The 2026 World Economic Forum (WEF) taking place in Davos, Switzerland from January 19-23, revealed a significant split in ideologies on climate policy between participants, particularly between the United States and the rest of the world.
The European Union (EU) has reiterated its commitment to the Paris Agreement and its climate goals. In a special address from Ursula von der Leyen, President of the European Commission, the ‘new Europe’ was a focus, with an emphasis on independence while “choosing fair-trade over tariffs, partnership over isolation, and sustainability over exploitation”. It was also noted that the EU is in the progress of developing free trade agreements with Australia, the Philippines, Thailand, and more, in addition to agreements already concluded with Latin America, Mexico, Indonesia, and Switzerland. Germany’s Environment Minister, Carsten Schneider, insisted the EU is sticking to its goal to cut emissions by 90% by 2040. This was agreed to last December, despite pressure to soften the target from more coal-reliant members of the EU.
China has similarly emphasized their resolve to reduce greenhouse gas emissions. Chinese Vice Premier He Lifeng stated that the country’s five-year plan will focus on green growth, fuelled by solar, batteries, and electric vehicles (EVs). He emphasized China’s willingness to collaborate with other nations and foreign companies in areas such as green infrastructure, energy, minerals and finance.
In a speech from Canadian Prime Minister Mark Carney the Prime Minister emphasized that Canada will have a new approach to international relations. While an emphasis is placed on strengthening the country’s autonomy, Carney is also making strides to strengthen international relationships through trade deals and defence arrangements. Climate and carbon policy were not directly addressed, however the recent MOU between Canada and Alberta has proven the country’s commitment to reaching climate targets while unilaterally achieving autonomy through facilitating oil and gas production and export.
Conversely, United States Commerce Secretary Howard Lutnick criticized solar and wind development and the EU’s net-zero goal, noting that this is not something the US will pursue. Instead, the country will aim to use domestically produced fossil fuels and suggested that the rest of the world should subsequently focus on coal as a primary energy source. These comments are in lockstep with the Trump administration’s decision to withdraw the United States from the Paris Climate Agreement early last year.
The EU has introduced a Carbon Border Adjustment Mechanism (CBAM) to their trade partners, which is currently in its first reporting period. The increase in free trade agreements and relationships between the EU and other countries may influence partners to implement their own carbon policies as a means to keep funding within their own country, rather than paying into CBAM.
The shift in values under the current United States administration which were reiterated at Davos highlights the divide between federal and state objectives on climate. President Trump's April 2025 Executive Order “Protecting American Energy from State Overreach,” directed the US Attorney General to make recommendations on policies related to climate, ESG, environmental justice, carbon penalties and taxes, with a distinct mention of state carbon markets and climate superfund laws.
Despite the divergence and rumours circulating, there have been no direct attacks from the US Department of Justice against the state carbon markets to date; such as California and Washington's Cap-and-Invest, RGGI, Clean Fuel Standards, Renewable Portfolio Standards and RECs, etc. However, as long as the Executive Order remains there is an element of uncertainty for markets in 2026.
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