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August 2017 Issue

Policy Brief: Trump Pulls the Plug on Paris

June 20, 2017 •

By Keith Reid

 

On June 1, President Donald Trump announced that America was going to pull out of the Paris climate accord, which had been agreed to by the Obama administration at the COP 21 meeting in 2015. The announcement was not particularly surprising given Trump’s campaign statements, which have been reinforced by his cabinet appointees and some of their initial actions to reverse former President Obama’s climate change initiatives.

The United States never ratified the accord as a treaty, as it stood little chance of making it though the Senate. The provisions were also voluntary and non-binding, which made it possible to avoid the Senate and increased the likelihood of it being more palatable to other governments as well, if history is any indication.

With that framework, the accord worked out a range of contentious issues relative to payments being sourced from developed nations and sent to developing nations through the UN Green Climate Fund, as well as aggressive carbon reduction goals that claimed to reduce the rise of global temperatures to be less than 2 degrees Celsius (°C) above preindustrial levels. Even this was considered inadequate by environmental activists—from the reduction targets to financial obligations. Further meetings are anticipated to ratchet up international requirements.

To force the reductions while bypassing Congress, the Obama-era Environmental Protection Agency (EPA) began or intensified a range of aggressive regulations—such as the Clean Power Plan and the ozone rule—to start working toward the agreement’s emission goals. At the same time, lawsuits from impacted parties began working against the most onerous regulations. During the campaign, Trump stated a goal to reevaluate and roll back much of these regulations, and he has already acted to work toward this end.

 

Trump’s Rationale

Having promised to pull back from the Paris accord, there was still some degree of uncertainty regarding its reality up until the official announcement was made. The media suggested that his daughter Ivanka and her husband Jared, both Trump advisors, were decidedly greener in their environmental outlook than the President and were positioned to influence his decision. And on May 26, White House Economic Advisor Gary Cohn stated, “I think [Trump’s] views are evolving. … His basis for a decision ultimately is going to be what’s best for the United States.” Obviously that was an overstatement.

Trump’s rationale for pulling out of the agreement mirrored common themes from the campaign. In his speech on June 1, he noted that the accord would be costly to the U.S. economy, citing an impact of 2.7 million lost jobs by 2025, including 440,000 manufacturing jobs, as reported by the National Economic Research Associates (NERA). In addition, the same study predicted that by 2040, paper production would be down by 12%, cement by 23%, iron and steel by 38%, coal by 86% and natural gas by 31%.

“The cost to the economy at this time would be close to $3 trillion in lost gross domestic product (GDP) and 6.5 million industrial jobs, while households would have $7,000 less income and, in many cases, much worse than that,” Trump said.

Of course, opponents provided a counter-argument based upon green jobs and a range of estimated ancillary savings, such as those found in the rationale for the various EPA regulations.

Trump also fell back on another campaign mainstay: that this accord was poorly negotiated. Most of the treaty’s impact would be felt by the developed Western nations—the U.S. at the forefront—which by and large are already green in their production and use of energy and fossil fuels.

“For example, under the agreement, China will be able to increase the emissions by a staggering number of years: 13,” said Trump. “They can do whatever they want for 13 years—not us. India makes its participation contingent on receiving billions and billions and billions of dollars in foreign aid from developed countries. There are many other examples, but the bottom line is that the Paris accord is very unfair at the highest level to the United States.”

Opponents have noted that China and India stated they will begin getting on board much earlier; however, both countries have previously shown no interest in taking hard measures that would impact their current growth.

Trump threw out the bone that he would be willing to renegotiate the accord should the other parties be interested, with the purpose of obtaining a deal that treated the United States fairly, but that is highly unlikely.

The primary reasons for the failure of past climate accord attempts—from Kyoto in 1997 to Copenhagen in 2009—have been the wealth redistribution from the developed world to the developing world and the relative impact between the two sides. The size of climate fund payments; the issues of liabilities for droughts that might, or might not, be linked to climate; and the requirements that skewed the playing field with emission targets have all worked to prevent an agreement more binding than the Paris accord. Even with a lineup of progressive climate regulations supporting governments in the developed world, the Paris accord was the best that could be achieved.

 

What Does the Announcement Actually Mean?

For something that was touted as a great achievement by much of the media, this was low on actual enforcement mechanisms and was generally criticized by a number of environmental activists. So why is there outrage over Trump’s announcement, and more specifically, what does it mean to those involved in motor fuels?

The “certainties” presented by climate change activists have been eroding for some time as many climate models have been found to be lacking, and some of the most alarmist claims made within the current timeframe have failed to develop. Additionally, as of late, there is a weakening consensus among scientist as to the actual threat posed by climate change, even by those who accept the likelihood of human influences.

Most notable recently was Dr. Judith Curry, who was a professor and chairwoman of the School of Earth and Atmospheric Sciences at the Georgia Institute of Technology. She had been called the “high priestess of global warming,” but she became alarmed over the degree to which public policies were being pushed where significant uncertainties existed, and disillusioned over the lack of actual free debate within academic climate circles.

As she noted in her January 1, 2017, retirement statement, “A deciding factor was that I no longer know what to say to students and postdocs regarding how to navigate the craziness in the field of climate science. Research and other professional activities are professionally rewarded only if they are channeled in certain directions approved by a politicized academic establishment—funding, ease of getting your papers published, getting hired in prestigious positions, appointments to prestigious committees and boards, professional recognition, etc.”

Unlike previous efforts, the requirements to comply with the Paris accord were going to become significant and more than noticeable to the average person. The result would be even more pushback in addition to more skepticism. Without support from the United States, international climate policies that, either as a bug or feature, centralize government power and control from the national level to the UN level are further imperiled.

More granularly on the motor fuels side, the next tier of Corporate Average Fuel Economy (CAFE) standards are already being called into review by the Trump administration, and it would seem likely that the similar Phase 2 diesel standards for commercial vehicles will come under review.

Trump has indicated his support for an all-of-the-above energy policy, and that does not seem to have changed. However, the specifics of how these initiatives will play out—from supporting electric vehicles (EVs) to tax incentives for biofuel production—are still question marks.

It can be expected that the virtual rubber stamp support seen under the Obama administration is a thing of the past. With the withdrawal from the Paris accord, we can get a solid indication that Trump was serious about his campaign promises.

 

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