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USAID Shutdown: A Climate and Geopolitical Own Goal That Hurts American Business

The Trump administration’s decision to shut down the U.S. Agency for International Development (USAID) isn’t just an attack on foreign aid—it’s an own goal that hurts American businesses, weakens U.S. influence abroad, and hands a strategic advantage to rivals like China and Russia.

For decades, USAID has quietly helped American businesses expand into emerging markets, funding everything from renewable energy projects to climate-resilient infrastructure and agriculture innovation. Now, that funding is gone, and U.S. firms that relied on it will have to compete against state-backed Chinese and Russian companies that are eager to fill the void.

But the damage doesn’t stop there. The global supply chain, regulatory landscape, and geopolitical risk profile for American companies is about to get a lot more complicated.

Here’s what’s at stake—and what corporate boards should do about it.

What Happens to the Climate Work?

Short answer: nothing good.

USAID has been a major player in the global push for clean energy and climate adaptation, particularly in developing countries that lack the resources to transition away from fossil fuels. American companies have benefited, too—providing solar panels, wind turbines, climate data analytics, and infrastructure solutions to USAID-funded projects. USAID had two initiatives that drive outcomes here — annual budget allocations to climate adaptation, clean energy and sustainable landscapes ($579M allocated in 2023) and the Climate Finance for Development Accelerator ($250M). Between 2022 an 2030, the objective was to mobilize $150B from both public and private sector players – a planned 30:1 ROI on the money USAID spends.

With the agency shut down, that pipeline of projects vanishes. This means less demand for U.S. solar, wind, and battery storage technology, pushing countries toward Chinese alternatives. It also means less demand for engineering services from American companies who are engaged in these large scale projects.

In addition, it means:

  • More deforestation as conservation efforts collapse, increasing carbon emissions and worsening climate change.
  • Greater vulnerability to extreme weather events, leading to humanitarian crises that strain global supply chains.

Companies that have built sustainability commitments into their business models will feel the hit—not just from lost contracts, but from increased environmental risks that drive up operational costs.

American Businesses Are About to Feel the Pain

USAID’s shutdown is now a business problem—especially for industries that have depended on USAID projects for growth.

Who’s at Risk?

Renewable Energy Companies (e.g., First Solar, NextEra, Tesla)

  • USAID has been a huge funder of clean energy transitions in emerging markets. With that funding gone, demand for      American solar, wind, and battery technology could shrink, leaving China to dominate.

Engineering & Infrastructure Firms (e.g., Bechtel, AECOM, Fluor)

  • USAID-backed projects fund everything from climate-resilient roads to flood defenses. Without them, U.S. engineering and construction firms lose out on lucrative contracts abroad.

Agriculture & AgTech Companies (e.g., Corteva, John Deere)

  • Many developing countries rely on USAID-funded initiatives for climate-smart farming, irrigation, and soil restoration. The shutdown puts those efforts at risk, reducing demand for U.S. agricultural technology and equipment.
  • American agriculture is also a major beneficiary of USAID funding. Hundreds of thousands of tons of US Government Food Aid is now stuck in port and risks going to waste. Annually, America purchases $2B in basic commodities like wheat, rice, soy and corn from American farmers for distribution as food aid. American agriculture is also at risk.

Technology & Telecommunications (e.g., Microsoft, Cisco, IBM)

  • USAID has supported digital infrastructure, cybersecurity, and data analytics for environmental and humanitarian programs. Now, developing nations may turn to Chinese and Russian tech providers instead.

Consulting & Professional Services (e.g., McKinsey, Deloitte)

  • USAID has been a major client for firms providing policy advice, impact assessments, and project management. Losing those      contracts will hurt U.S.-based international development consultancies.

Defense & Security Contractors

  • USAID has funded stabilization efforts in fragile regions, reducing the need for military intervention. Without those programs,      instability rises, and American companies operating abroad face higher security risks.

China and Russia: The Real Winners Here

With the U.S. retreating from development aid, China and Russia are more than happy to fill the gap.

  • China’s Belt and Road Initiative (BRI), already a dominant force in global infrastructure investment, will expand into areas   once supported by USAID, locking nations into Chinese-built roads, power plants, and data networks.
  • Russia benefits from prolonged fossil fuel dependence, as many USAID projects focused on transitioning developing countries   away from coal, oil, and gas. Without that funding, demand for Russian energy exports remains high.
  • Both countries use foreign investment as a political tool, pushing nations away from democratic governance models and toward   authoritarian-friendly policies.

For U.S. companies, this means increased competition, tougher trade conditions, and a shifting regulatory landscape in many of the world’s fastest-growing markets.

