The United States of Sanctions
The Use and Abuse of Economic Coercion
For decades, the world has understood the threat of climate change. But until recently, the economic and political obstacles to tackling the problem stymied global action. Today, that calculus has changed. Technological progress has made clean energy a profitable investment, and growing popular pressure has forced politicians to respond to the threat of ecological disaster. These trends have enabled major diplomatic breakthroughs, most notably the 2015 Paris agreement. In that pact, 195 countries pledged to make significant reductions in their greenhouse gas emissions. “We’ve shown what’s possible when the world stands as one,” proclaimed U.S. President Barack Obama after the talks concluded.
Now, however, that agreement is under threat. When it comes to climate change, U.S. President Donald Trump has replaced urgency with skepticism and threatened to pull the United States out of the Paris agreement. He has spent the early months of his presidency attempting to roll back the Obama administration’s environmental regulations and promising the return of the U.S. coal industry.
The Trump administration has not yet decided whether to formally leave the Paris agreement. Whatever it decides, the agreement itself will survive. Negotiators designed it to withstand political shocks. And the economic, technological, and political forces that gave rise to it are only getting stronger. U.S. policy cannot stop these trends. But inaction from Washington on climate change will cause the United States serious economic and diplomatic pain and waste precious time in the race to save the planet. Sticking with the deal would mitigate the damage and is clearly in the U.S. national interest, but Washington’s failure to otherwise lead on climate change would still hurt the United States and the world. So U.S. businesses, scientists, engineers, governors, mayors, and citizens must step forward to demonstrate that the country can still make progress and that, in the end, it will return to climate leadership.
A decade ago, the Paris agreement could never have been negotiated successfully. Effective collective action on climate change was simply too difficult to achieve because of the vast costs involved. But since then, rapid reductions in the price of renewable energy and increases in the efficiency of energy consumption have made fighting climate change easier, and often even profitable. By the time of the Paris negotiations, the world had reached a milestone that energy analysts had previously thought was decades away: in many places, generating energy from solar or wind sources was cheaper than generating it from coal. According to research from Bloomberg New Energy Finance, in 2015, clean energy attracted twice as much investment globally as fossil fuels.
As a result, the world has adopted clean energy far faster than experts expected. Consider the projections of the International Energy Agency, the world’s most respected forecaster of energy-market trends. In 2002, the agency predicted that it would take 28 years for the world to generate more than 500 terawatt-hours of wind energy; instead, it took eight. And in 2010, the agency projected that it would take until 2024 to install 180 gigawatts of solar capacity; that level was reached in 2015, almost a decade ahead of schedule.
This improbable progress has upended the once dominant assumption that economic growth and rising greenhouse gas emissions must go hand in hand. Between 2008 and 2016, the U.S. economy grew by 12 percent while carbon emissions from energy generation fell by about 11 percent—the first time the link between the two had been broken for more than a year at a time. This decoupling of emissions and economic growth has begun to occur in at least 35 countries, including China, where many believe that emissions will peak and begin to decline in the next few years, more than a decade earlier than the 2030 target China has set for itself. In fact, 2016 was the third year in a row when global emissions did not rise even as the global economy grew. Before this streak, only recessions had ever brought emissions down. This quiet shift represents a seismic change in the political economy of clean energy. Once, countries had to trade faster economic growth for reducing emissions. Now, they are racing against one another to claim the economic benefits of clean energy.
The incentives for politicians to address climate change will only strengthen.
The pace of change will likely continue to outstrip projections. Technological breakthroughs in energy storage will make renewable power cheap enough to use in more places and accelerate the move to electric cars and other electric transportation systems. China plans to invest $340 billion in renewable energy sources by 2020; Saudi Arabia is investing $50 billion. In the last year alone, India doubled its solar capacity. It is installing solar panels so fast that Prime Minister Narendra Modi’s audacious goal of reaching 100 gigawatts of solar capacity by 2022 no longer seems like a pipe dream.
