The Pandemic Depression
The Global Economy Will Never Be the Same
President Donald Trump’s decision to withdraw the United States from the Paris climate agreement on June 1 was terribly misguided, and his justification for doing so was misleading and untruthful. As he announced in the Rose Garden that day, “The Paris climate accord is simply the latest example of Washington entering into an agreement that disadvantages the United States to the exclusive benefit of other countries, leaving American workers…and taxpayers to absorb the cost in terms of lost jobs, lower wages, shuttered factories, and vastly diminished economic production.” The reality is that leaving the accord will neither bring back jobs nor help the taxpayer, but will most certainly hurt the United States and the world.
The initial reaction from abroad was one of dismay and confusion over what the president was actually trying to say. Trump declared, without seeming to understand the terms and dynamics of the agreement, “I will withdraw from the Paris climate accord but begin negotiations to reenter either the Paris accord or an entirely new transaction on terms that are fair to the United States.” First of all, renegotiation is a nonstarter. If this was not already clear, it was made more so when within hours of the announcement world leaders rebuked the idea. British Prime Minister Theresa May, Canadian Prime Minister Justin Trudeau, French President Emmanuel Macron, German Chancellor Angela Merkel, and Italian Premier Paolo Gentiloni, among many other heads of state expressed their refusal to return to the drawing board.
Even if Washington could renegotiate, it cannot “reenter” the Paris agreement until the end of 2019. The treaty requires that any party wishing to leave wait three years from when the agreement came into force in November 2016. Once withdrawal is initiated, it takes another year of negotiations before the process is complete. This means that the United States will essentially remain in the agreement for the remainder of Trump’s current term as president.
The idea of “unfairness” is equally puzzling since the agreement is nonbinding. Each party determines its own targets, which under the administration of former U.S. President Barack Obama had been set for a 26–28 percent reduction in emissions from 2005 levels by 2025 and would have been achieved through the shuttering of coal-fired power plants and the building of new wind and solar capacity. In an executive order in March, Trump began the process of rolling back Obama-era climate regulations, which, according to a recent analysis by the Rhodium Group consulting firm, would mean an emissions reduction of only 15–19 percent from 2005 levels by 2025. If Trump felt that Obama’s stated contribution to the Paris accord was unfair, he could have reset it to this lower standard, rather than pull out of the Paris agreement altogether.
Trump also considers unfair the United States’ financial contributions to the Green Climate Fund, to which industrialized countries have voluntarily pledged $10 billion since 2013 to help low-income countries reduce their greenhouse gas emissions and adapt to the effects of climate change. But if the United States were to fulfill its original $3 billion commitment to the fund, this would amount to $9.41 per capita, making it only the 11th most generous donor. (Sweden tops the list with a $59.31 per capita pledge.) Since Trump plans to halt contributions to the fund entirely, only allowing for the $1 billion already delivered under Obama, the United States will commit roughly $3 per capita, ranking second to last, a bit above South Korea at $2 per capita.
Given that the United States is one of the largest contributors to accumulated greenhouse gas concentrations in the atmosphere, its refusal to donate further to the fund makes it appear mean-spirited. The United States accounts for about 14 percent of global greenhouse gas emissions, with China the largest emitter at 30 percent, followed by the European Union at ten percent and India at seven percent. But climate change is a function of atmospheric concentrations, and when looking at cumulative emissions since 1850, the United States is first with 29 percent of the total, then the EU with 27 percent, and finally China and Russia with eight percent each. With Trump’s announced withdrawal, the United States will join Nicaragua and Syria as the only countries among 195 that are not party to the Paris agreement.