What Should Boards Be Doing Right Now?

Corporate boards cannot afford to ignore this shift. Here’s how they should respond:

1. Assess Exposure to USAID-Backed Markets

  • Identify which parts of the business relied on USAID funding—either directly through contracts or indirectly through supply chains.
  • Determine if competitors (especially from China) are poised to replace lost revenue streams.

2. Monitor Geopolitical & Regulatory Risks

  • Watch for new sanctions, trade restrictions, or regulatory changes as China and Russia expand their influence in emerging markets.
  • Engage government affairs teams to track potential alternative funding mechanisms.

3. Strengthen Global Business Resilience

  • Diversify international partnerships beyond government-funded projects, exploring private-sector partnerships and impact investors.
  • Reevaluate supply chain vulnerabilities, particularly in climate-sensitive regions.

4. Double Down on ESG & Sustainability Strategy  

  • If USAID-backed sustainability initiatives disappear, companies may need to step in with their own funding. There are two kinds of risks that will need to be evaluated – supply chain risk and reputational risk.
  • Consider investing in climate adaptation measures independently to mitigate long-term business risks.

5. Prepare for Increased Competition from China and Russia   – Expect Chinese and Russian firms to aggressively pursue markets where USAID once operated.

  • If expansion into certain regions becomes riskier due to geopolitical shifts, companies should consider alternative growth strategies.

Final Thought: USAID’s Shutdown Is a Global Business Risk

The closure of USAID isn’t just about humanitarian aid—it’s about economic influence, market access, and business risk.

For American companies that operate internationally, the disappearance of USAID funding means more uncertainty, more competition, and fewer opportunities in emerging markets. Boards that fail to recognize this shift will find themselves caught off guard as China and Russia consolidate their economic and political dominance in regions that once looked to the U.S. for support.

If the U.S. wants to remain a global leader—not just on climate, but in business and diplomacy—corporate leaders should be asking “How do we adapt?” Because right now, standing still isn’t an option.

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Is energy access simply modern colonialism?

Small Guatemalan village

770 million people globally lack access to electricity. They’re predominantly in developing nations. Despite international commitments to energy equity, like the UN Sustainable Development Goals, the dominant view is that electricity access for these folks will be a slow and expensive process.

On July 14th, the Carbon Tracker Initiative published a report titled Reach for the Sun, which challenges this view. They forecast that 88% of the growth in global electricity demand between 2019 and 2040 will come from emerging markets. Moreover, demand for fossil fuel generation in those markets has already, or is about to, peak. Those countries are investing in renewables.

They divide the emerging markets up into four groups:

  1. China, which is nearly half the demand for electricity, and 39% of the expected growth.
  2. Coal and gas importers, such as India or Vietnam, which account for 1/3 of the demand for electricity, and nearly half of the growth.
  3. Coal and gas exporters, like Russia and Indonesia, which are 16% of the electricity demand, but only 10% of the forecast growth.
  4. Fragile states, like Nigeria and Iraq, which account for 3% of demand, and about the same percentage of growth.

Carbon Tracker makes the case that emerging markets will leapfrog developed nations in renewable energy deployment as they modernize their economies. With little to no legacy generation infrastructure in place, it makes sense to build out with renewables. Moreover, the added attraction of energy independence makes this a strongly preferable path.

Developed nations in North America and Europe have the disadvantages of:

  1. Sunk costs in the form of coal and gas generation infrastructure.
  2. Political headwinds as vested interests in fossil fuel industry players work against renewables.
  3. Economic headwinds slowing down deployment of renewables as comparitively low growth in demand makes financial cases difficult.

The report is tremendously detailed. There is much to digest here.

The most extraordinary takeaway for me, though, was the similarity between 19th century colonialism, and today’s oligarchy of fossil fuel producing businesses and nations. Colonialism is the control of one group of people by another, generally by establishing colonies of settlers, for the purpose of economic exploitation. Developing nations export raw materials, and in some cases finished goods to the West. Energy independence is an inarguable benefit for them. Yet Western interests have actively sought to thwart renewable deployment in developing nations in order to continue to extract energy “rents” from these economies.

Is this modern colonialism? You tell me.

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Long Read: Statistical Review of World Energy.

Businessman touching the screen about energy source

BP’s 70th annual Statistical Review of World Energy came out this past week. This data-rich documents is 70 pages of detailed, country by country, statistics about world energy capacity, production, and consumption with commentary. Here are some of the highlights.

