On June 1 2017 President Trump followed through on one of his signature campaign promises and announced that the United States will withdraw from the Paris Agreement on climate change.

The Paris Agreement is an international accord intended to reduce worldwide greenhouse gas (GHG) emissions and mitigate the effects of climate change. Almost 200 countries signed the agreement, which took effect in November 2016. However, the agreement is not a binding treaty. Instead, the signatories agreed to set voluntary, individualised carbon emission targets. The US target was to reduce GHG emissions by 26% to 28% below its 2005 levels by 2025.

The president's announcement does not mean that the United States will leave the agreement immediately. Instead, it is expected to take up to four years, as the agreement sets a three-year moratorium on withdrawals, and the withdrawal takes one year to complete. This process may allow time for the United States to reengage in further negotiations. The United States also remains a party to the United Nations Framework Convention on Climate Change, a treaty ratified by the Senate and signed by President George HW Bush.

Withdrawal from the Paris Agreement fits firmly within the new administration's agenda to promote domestic fossil fuel development. Through executive orders, Trump has sought to promote US economic growth by directing federal agencies to reconsider federal rules that have restricted the development and use of domestic energy resources, particularly fossil fuels that produce GHG emissions. Withdrawal from the agreement fits within these goals, which include the president's direction to the Environmental Protection Agency (EPA) to review its Clean Power Plan – one of the previous administration's stated methods for achieving the US target. Exiting the agreement will give the EPA more flexibility in implementing the president's orders.

Other governments' responses now bear close watching. In the lead up to the president's decision, much had been said about how other parties to the agreement may react to a US withdrawal. For example, China – the world's largest source of GHG emissions – came to the agreement with the United States on board. Without US participation, it could decide to take on a larger leadership role or, with other large sources of GHG emissions (eg, India), choose to join the United States in withdrawal. There has also been speculation that some signatories may attempt to use trade, such as a tariff on the carbon content of US exports, to take a tougher stance with the United States. These actions could result in additional costs for US businesses.

For further information on this topic please contact Richard Alonso or Samuel B Boxerman at Sidley Austin LLP by telephone (+1 202 736 8000) or email ([email protected] or [email protected]). The Sidley Austin LLP website can be accessed at www.sidley.com.