Tuesday, June 6, 2017

6/6/17: Trump, Paris, Climate: The Problem is Bigger than COP21

U.S. withdrawal from Paris Climate Accord has been described by various policymakers, analysts and journalists around the world as a travesty, betrayal of the environment, and the surrender of the U.S. leadership (from undefinable 'global leadership' to historically incorrect 'environmental leadership'). In reality, it is none of the above, despite the fact that it does not bode well for the future of environmental policies worldwide and for the environment in general.

Paris Agreement: Taking an Unnecessary 'Exit' Route

The reasons for why the U.S. 'exit' from Paris deal is more rhetorical than tangible are numerous, but here are some major ones.

1) Paris COP21 Agreement was never ratified by the U.S. so, technically-speaking, the Trump Administration has managed to 'exit' what the U.S. has not 'entered' into in the first place. Let me explain, briefly: the Paris climate agreement (the Paris COP21 Agreement) was "adopted" via a Presidential executive order on September 2016. This raised a range of questions - at the time barely-covered by the media - as to the validity of such an order. Unlike normal executive orders, the Treaty adoption was committing the U.S. to an agreement with a four-year breaking clause period, thus de facto binding the one-over Presidential Administration to Obama Administration order. In contrast to the U.S., all other signatories to the agreement required ratification by their legislatures or via other constitutionally-stipulated procedures. The U.S. was unique, to-date, in not seeking domestic ratification. 

A constitutional position - that the Paris treaty should not be treated as an ordinary 'executive order' agreement was expressed by some legal scholars who view the Paris agreement as more than a simple executive agreement. Bodansky (2016) points to the fact that COP21 adoption via an executive order belongs to a category of commitments that "have a long, heretofore undiscovered [constitutional] pedigree." In other words, the actual act of 'adoption' of the Paris agreement by the U.S. can be legally shaky and it is shaky especially given that there is clearly not a chance that the COP21 can be ratified by the current Congress. 

As the result, Trump Administration did not claw back on U.S. international commitment, but it did renege on President Obama's international commitment. The U.S. is not equivalent to President Obama, unless we get comfortable with an idea of Presidents residing above the Constitution. Which, given the current White House resident, might be the case of 'watch what you wish for'.

2) President Trump has committed to withdrawing from the agreement some time in late 2020, and potentially, given the questionable constitutionality of the agreement validity in the first place, some time after that or never. The Paris Agreement allows withdrawal only following a four year delay period, after the agreement coming into power. If the U.S. adoption of the agreement requires approval by the Congress, the actual date of the treaty coming into power can be set as the date of such an approval. And the four year delay period will have to start from that date. I am not a legal scholar, so I am speculating on this, but it might just be the case that the U.S. might technically remain within Paris agreement past 2020 election and into the next Administration. 

3) Now, consider the gargantuan misrepresentation of the nature of the Paris agreement by the Trump Administration. The President made repeated statements that Paris agreement imposes severe burdens on the U.S. economy, with potential for costing some 2.7 million American jobs. In reality, the agreement is a non-binding and non-enforceable commitment. If the U.S. faced with severe damages to its economy from Paris commitments, instead of withdrawing from the accord, the Washington could simply reduce promised deliverables and let its emissions reduction targets lapse. There would have been no repercussions for the U.S., beyond bad PR (the same bad PR that is already forthcoming). In fact, one of the reasons that Nicaragua (one of only two non-signatories, alongside Syria) refused to join the agreement was that the SOP21 lacked meaningful enforcement and had no commitment obligations with respect to targets. 

In other words, Trump Administration 'exited' an accord that had, materially, no legally binding power to change anything. Which also flies in the face of the President claiming he can re-negotiate U.S. position in the Paris agreement. Why would you need to renegotiate that which can be changed unilaterally at will?

As the Paris Agreement is a non-binding and non-enforceable, calling the U.S. participation in it an example of U.S. 'leadership' is nonsense. Calling the U.S. withdrawal from it a 'tragedy' is a case of hysterical overreaction. And, equally, calling it 'draconian' in terms of its potential impact on the U.S. is pure demagoguery. 

Policies, not Non-binding Treaties, Matter

What really is of concern here is not the U.S. participation or non-participation in the Paris COP21 Agreement, but the Administration's policies on the environment, including matters relating to President Trump's desire to 'resurrect' the U.S. coal industry, and his push for more oil and gas production, as well as his attitudes to the EPA, the plans to open up commercial and mining / extraction development on protected Federal lands, etc, etc, etc. 