Consumption

Due to COVID-19, last year saw the largest decline in energy consumption since World War 2. Consumption fell by 4.5%, primarily due to the shutdown of the transportation industry. Oil consumption fell by 9.2%, while natural gas fell only 2.3%. But renewables — solar and wind — had their best year ever as capacity increased by 50%. BP themselves were surprised by this, saying “we materially underestimated the growth of wind and solar power over the last five years”. But before we break out the bubbly, let’s put that in context. Even with that super result, renewables are still a small fraction of the global energy mix. Non-emitting energy (Nuclear, Hydroelectric, Solar and Wind) are still just 16.8% of the overall energy mix.

OilGasCoalNuclearHydroRenewableTotal
173.73137.62151.4223.9838.1631.71556.63
31.2%24.7%27.2%4.3%6.9%5.7%
Primary Energy Consumption (EJ – Exajoules)

The world is finally weaning itself off coal. Coal generation declined by 405 TWh, which was almost directly correlated to the 358 TWh increase in solar and wind generation. We are truly seeing coal-fired generation being phased out in favor of renewables.

On a country by country basis, the biggest global consumers of energy were the United States (87.79 EJ) and China (145.46 EJ), or 15.8% and 26.1% of global energy consumption. Nobody else comes close, except if you start to combine regions. All of Europe, for example, consumed 77.15 EJ, a little less than the USA. It’s also worth noting that the United States consumed 15.8% of the global energy supply, but has just 4.25% of the population. China consumed 26.1% of the worlds energy, but has 18.5% of the population.

Globally, each human on the planet averages annual consumption of 71.4 Gigajoules (GJ) of electricity. However, Canadians (361GJ), Qataris (594 GJ), Saudi Arabians (303 GJ), Emeratis (423 GJ), and Australians (218 GJ) all are good examples. Or maybe it’s just the weather. Singapore has no natural resources, and Singaporeans use an astonishing 583.9 GJ per person of energy annually, second only to Qataris.

Emissions

Global carbon emissions from energy use also fell, and even more dramatically than energy use itself. Carbon emissions fell by 6.3%, while energy consumption declined by just 4.5%.

Among the big economies, the US generates 18.3% of its energy from non-emitting sources, China 15.7%, and Europe 28.8%. China is still heavily dependent on coal, and Europe has been helped out by a favorable shift to renewable plus the fact that a whopping 36% of France’s energy comes from nuclear. Canada, often in the news because of it’s foot-dragging on emissions targets, does surprisingly well with 35.4% of it’s energy coming from non-emitting sources. This is due to the outsize impact of the country’s hydro-electric industry. Canada, with fewer than 40 million people, is the second largest producer of hydro-electric power globally, only surpassed by China.

The biggest absolute GHG emitters are (in order) China with 9,899.3 megatonnes, the United States (4,457.2), Indonesia (2,302.3), and Russia (1,482.2). Nearly a third of all emissions are from China. This is no surprise, given China’s massive energy appetite, but it’s still sobering nonetheless. Let’s put these into context, though. The US, with 330M people, is a much bigger emitter, per capita, than China. If the Chinese were to pollute the way America does, then their emissions would be close to 19,000 megatonnes. And all of Europe, which is a population of roughly half of China, emits just 3,596.8 megatonnes.

Geopolitics

The geopolitical world of energy stands out clearly in this report.

The United States is well established economically, and has small reserves of oil (68.8M barrels), about 6.7% of the worlds gas reserves (12.6 trillion cubic metres), and almost a quarter of the worlds coal reserves (248,941 million tonnes). At current rates of consumption, the US will exhaust its oil in about 10 years, and gas in 15 years. The US is the “Saudi Arabia of coal”, but most of that resource will stay in the ground.

China, by contrast, sits on a paltry 26M barrels of oil, 8.4 trillion cubic meters of gas, and 143,197 million tonnes of coal. China uses less oil annually than the US, but has only about 4 years reserves remaining. The country uses less than half the gas of the United States today, and thus has 25 years of reserves remaining. And they burn a lot of coal to generate power.

Consequentially, the US is a net exporter of oil and gas. In contrast China imports nearly all the oil and gas it needs to meet its energy needs, and China’s energy needs are growing at a blistering 3.8% annually.

The Chinese have been reluctant to give up coal electric generation, as the one energy source they have in abundance is coal. It is the one tool they have which gives them a measure of energy independence. It should therefore be unsurprising that China now leads the world in renewable power generation (#1 in hydroelectric, solar and wind), and new renewable capacity additions (in 2020 China accounted for 36% of new global solar capacity, and 38% of new global wind capacity). China has no choice. They cannot continue to generate electricity with coal. The global trend toward net-zero emissions means that Chinese companies risk being cut off from global export markets unless they can show that the carbon footprint of the products they sell is acceptable to their customers. Moreover, China cannot continue using coal to generate electricity at home without polluting its already fouled air even more.