As new technologies upend the economics of climate change, the politics surrounding the environment are changing, too. In 2008, the U.S. embassy in Beijing made a routine decision to place an air-quality monitor on its roof and tweet out the readings. It began as a way to provide information to Americans and other expats living in Beijing about how safe it was to go outside at any particular moment; most Chinese were unable to see the tweets, since China’s “Great Firewall” generally blocks Twitter. But as more Chinese citizens acquired smartphones, app developers created ways for them to bypass the filter and access the air-quality updates. Beijing’s middle-class residents reacted with outrage at the prospect of exposing their children to dangerous air pollution. Schools built giant domes for pupils to play in, safe from the polluted air. Many children started wearing heavy-duty masks on their way to school. The furor forced the Chinese government into action. By 2013, it had installed hundreds of air-quality monitors in over 70 of China’s largest cities. That same year, the government promised to spend billions of dollars to clean up the air, and it pledged to set initial targets for reducing the emissions of air pollutants in major cities.
Meanwhile, environmental activism across the world was moving from the fringe to the mainstream. Parents in India worried that pollution from vehicles was damaging their children’s health. Inhabitants of remote islands such as Kiribati anxiously watched the sea rising around them. Ranchers in the western United States saw their land ravaged by droughts and wildfires unlike any they had experienced before. Along with other alarmed citizens all over the world, they began calling on politicians to act, with louder and more unified voices than ever before.
When world leaders gathered in Paris in December 2015, they were responding to this wave of climate activism. At the conference, a group of over 100 countries that had traditionally been at odds on climate change formed the “high-ambition coalition.” Propelled by grass-roots activism, they successfully demanded that the agreement adopt the ambitious goal of limiting the warming of the earth’s atmosphere to 1.5 degrees Celsius. “Anything over two degrees is a death warrant for us,” said Tony de Brum, then the foreign minister of the Marshall Islands, an informal leader of the coalition. The incentives for politicians to address climate change will only strengthen as more people, particularly in developing countries, leave poverty for the ranks of the middle class and gain access to information about how climate change is directly affecting their lives and livelihoods.
This shift is already well under way. In January, in a speech that stood in stark contrast to China’s previous unwillingness to accept responsibility for tackling climate change, Chinese President Xi Jinping told the World Economic Forum, in Davos, that “all signatories should stick to [the Paris agreement] instead of walking away from it, as this is a responsibility we must assume for future generations.” And the day after Trump signed an executive order to begin undoing the rule known as the Clean Power Plan, which Obama had implemented to reduce emissions from power plants, the EU's climate action and energy commissioner, Miguel Arias Cañete, tweeted a picture of himself hugging China’s chief climate negotiator. “A new climate era has begun, and the EU and China are ready to lead the way,” the caption read.
These economic and political forces made the Paris agreement possible, but to get the entire world to sign on, negotiators still needed to clear a major diplomatic hurdle: deciding who should do what and who should pay for it. For about two decades after the 1992 Rio Earth Summit, climate negotiations were predicated on the idea that since developed countries had been responsible for the lion’s share of past greenhouse gas emissions, they should shoulder the burden of addressing global warming.
By the end of the last decade, that concept had clearly outlived its usefulness. As the world saw the economies of China and India grow rapidly, the United States and other developed countries could no longer justify to their citizens accepting limits on emissions when major emerging-market countries were doing nothing. And when China overtook the United States as the world’s largest emitter of carbon dioxide in 2007, it became clear that developed countries could not solve the problem alone. Indeed, by 2040, close to 70 percent of global emissions will come from countries outside the Organization for Economic Cooperation and Development, a group of mostly developed countries.
Yet for years, governments could not agree on an alternative approach. The size of the problem meant that all would have to participate. But no country was prepared to accept a supranational body that would dictate and enforce targets and actions. The failure of the 2009 Copenhagen climate conference showed that insisting on a rigid goal would create a zero-sum game in which every country tried to do less and make others do more. The Paris agreement solved this problem by combining the ambitious goal of a universal compact with the conservative method of allowing each country to decide for itself how it could contribute to hitting the overall target.
