emissions continued to fall, driven mainly by the replacement of coal generation with natural gas and renewables on cost grounds. State policies, utility resource plans and corporate procurement contracts carried on independently of the federal position. That pattern reflects how US electricity is planned: most decisions on new generation are made by utilities, state regulators and grid operators, and they respond to fuel prices, load growth and reliability needs.
The conditions in 2025 differ in one important respect. Electricity demand is now rising after more than a decade of near-flat consumption, driven by data centers, manufacturing and electrification. Rising load changes the investment case for every type of generation, and it is likely to matter more to the fuel mix over the next five years than the treaty decision.
What it means for investors
Three practical points follow for energy investors and buyers.
First, the one-year delay gives a fixed timeline. US participation in the November 2025 conference in Belém, Brazil, will be as a party on its way out. Any negotiating role will be limited.
Second, domestic regulatory change is being pursued through separate channels. Investors tracking power plant rules, methane standards or clean energy tax credits should follow those dockets and bills directly. The treaty exit does not by itself repeal any of them.
Third, the climate-linked costs facing US exporters are set abroad. Border adjustments, methane import standards and corporate disclosure rules in the EU, UK and elsewhere apply to US goods and US companies operating in those markets, whatever the US federal position.
The signal for other parties
The withdrawal coincides with the third round of NDCs, which are due on February 10, 2025, ahead of COP30. Most large emitters have not yet filed. Whether the US exit changes the content of other countries' targets is uncertain. China, the European Union and India have each said their policies are driven by domestic energy security and industrial goals, and those claims will be tested as their new targets arrive during 2025.
What can be said now is that the main climate instruments with direct price effects on energy, carbon markets in Europe and China, border adjustments and methane standards, sit outside the US decision. The withdrawal changes who is in the room. It does not by itself change the prices that US energy exporters face in those markets.