It should also come as no surprise that 44% of the electric vehicles manufactured and sold in the world were sold in China. China is completely dependent on foreign oil. They cannot satisfy the growing appetite for vehicles domestically without an alternative to gasoline. They also cannot build the economy they want without the logistics in place to move goods from one location to another. They need electrified transportation more than any other economy globally.

Nuclear

Nuclear was a surprise. The top producer of nuclear energy in the world today is the United States, despite the unpopularity of nuclear domestically. 31% of the nuclear in use today is in the USA (7.39 EJ), although it is declining. The next largest producers of nuclear energy were China (3.25 EJ) and France (3.14 EJ). Few countries globally are adding nuclear capacity, the most notable exception being China, where nuclear (pre-COVID) was growing at a rate of 16.7% annually. Again, unsurprising that China would be building this capacity.

Conclusions

There are three inescapable conclusions in BP’s numbers.

The first is that there is little economic incentive in the west (Europe and North America) to replace fossil fuel generation. The energy demands of the west’s stable economies are growing slowly, having shifted most manufacturing overseas. The western economies’ focus on emissions are largely domestic politics, centered around climate change risk management. To make the transition from fossil fuel to renewable energy will require deft political skills, regulatory frameworks, and a continuation of the economic incentives we have seen.

The second is that Asia-Pacific, having become the center of global manufacturing, must navigate growing their energy use carefully. Global supply chains originate in Asia-Pacific, today. Consequently the region has a ravenous appetite for energy, but must find ways to meet that appetite and grow consumption while managing and reducing GHG emissions. Expect to see this region lead renewable energy deployment globally for some time, as they deal with the double incentive of managing climate change risk, while rapidly growing economies to satisfy western consumers needs.

And finally, the two remaining superpowers of the world, China and the United States, are quite different in their approaches.

America is divided. America has a substantial fossil fuel export business, many politicians support that business, and American free speech rights permit climate deniers to manipulate the public by spreading disinformation about the severity of the climate crisis, and the value of solutions being proposed. The fossil fuel lobby is strong! However, America has the luxury of being able to dither simply by virtue of the fact that it has secure domestic energy resources, and business seems to be stepping into the leadership vacuum in a way that Washington is apparently not able to.

China, in contrast, has a more immediate crisis and as a result seems to have a more unified approach. The Chinese don’t have the energy independence that America has. As a result, they are simply “getting on with it”, rapidly deploying renewables, building electrified products and industry, and making plans to decarbonize generation by taking their coal plants off line. The pace at which China is weaning itself off coal is slower than some in the west want, yes, but it is happening.

The inescapable conclusion is that China is playing a “long game”, building expertise that will serve it well for generations. The rest of the world already buys much of its wind and solar generation capability from China. It’s not hard to see how cars and batteries will be next.

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Climate outcomes at the G7 meeting

Did the G7 meeting in Cardiff achieve anything of significance on the climate crisis? Some say yes, and some no. Let’s dig into it a little and see, shall we?

In this excerpt from the final communiqué we read:

Protect our planet by supporting a green revolution that creates jobs, cuts emissions and seeks to limit the rise in global temperatures to 1.5 degrees. We commit to net zero no later than 2050, halving our collective emissions over the two decades to 2030, increasing and improving climate finance to 2025; and to conserve or protect at least 30 percent of our land and oceans by 2030. We acknowledge our duty to safeguard the planet for future generations. 

CARBIS BAY G7 SUMMIT COMMUNIQUÉ, June 13, 2021

And then beginning at paragraph 37 of the communique, it provides more details.

  • Domestically, the member countries have committed to “overwhelmingly decarbonized power” by the mid-2030’s. Internationally, they commit to “phase out new direct government support for international carbon-intensive fossil fuel energy as soon as possible”. Note the use of “overwhelmingly” and “as soon as possible”, rather than hard commitments.
  • Recognizing that coal power generation is the single biggest cause of greenhouse gas emissions, they call for the immediate cessation of international investments in “unabated” coal, and commit to an end to new direct government support for unabated international thermal coal power generation by the end of 2021. This appears to be a hard commitment, but is their a difference between “unabated” coal and plain old coal?
  • In transport, they commit to decarbonizing the roads “throughout the 2020s, and beyond”. This includes accelerating the roll out of infrastructure, like charging stations.
  • In industry, the commitments are “to take action to decarbonize areas such as iron and steel, cement, chemicals, and petrochemicals” and to launch the “G7 Industrial Decarbonization Agenda”.
  • And in homes and building, and land use sectors like forestry and agriculture, the “commitments” were similar to industry. Soft.