Obama hoped that if China and the United States—the two largest emitters—bought into this approach, others would follow. To that end, he sought an agreement between the two countries well in advance of the Paris negotiations. In November 2014, in a joint announcement, the United States promised to reduce its emissions by 26–28 percent below their 2005 levels by 2025, and China pledged to cap its emissions by 2030. The deal demonstrated that countries could move beyond the old approach and created the possibility of a universal effort to reduce emissions and claim the economic spoils of a clean energy boom.
With striking speed, countries at every stage of economic development joined the race. Before the negotiations had even begun in Paris, enough countries to account for over 90 percent of global emissions had established their own targets. This meant that, unlike in Copenhagen, countries came to Paris agreeing that they would all have to reduce emissions in order to meet the challenge of climate change.
The agreement has proved surprisingly durable.
Even with these commitments in hand, the process of getting nearly 200 countries to let go of the old model was painful. Perhaps inevitably, allowing each country to determine its own way forward meant that the initial pledges were insufficient. According to a study by a group of climate scientists published in the journal Science in 2015, even if all countries meet their targets and global investment in clean energy technology accelerates, the world will still have only a 50 percent chance of limiting warming to two degrees Celsius, and the 1.5 degree target will remain out of reach. Nevertheless, the move from a head-to-head climate battle to a global clean energy race created the potential for collective action to accelerate progress.
More than a year later, the agreement has proved surprisingly durable. Throughout 2016 and early 2017, countries moved aggressively to reach their targets, even as world events, such as the Brexit vote and Trump’s election, signaled a global shift away from multilateralism. India recently set a goal of putting six million hybrid and electric cars on its roads by 2020 and ending the sale of internal combustion vehicles in the country by 2030. Last December, Canada created a national carbon-pricing regime. In April, the United Kingdom went a full day without burning coal to generate electricity, the first time it had done so since 1882. And although most expected that it would take years for enough countries to ratify the Paris agreement for it to formally take effect, the world accomplished that goal just 11 months after the talks ended. Even OPEC has embraced the accord.
This progress suggests that the agreement’s main assumption—that countries would grow more ambitious over time—was a reasonable bet. The agreement encourages governments to raise their climate targets every five years, but it imposes no binding requirements. A more stringent accord would have looked better on paper, but it might well have scared many countries away or led them to set their initial targets artificially low. Because the economic forces that gave rise to the agreement have continued to accelerate, more and more countries now see the benefits of leading in the fast-growing clean energy industries. So they will likely raise their targets to reap the rewards of staying ahead of the pack.
Although the Trump administration cannot halt global progress on climate change, it can still hurt the U.S. economy and the United States’ diplomatic standing by abandoning the Paris agreement. On everything from counterterrorism and trade to nuclear nonproliferation and monetary policy, the Trump administration will need to work with other countries to accomplish its agenda. If it pulls the United States out of the Paris agreement, it will have a harder time winning cooperation on those issues because other countries increasingly see leadership on climate change in the same way they see security pledges, foreign assistance, or aid to refugees, as a test of a country’s commitment to its promises and of its standing in the global order. When, in 2001, the Bush administration stepped away from the Kyoto Protocol, it was surprised by how harshly China, India, the EU, and many others criticized the move. Since then, the world has made dramatic progress on cooperation over climate change. So abandoning the Paris agreement would do far worse diplomatic damage.
Leaving the Paris agreement would also cause the United States to lose out to other countries, especially China, on the benefits of a clean energy boom. More than three million Americans work in the renewable energy industry or in the design, manufacture, or maintenance of energy-efficient products or clean energy vehicles, such as electric cars. Employment in the solar and wind energy industries has grown by about 20 percent each year in recent years, roughly 12 times as fast as employment in the economy as a whole. Maintaining this pace will require sustained investment and the ability for U.S. industries to capture larger shares of the growing clean energy markets abroad.
On this front, China is already starting to overtake the United States. According to data from Bloomberg New Energy Finance and the UN Environment Program, in 2015, China invested $103 billion in renewable energy; the United States invested $44 billion. China is home to five of the world’s six largest solar-module manufacturers and to the world’s largest manufacturers of wind turbines and lithium ion, which is used to make the batteries needed to store renewable energy.
