Why USAID is such a critical piece of the global climate aid puzzle – and what happens next as it is cut

As development projects battle over which is the most ‘life-saving’ in order to secure the dregs of US aid funding, climate action is likely to be deemed lowest priority

Though the US only spent one per cent of its federal budget on foreign aid, its sheer financial firepower meant that before Elon Musk’s efficiency drive, the country’s main humanitarian agency USAID funded a quarter of all global support.

An executive order from from Donald Trump on 20 January paused all that for 90 days.

As the world waits to see what this means in the long term, it has been confirmed that nearly 90 per cent of USAID programmes will be terminated, according to analysis from Devex, with remaining projects brought under the control of the State Department.

The priority now is work that is considered “life-saving” - though even here there appear to be major challenges. One aid worker working on a food distribution project in Somalia tells The Independent that despite retaining funding, partners in America have become increasingly difficult to work with.

“We are not sure who to reach out to now to discuss grants, and nobody is replying to any emails,” they say. “Apparently everything has to now be approved by [acting aid administrator] Marco Rubio, which makes it all incredibly inefficient.”

When it comes to climate action, however, experts agree that - given the ideological bent of the administration - these programmes will now be deemed lowest priority.

“It really is devastating what has happened,” says Claudio Forner, head of climate policy at think tank Climate Analytics. “So much of what the US used to do for climate was channelled through USAID, so for that to just disappear is terrible.”

Bella Tonkonogy, senior director of programmes at the Climate Policy Initiative, agrees that the US cuts represent “a very big hole that countries will not be able to just fill up again”.

Ironically, the shift away from aid comes just as the US was starting to contribute to climate finance in a meaningful way under President Biden, with more than $11bn handed out in 2024, up from $1.5bn in 2021.

Climate finance helps developing countries deal with the already-critical impacts of the climate crisis, including heatwaves, floods, and droughts. Extreme weather already costs countries hundreds of billions of dollars per year, with cash-strapped governments often unable to cope without foreign assistance.

Around one third of the US climate finance total came from USAID. The rest came from the State Department, via financing for green investment funds or the World Bank, or via public finance institutions that invest in infrastructure projects abroad. The US used to make up a fifth of climate finance provided by wealthy countries.

But USAID was particularly valuable because so much was provided in the form of grants, rather than loans, according to another climate finance expert, speaking on condition of anonymity due to their organisation’s own funding hole following USAID’s retreat.

“The fact that USAID would give out so many grants was really valuable, particularly for the countries in the lowest income bracket, who are often suffering the worst effects of climate change, and have the lowest ability to respond financially because of debt,” they say.

“A lot of other countries provide a much greater share of their aid in the form of loans, which can be less helpful.”

In 2023, some $5.2bn in climate funding was provided in the form of grants, compared to $4.3bn provided as loans and other financial instruments, according to the State Department.

Examples of USAID’s climate work can be found all around the world, in sectors ranging from healthcare to education, and from the level of local communities, to vast, multibillion dollar funds.

The SERVIR satellite programme, which help countries predict weather-related threats, only for earlier warnings of cyclones in places like Bangladesh. as well as community programmes in drought-prone regions designed to prevent climate-related conflict, have both lost USAID funding. A Massachusetts Institute of Technology project that uses satellite sensors to map the impacts of extreme heat, air pollution and flooding on prisons has also been cut.

President Trump has also cancelled $4bn in pledges to the world’s largest climate fund, The Green Climate Fund, which is a UN initiative supporting climate projects in 297 projects in 133 developing countries, from supporting climate-smart agriculture in Senegal, to boosting forest integrity in Serbia.

Power Africa, established in 2013 under President Barack Obama, is another programme coordinated by USAID which has been vital in driving climate action in the developing world, which was specifically highlighted by the climate finance expert interviewed by The Independent as having particularly impactful work.

Around 600 million people in Africa continue to lack reliable access to electricity, and close to a billion people are without access to clean-burning cooking fuels. But for the past twelve years, Power Africa deployed some $1.2bn, which in turn catalysed a further $29bn in other funding sources, to develop over 150 power projects in 42 countries, and bring electricity to more than 200 million people, according to the Center for Global Development.

Power Africa also supported US companies in $26.4 billion worth of deals: an economic benefit that far outweighs the initial investment from the US government. The projects supported were a mixture of renewable and gas-fired power projects.