Press coverage was mixed, as might be expected. In a relatively balanced piece, the NY Times wrote “G7 Nations Take Aggressive Climate Action but Hold Back on Coal“, and quoted energy experts saying that the leaders failure to set an end date for coal made negotiating with China to end its use of coal more difficult. The hard end date was the signal that activists had been hoping to see.

Personally, I would have liked to see harder commitments on decarbonizing power generation, including that hoped-for date to phase out coal. I found the statements on industry encouraging. Industrial use of energy is one of the toughest challenges to solve, and it was important for the G7 leaders to say that they would make it a focus.

All of this is a prelude to COP26 in November. When the global community meets, and not just the G7, there will be an opportunity to set global commitments. It begs the question “Should the G7 have led now, or waited until November?”. Time will tell.

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Another Day… Another Corporate Call for Action

Yesterday, we saw The Investor Agenda call on government to step up with more comprehensive commitments to meeting Paris Accord climate change targets. The World Economic Forum’s CEO Alliance for Climate Change also issued a similar call for action. The CEO Alliance represents roughly 400 of the top 2000 publicly traded global companies. The letter, signed by 78 of the CEOs participating in this group, called on governments to deliver policy changes including:

  • Publish new NDCs, aligned to a 1.5C target, and halving emissions by 2030.
  • Commit to net-zero by 2050, with roadmaps to get there.
  • Ensure that developed countries meet and exceed their $100B commitment to support developing countries mitigate and adapt to climate change.
  • Develop broadly accepted carbon pricing mechanisms, with escalating carbon prices to drive the transition.
  • Compel all business to establish credible decarbonization targets, and fully disclose all emissions.
  • Eliminate fossil fuel subsidies, and cut tariffs on green goods.
  • Boost R&D spending.
  • Invest in climate adaptation. This means resilient cities and infrastructure.
  • Create and implement sector-specific incentives for power, transport, buildings and cities, industry, land and agriculture, and finance.

It encompasses the same policy actions as the Investor Agenda open letter, and then takes them a step further asking government to provide incentives and R&D as well.

Both the Investor Agenda letter, and the CEO group letter ask for the elimination of fossil fuel subsidies, and for synchronized carbon pricing mechanisms to be introduced. What would this do?

  • Direct fossil fuel consumption subsidies are substantial, according to the IEA, at about $320B annually. The incentives and R&D asked for could be funded by the elimination of these subsidies.
  • Similarly, carbon pricing mechanisms send a signal to markets that low-carbon investments will be valuable and also create incentives for companies to be more efficient. Carbon pricing has momentum. According to the World Bank’s 2020 State of Carbon Pricing report, there are now 61 carbon pricing initiatives scheduled or implemented, and to-date some 14,500 projects registered. One challenge for business is the diversity of models. 30 of these initiatives are carbon taxes and 31 are carbon exchange trading systems.

Taken together, these two open letters are a strong endorsement by business. Rather than fight climate change efforts and regulation by government, they are calling for public/private partnerships to make progress more quickly.

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Investors Group Asks Governments to Step Up

The Investor Agenda is a policy advocacy organization with the mission of accelerating a net-zero emissions economy. Today 457 of their members with a combined $41 trillion in assets asked governments to do more than meet their Paris Agreement commitments. Specifically, they are asking government to:

  1. Strengthen their NDCs to align with a 1.5 C target for 2030. NDCs are simply the commitments that governments made at the Paris conference.
  2. Commit to mid-century (2050, presumably) net-zero emissions targets, and outline the interim steps to get there.
  3. Implement policies to deliver these targets, including phasing out fossil fuel subsidies, carbon trading systems and more.
  4. Use COVID-19 recovery plans to double down on the transition to net-zero.
  5. Commit to mandatory climate risk disclosure requirements.

One of the misunderstood stories of the climate transition is the opportunity in it. The capital and operation costs of both solar and wind power are now well below corresponding fossil fuel generation, creating massive opportunities for investment. You can see this in the financial performance of renewable assets as a class. These investors are saying “we have the capital to make help make this transition”. They’re asking governments to commit with them, to require disclosure of climate risk by business, and to remove the subsidies that artificially support the fossil fuel industry.

Transforming the global economy will be a hugely expensive, but hugely profitable opportunity. This is a relatively small, entirely understandable, and fair ask on the part of the investment community.