These policies are worth criticising and fretting about. COP21 is only tangentially material to them. 

In fact, President Trump's obsession with making 'coal great again' is worrying not only from environmental perspective, but also from economic development perspective, and it exemplifies the Administration's bizarre view of the U.S. economy. For a number of reasons, which I don't have room to discuss here at length, but are worth mentioning in passing. 

Much of the decline in coal's fortunes from 2012 on is accounted for by non-environmental policy factors. As the report shows, growth in energy supply from natural gas accounted for 49 percent of the total market share loss accruing to coal. Further 26 percent of coal's decline was down to a drop in overall demand, and 18 percent was accounted for by renewables. Only 3-5 percent of coal's market share decline was down to Obama Administration's environmental regulations.

Someone has told President Trump a porky: clawing back on Obama's environmental regulations would have saved, at most, only 2,900 coal miners jobs out of 58,000 lost during the 2012-2016 period. Though even that figure is highly questionable, as research linked above suggests that the true number of jobs saved would be closer to 1,700. 

Here's a chart from the above-linked study estimating jobs impact of the President Trump's policies favouring coal:

The U.S. leadership on the environment comes through with all its shoddy 'glory' in coal's fortunes history. High coal prices in the first decade of the century were driven by the demand for energy from China and, arguably, by sky high global price of oil. As Chinese demand fell, starting, in 2011, the U.S. environmental leadership turned out to have little to do with globally collapsing demand for coal and coal prices or with an ongoing substitution away from more CO2-intensive fossil fuels in the global energy production mix. Active Chinese shift away from coal to other sources of energy plus decline in the rate of growth on Chinese energy demand drove down global prices, accounting for almost half of the entire decline in the U.S. (and global) coal's fortunes.

In simple terms, coal hardly makes any sense as a target for either investment, or jobs creation, or economic value added creation. Not because the U.S. is leading the world on the environmental policies, but because China is shifting its energy mix toward cleaner alternatives. Worse, improving coal demand outlook makes even less sense for an Administration that actively promotes more gas production and exports. President Trump is missing the main point of changing global economy: no one wants coal anymore. Nor do many want more supplies of oil and gas, as clearly evidenced by collapse in worldwide prices of these sources of energy. 

Another point shows that the alleged U.S. leadership on environmental policies has been bogus at best, even during the 'environmentally conscious' Obama era. The very reason why the COP21 Agreement was left without an enforceable commitment mechanism and with a unilaterally adjustable targets is... the U.S. push for these features of the agreement. During the treaty negotiations, it was the U.S. that insisted on undermining the treaty strengths in order to increase the number of signatories. And although the U.S. was one of the countries that insisted on public monitoring of the Paris Agreement progress, such insistence was little more than rhetorical, given the fact that global research into CO2 emissions would have provided de facto public disclosure of countries' progress.

COP21: A Problem Was Always Bigger than the Solution

Confused, yet? You shouldn't be. The problem with the Paris agreement is the same as the problem with the U.S. 'leadership' on the environment and is identical to the broader problem of so-called global 'leadership' on the environment: there is no material will on behalf of core countries (including the U.S., but excluding Europe) to do anything serious about setting, achieving and enforcing robust and meaningful environmental targets. 

Paris agreement in and by itself is a fig leaf of decorum. Being a part of it or being outside of it are rhetorical positions, more designed to shore up symbolism of 'something being done', than actually doing what would be needed to address a wide-ranging case of environmental degradation and depletion of the natural capital. Note: environmental problems vastly exceed carbon emissions, alone, despite the fact that media and politicians are hell-bent on talking primarily about carbon.

Which brings us to another mystery, worth mentioning in passim, again due to space constraints. What constituency does President Trump serve in withdrawing from the agreement? Not getting drawn into speculating about the right- v left- wing opportunism, here are the simple facts: the Paris Agreement is more popular than the President himself. November 2016 survey by the Yale University showed broad-based support for the treaty and the U.S. participation in it. Some snapshots from the survey:

  • 69% of registered voters said "the U.S. should participate in the international agreement to limit climate change (the Paris COP21 agreement), compared with only 13% who say the U.S. should not";
  • 66% of registered voters "say the U.S. should reduce its greenhouse gas emissions, regardless of what other countries do", aka independent of the COP21; 
  • "A majority of registered voters want President-elect Trump (62%) and Congress (63%) to do more to address global warming";
  • "A majority of registered voters say corporations and industry should do more to address global warming (72% of all registered voters; 87% of Democrats, 66% of Independents, and 53% of Republicans)". Which means that, based on party affiliation, in each party, including the Republican party, majority of voters support greater action on global warming;
  • When it comes to 'making coal great again', 70% of U.S. registered voters "support setting strict carbon dioxide emission limits on existing coal-fired power plants to reduce global warming and improve public health, even if the cost of electricity to consumers and companies would likely increase – a core component of the EPA’s Clean Power Plan. Democrats (85%), Independents (62%) and Republicans (52%) all support setting strict limits on these emissions". Again, we have majority support even amongst the Republicans;
  • "A large majority of registered voters say the Federal government should prepare for the impacts of global warming, prioritizing impacts on public water supplies (76%), agriculture (75%), people’s health (74%), and the electricity system (71%)".
  1. Carbon intensity of the global economy will continue to fall, irrespective of whether the U.S. presidential administration likes it or not. The reasons for this go beyond simple carbon accounting, and deeper into the issues of public health, quality of life and changing energy intensities of production. The transfer is happening not from the U.S. to foreign destinations, but from the U.S. carbon-intensive economy to the U.S. carbon-reducing economy. The same transfer is happening in other economies. Here's an OECD report on the trend and potential for such transfers. More partisan on the issue NDRC had this report on jobs generation in the alternative energy sector.
  1. Reductions in carbon intensity of production are not a zero sum game, but rather create opportunities for innovation, increasing value added, deepening the customer base and improving efficiencies in production and investment. Environmental market worldwide is estimated at USD 1.4 trillion in just 'advanced energy' segment, of which the U.S. domestic market accounts for just 1/7th. Cleantech market size is USD 6.4 trillion, and so on. An example of the opportunity space open for business investment and development in the environmental services, energy and manufacturing sectors is so significant that days after President Trump's decision to exit COP21, the State of California signed a long-term agreement with China to engage in joint development of "climate-positive" technologies and emissions trading. Ironically, few years back, Chinese carbon permits system drove the global carbon markets off the cliff. Today, Beijing is trying to position itself as a positive player in rebooting these markets.
  1. Environmental protection (and policies aimed at alleviating the adverse impact of global warming) is more than a market for new goods and services. From both economic and (more importantly) social perspectives, it is also about improving quality of air, quality of water (e.g. here and here), public health (for example, here) and food security (e.g. here and here). In the end, treating environment as part of our productive, long-term investable, tangible capital, is more about preventing future social suffering and unrest than about earning profits. But, even for those politicians solely concerned with jobs and financial or economic bottomline, the case for environmental protection-led economic development is very strong.
So the really puzzling matter for the Trump Administration and the U.S. political elites (namely the Republicans' dominated Congress) is: what on Earth are they doing in dismantling the environmental policies in a wholesale fashion? 

President Trump, and a range of his advisers, appear to believe that environmental policies are zero-sum game, transferring income, wealth and jobs from 'traditional' (carbon-intensive) sectors of the U.S. economy to foreign competitors. Which is simply false. For a number of reasons, again worth touching here:

Incidentally, China's commitments (or pledges) prior to the COP21 clearly show that its leadership sees all three of the above points as salient for the country future. Back in 2014, the Chinese government has promised to peak its emission by or before 2030, first time ever setting a deadline for peak emissions. It also promised to increase the renewables share in its energy mix to 20% by the same date. Doing this will require China to instal some 800-1000 gigawatts of carbon-free energy generation capacity, or more than its current coal capacity and close to the total current market size for electricity generation in the U.S. The Obama Administration claimed credit for 'bringing China' to agree on these environmental targets, but reality is quite different: Beijing is desperate to clean up its urban environment, claw back on severe pollution of its water sources and secure some sort of sustainable agriculture and food production. Of course, not is well on the Chinese front either. As a side note, those who are worried about China taking the leadership jersey from the U.S. on environment, should read this report: like the U.S., China is producing more rhetoric than action.

In short, the problem of addressing huge gaps between political rhetoric and the reality of our deteriorating global environment remains insurmountable to our political leaders. President Trump's extreme position on COP21 is just an outlier to the cluster of politicians worldwide who are strong on promises and media soundbites, yet unable and unwilling to develop a global policy framework that can deliver measurable, enforceable and transparent commitments on the environment. The problem of finding a solution to continued depletion of our natural capital around the world remains larger than COP21. With the U.S. 'leadership' in it, or without.
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