It is likely inevitable that much of the manufacture of lower-value-added clean energy products will move away from the United States. But it is troubling that the country risks ceding ground on clean energy innovation, as well. According to a study by the public policy experts Devashree Saha and Mark Muro, the number of clean energy technology patents granted in the United States each year more than doubled between 2001 and 2014, but it declined by nine percent from 2014 to 2016. Other countries are filling the void. “In 2001, both U.S. and foreign-owned companies generated about 47 percent of [clean energy technology] patents each,” Saha and Muro write. But “by 2016, 51 percent of all cleantech patents were owned by large foreign multinationals, while only 39 percent were generated by U.S. companies.”
A lack of U.S. leadership will cost the world valuable time.
Should the Trump administration abandon the Paris agreement, these trends will likely get worse. If Washington is not part of crucial discussions as details of the agreement are finalized over the coming years, other governments could shape the rules around intellectual property, trade, and transparency in ways that would disadvantage the U.S. economy. Some countries have also suggested that if the United States leaves the Paris agreement, they would consider imposing retaliatory measures, such as import taxes. Even if they do not, with the United States outside the Paris agreement, foreign governments, international agencies, and private investors might direct funds for clean energy research, development, and deployment to U.S. competitors. China has already pledged more money than the United States has to help poorer countries develop their markets in clean energy. If the United States leaves the discussion, it will lose its influence over where and how those funds get spent. And if Washington skips future rounds of negotiations within the UN framework, an emboldened China might look for ways to water down the Paris agreement’s rules on important issues, such as requiring all countries to submit their emissions plans to independent reviews.
For all these reasons, the Trump administration should keep the United States in the Paris agreement. Yet that by itself will not be enough. Even inside the agreement, if Washington otherwise fails to lead on climate change, the United States will still suffer, as will the rest of the world. Without robust government investment in clean energy, and government policies that help set a stable price for greenhouse gas emissions, the U.S. economy will not see the full dividends of the transition to clean energy.
A lack of U.S. leadership will not just hurt the United States; it will cost the world valuable time. Rising temperatures are outpacing efforts to cut emissions. Last year was the hottest on record, the third year in a row to earn that distinction. Sea ice in the Arctic and around Antarctica has reached record lows. And the pace of extreme weather events is accelerating across the United States and the rest of the world.
To reverse these trends, countries need to move to decarbonize their economies even faster. Although other countries will move forward with the Paris agreement even without the United States, getting them to dramatically raise their targets without U.S. leadership will be difficult. China and the EU will continue to compete in the clean energy race, but only the United States has the political clout and resources to spur other countries to action, the way it did before the Paris negotiations. A U.S. president using every possible diplomatic tool at his or her disposal—as Obama did—can bring remarkable results.
Because the Paris agreement calls on most countries to set their next round of national targets after 2020, much will hinge on the next U.S. presidential election. If the next U.S. administration restores U.S. leadership on climate change, it might be able to make up for lost time.
Meanwhile, not all progress in the United States will stall. Several states, including California, Nevada, New York, and Virginia, are cutting their greenhouse gas emissions and seeing the economic benefits firsthand. They should raise their sights even further and remind the world of the collective impact of their efforts. Major U.S. cities are finding novel ways to go green. They should explore new partnerships with foreign counterparts. American companies will need to speak loudly and clearly about the economic benefits of a credible plan to reduce emissions and the costs of ceding leadership on clean energy to China and other countries. American scientists and engineers are poised to transform several technologies crucial to tackling climate change, such as batteries and those used for carbon capture and storage. Engineers could exploit recent breakthroughs in satellite technology, for example, to create a real-time global emissions monitoring system that could settle disputes between countries over the extent of their past progress and allow diplomats to focus on the future. And concerned citizens must continue to organize, march, and convey to politicians that ensuring clean air and water in their communities is a requirement for their votes.
The Paris agreement represents real progress, but it alone will not solve the climate crisis. Its significance lies primarily in the economic, technological, and political shifts that drove it and the foundation for future action it laid. Its negotiators made it flexible enough to withstand political changes and policy differences while betting that the global movement toward cleaner energy would continue to accelerate. The road may not always be smooth, but in the end, that bet looks likely to pay off.