“Power Africa has been hugely successful developing renewables in Africa. Now that it has been defunded, it is going to completely change the energy transition pathway of the whole continent,” says the climate finance expert.

Katie Auth is a former senior advisor at USAID, where she worked developing clean energy projects. She says one of the “most impactful things” she did in her work was help establish renewable energy auctions in 12 countries around the world.

“These auctions are competitive instruments that help countries introduce renewables into their power markets at a reasonable price,” she says. “Since USAID came in, those countries have been able to bring in a tonne of clean energy paid for with private capital. But they would not have struggled to do that without USAID’s initial support.”

Funding for these kinds of programmes just “dried up overnight”, says Auth, who is now spending much of her time lobbying the US government as part of the DC-based Energy for Growth Hub, arguing that clean energy remains a good investment for public money.

“This is not some leftist woke agenda,” she says. “Countries want to be able to build renewables to boost their energy security and boost energy access, as well as making the most of the vast renewable resources that developing countries have.”

It remains unclear how far such arguments will make inroads in the Trump administration, given the “many factions” currently fighting for dominance in government, Auth adds. “There are some people who see the importance of economic development around the world, and want to work to make sure we don’t just burn it all down.

“But there are others who maybe do want to burn it all down.”

While investing in energy might remain attractive for some members of the US government, there is less hope for areas such as landscape conservation and climate change adaptation.

“I think work in resilience and adaptation is much more at risk,” says Auth. “Only where there is a clear argument for economic development, without necessarily a reference to climate, is there really an opening for the administration to continue that work.”

The largest portion of USAID’s climate-related spending went towards disaster resilience. The impact of these drying up could have devastating long-term impacts, according to Ian Scoones, a fellow at the Institute of Development Studies.

“In 2023 when the Horn of Africa was suffering one of the worst droughts in living memory, several initiatives supported by USAID provided relief and support, as well as building the capacities of communities to respond to such shocks into the future,” he says.

“Earlier this year, nearly all of these projects received letters from the US State Department cutting their funds, stating that their work was not in the US ‘national interest’.

“The consequences of this have been disastrous: funds have dried up and projects have folded. And this will have dire consequences everywhere, given the fragile geopolitics of the region and the fact that it is the source of many migrants seeking alternative opportunities the world over.”

Scoones adds that in the region he knows best – Northern Kenya – “nearly everyone had contracts terminated,” including the large-scale Nawiri project, which was aiming to reduce malnutrition among 600,000 individuals by 2027. Caritas and Catholic Relief Services, the main two organisations working on the project, have each had to let go more than 120 and 300 staff respectively in Marsabit region alone, says Scoones.

Some observers express hope that other wealthy countries or deep-pocketed institutions can fill the gap left by USAID. But the signs so far are not positive.

Countries including the UK (cutting its aid budget from 0.5 to 0.3 percent of GDP), France (cutting aid by 37 percent), and the Netherlands (cutting aid by €8bn over four years) have all announced wide-ranging cuts.

Western countries are shifting their budgets over pressure to both rearm and cut budget deficits. Where aid funding remains - both from governments and from philanthropies - it looks likely that healthcare programmes will be prioritised.

“If you know you need to make a decision between paying for a solar panel or saving people that are at risk of dying from a preventable disease in Africa, it is kind of a no-brainer,” explains Climate Analytics' Claudio Forner.

Some tentative grounds for optimism can still be found, however. For Forner, the aid budget cuts made by Europe is more “sleight of hand”, and intended to allow for greater spending in other areas, rather than in the US where the opposition to aid is more ideological. There is every chance, therefore, that European countries could restore funding in the future.

Forner also finds a silver lining in the fact that the move away from climate-related aid is likely to be followed by a dramatic swing in the other direction, once the world sees how disastrous this has been.

“While we are facing a situation that is so dire, with everything falling apart, we need to remember that it is these kinds of catastrophes that make people come together,” he says. “I think we will ultimately emerge from this crisis with a stronger sense of cohesion in the world.”

Auth says there is also now an opportunity for countries that had been over-reliant on aid to seize the opportunity to become more independent.

“Some countries, like Kenya, have a really sophisticated public and private sector. A lot of people are arguing that this is an opportunity to rid themselves of their dependence on aid, and figure out what they need to do on their own going forward,” she explains.

For other countries - where, given high debts or other economic challenges, USAID and other aid organisations have effectively taken over the provision of public services - the situation looks increasingly dire.

Cover photo:  (Getty Images)