What’s more, the Paris agreement is more than fair to the United States. Its very structure answers all of Washington’s demands, going back to the bipartisan Byrd–Hagel Resolution of 1997, in which the U.S. Senate voted 95–0 against the ratification of any international climate agreement that did not include the large emerging economies (Brazil, China, India, Mexico, South Africa, and South Korea). After more than 20 years of stalled negotiations, the Paris agreement broke through the deadlock, increasing the scope of participation from countries accounting for just 14 percent of global emissions in the current commitment period of the Kyoto Protocol to countries accounting for a full 97 percent. Other longstanding U.S. demands that the Paris agreement fulfilled include granting all countries the right to determine their own targets and paths of action, as well as demanding transparency from countries when reporting their emission levels and the progress they’ve made toward their goals. In other words, the Paris agreement is eminently fair to the United States, and is, in fact, the answer to Washington’s bipartisan prayers after more than 20 long years.
THE POTENTIAL FALLOUT
Trump’s decision to withdraw from the Paris climate agreement is a rebuke not only to heads of states around the world, but also to key senior officials of his administration such as Secretary of State Rex Tillerson who strongly supported the Paris agreement when he was CEO of Exxon-Mobil and has argued in favor of remaining a party to the agreement since joining the administration. There was also broad-based support for the agreement within U.S. private industry—from electricity generators such as PG&E and National Grid, to oil companies such as Chevron, ConocoPhillips, Exxon-Mobil, BP, and Shell, and a very long list of manufacturers, including giant firms such as General Motors and General Electric. Even some of the largest coal producers, such as Arch Coal, Cloud Peak Energy, and Peabody Energy, informed the president that they wanted the United States to stay in the agreement. This broad consensus stemmed from the simple reality that any domestic benefits of withdrawing from the Paris climate accord are less than the costs. Furthermore, dropping out of the Paris accord will have no meaningful impact on employment. Coal jobs are not coming back. The losses, which took place over decades, were due to increased productivity from technological change in the coal sector, and more recently, market competition from low-priced natural gas for electricity generation.
The potential damages of the U.S. withdrawal, however, are immense, particularly to U.S. influence. By retracting its participation, the United States will lose its ability to pressure other countries, such as the large emerging economies of China and India, to do more. In fact, it’s possible that the announcement may encourage some nations to do less than they had planned. The worst possible outcome would be the unraveling of the Paris coalition altogether, but initial indications from the EU, China, India, and other key parties offer some hope that they will maintain their targets and that some may even make them more aggressive. Only time will tell whether their rhetoric translates into real action. More broadly, at a time when the United States needs to cooperate globally on matters of national security, trade, and a host of other issues, it is counterproductive to willingly become an international pariah on global climate change.
Of course, withdrawing from the Paris climate accord is not the end of all climate change action in the United States. Climate policies in California, Oregon, Washington, and the northeast will remain in place, and quite possibly be strengthened. More than half of all states have renewable energy policies, and the Republican governors of Illinois and Michigan recently signed legislation aimed at increasing solar and wind power generation. At the federal level, important tax credits for wind and solar power continue to receive bipartisan support in the U.S. Congress. But it is highly unlikely—in the absence of a significant economic recession—that those policies (plus others from cities across the country) will be sufficient to achieve the climate targets that Obama had set.
For Trump’s core voter base, the move was probably perceived in very positive terms. As Cary Coglianese, a professor of law and political science at the University of Pennsylvania, has said, “For Trump supporters it looks like he’s delivering on a campaign promise—it looks like he’s standing up for Americans against the rest of the world.” The president’s announcement certainly aligns with his “America First” campaign slogan, and it will likely rally his core constituency as he faces serious difficulties in Washington—from congressional hearings for his key advisers and Justice Department investigations into his ties to Russia. As I and Ban Ki-moon, former Secretary-General of the United Nations, wrote in April in The Boston Globe, “reducing emissions will not be cheap or easy, but the greatest obstacles are political.”
Truly, Trump’s decision to withdraw the nation from the Paris climate agreement was not based on science or sound economics, but on a confused, misguided, and simply dishonest desire to score some short-term political points with his voters. What he sacrifices in the long term will be immensely more difficult for the country to win back at the ballot box: authority, credibility, and influence. Sadly, former Mexican President Vincente Fox may have summed it up best when he said, “The United States has stopped being the leader of the free world.”