Trump effect: World Bank drops climate agenda

It is a much-publicised and loudly proclaimed fact that US President Donald Trump is a climate change denier and he is proud of his ill-informed position. Ever since he became president for the second time November 2024 and took office in January 2025, he has been reversing policies that aimed at reducing carbon emissions. His motto is to drill more oil, his motto, “Drill baby, drill’.

Even oil producing countries had become aware of the need to explore renewable sources of energy and of finding ways to supplement and complement fossil fuels. Trump does not believe in any kind of nuanced policy. So he is all set to increase carbon emissions without a thought for the consequences. In his latest move in the war against climate change measures and policies, he has arm-twisted the World Bank to drop its programme of marking 45 per cent of lending to projects which will help in dealing with climate change.

The 45 per cent formula was adopted in 2023 during Joe Biden’s presidency. Though, the bank and many of its shareholders are convinced that green policies are needed to safeguard the future, the US, which is the largest shareholder in the bank, has managed to force the bank to abandon its green agenda.

The bank did not say that it is dropping the 45 per cent lending for climate change projects, but it said that from now on it will support project have positive climate change impacts, and that it would now look at the outcomes rather than inputs. The 45 per cent lending for projects of climate change are seen as input oriented and not so much of outcome-oriented. The US too has tried to rationalize its anti-climate change policy stance by saying that the World Bank, and its sister institution, the International Monetary Fund (IMF), should adhere to the original intent of developing and stabilizing global economy.

The World Bank has announced that an Independent Enquiry Group has been set up to assess the Climate Change Action Plan (CCAP) of the bank which was adopted in 2016. Bank president Ajay Banga is now being asked shift focus to ‘smart development’ which boostsin jobs while at the same time ensuring climate related benefits like drought-resistant agriculture or ‘storm-resistant infrastructure. This implies in so many words that there is the acceptance that climate change is happening and instead of trying to remedy its ill-effects, policies are now to be formulated to adapt to the disastrous consequences of climate change like droughts and storms.

It also show that other influential share-holders of the World Bank and International Monetary Fund are not putting up enough resistance or counter-pressure to whimsical notions of an American president. The US might be the largest shareholder of global finance institutions, but it cannot play truant when it comes to the issues of common challenge. Climate change is one of the most important ones among them. The US cannot dictate policies of either IMF or WB.

It is certainly the case that not all policies meant to combat climate change are right and rational. Many a time decisions are made based on inadequate evidence and the measures taken are not effective enough. Even if there is consensus on the implications of climate change, there is room for differences of opinion on how it should be tackled. There is need for debate and exchange of points-of-view. There is need to move from the false polarization of those accepting climate change and those denying it. There is need for more empirical evidence on the magnitude of climate change, and the appropriate counter-measures needed to taken.