What Does the Trump Victory Mean for Climate Change Policy?

 

Those of you who have read my previous essay at this blog, “This is Not a Time for Political Neutrality” (October 9, 2016), know that my greatest concerns about a Trump presidency (then a possibility, now a certainty), were not limited to environmental policy, but rather were “about what a Trump presidency would mean for my country and for the world in realms ranging from economic progress to national security to personal liberty,” based on his “own words in a campaign in which he substituted impulse and pandering for thoughtful politics” … and “built his populist campaign on false allegations about others, personal insults of anyone who disagrees with him, and displays of breathtaking xenophobia, veiled racism, and unapologetic sexism.”

That’s a broad indictment, to be sure, but whatever real expertise I may have is actually limited to environmental, resource, and energy economics and policy, and so that has and will continue to be the real focus of this blog, “An Economic View of the Environment.”  With that in mind, I return today from last month’s brief immersion in partisan politics to discuss climate change policy.

Yesterday, an editor at The New York Times asked me to write a 500-word essay giving my view of what the Trump victory will mean for climate policy.  This morning, my very brief essay was published under the headline, “Goodbye to the Climate.”  Given the brevity of the piece, it does not touch on many issues and subtleties (I come back to that at the end of today’s blog post), but rather than take the time to expand it, I want to get this to you quickly, and so I am simply reproducing it as it first appeared in the Times (along with an interesting group of other essays, under the overall heading, “What Happened on Election Day:  How the election and Donald Trump’s victory looks to Opinion writers.”

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The New York Times

Goodbye to the Climate

By Robert N. Stavins

Donald J. Trump once tweeted that “the concept of global warming was created by and for the Chinese in order to make U.S. manufacturing noncompetitive.” Twitter messages may not be clear signs of likely public policies, but Mr. Trump followed up during the campaign with his “America First Energy Plan,” which would rescind all of President Obama’s actions on climate change.

The plan includes canceling United States participation in the Paris climate agreement and stopping all American funding of United Nations climate change programs. It also includes abandoning the Clean Power Plan, a mainstay of the Obama administration’s approach to achieving its emissions reduction target for carbon dioxide under the Paris agreement.

What should we make of such campaign promises? Taking Mr. Trump at his word, he will surely seek to pull the country out of the Paris pact. But because the agreement has already come into force, under the rules, any party must wait three years before requesting to withdraw, followed by a one-year notice period.

Those rules would seem to be mere technicalities. The incoming Trump administration simply can disregard America’s pledge to reduce carbon dioxide emissions by 26 to 28 percent below the 2005 level by 2025. That is bad enough. But the big worry is what other key countries, including the world’s largest emitter, China, as well as India and Brazil, will do if the United States reneges on its pledge. The result could be that the Paris agreement unravels, taking it from the 97 percent of global emissions currently covered by the pact to little more than the European Union’s 10 percent share.

In addition, Mr. Trump’s Environmental Protection Agency probably will stop work on regulations of methane emissions (a very potent greenhouse gas) from existing oil and gas operations. Undoing complex existing regulations, such as the Clean Power Plan, will be more difficult, but a reconstituted Supreme Court will probably help President Trump when that plan inevitably comes before the court. Also, the new president will most likely ask that the Keystone XL pipeline permit application be renewed — and facilitate other oil and gas pipelines around the country.

On the campaign trail, Mr. Trump promised to “bring back” the coal industry by cutting environmental regulations. That may not be so easy. The decline of that industry and related employment has been caused by technological changes in mining, and competition from low-priced natural gas for electricity generation, not by environmental regulations. At the same time, Mr. Trump has pledged to promote fracking for oil and gas, but that would make natural gas even more economically attractive, and accelerate the elimination of coal-sector jobs.

If he lives up to his campaign rhetoric, Mr. Trump may indeed be able to reverse course on climate change policy, increasing the threat to our planet, and in the process destroy much of the Obama legacy in this important realm. This will make the states even more important players on this critical issue.

Robert N. Stavins is a professor at Harvard, where he directs the Harvard Project on Climate Agreements.

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Given the brevity of the piece, it is not intended to be comprehensive of the many implications for climate change policy of the Trump victory (nor the implications of the Republicans continuing to hold majorities in both houses of Congress).

And I did not get into the many subtleties of the issues I identified.  At a bare minimum, these would include:

  • the possibility of the new administration trying to bypass the four-year delay involved in dropping out of the Paris climate agreement by taking the one-year route of dropping out of the overall United Nations Framework Convention on Climate Change (UNFCCC) – signed by President George H.W. Bush and ratified by the U.S. Senate in 1992;
  • federal “climate change policies” that have been bipartisan and are therefore much less likely to be repealed, such the latest CAFE and appliance efficiency standards, and the recently extended wind and solar tax credits; and
  • the myriad of sub-national climate change policies, ranging from AB-32 in California to the Regional Greenhouse Gas Initiative in the northeast (It’s not a coincidence that there’s a high – although not perfect – correlation between the states Secretary Clinton won in the election and the location of the most ambitious climate change policies).

On another occasion, after I’ve had an opportunity to reflect more calmly and carefully on the implications of the forthcoming Trump presidency for environmental, natural resource, and energy policy, I will return to this topic.  But for now, I have to prepare for my trip in a few days to Marrakech, Morocco, for the annual UNFCCC negotiations.  Given the election results, my meetings there may be quite strange, if not surreal. I hope to write about that in my next essay at this blog.

A Key Moment for California Climate Policy

The past year has been a crucial time in international climate negotiations.  In December, 2015, in Paris, negotiators established an agreement on the next round of targets and actions to succeed the Kyoto Protocol, which was signed in 1997 and will effectively close down in 2020.  In Paris, negotiators set up a new and meaningful agreement for multinational action through individual country “Intended Nationally Determined Contributions” (INDCs).  The Paris round was crucial, because it expanded the coalition of contributions from countries responsible for 14% of global emissions under Kyoto (Europe and New Zealand) to 187 countries responsible for 96% of emissions under the Paris Agreement.

California’s Role in Global Climate Change Policy

California sent a delegation to the Paris talks. While not officially a party to the negotiations, California government officials attended to show support for broad and meaningful action.  For many years, spurring action beyond California’s borders has been the key rationale for developing a California-based climate policy.  This began with Assembly Bill 32 (AB 32), the Global Warming Solutions Act of 2006.  Initially, the focus was on encouraging action within the United States, including federal legislation, state-level actions, and multi-state compacts, but subsequent domestic action turned out to be much less than originally anticipated. As a result, California’s focus shifted to the international domain.

This is a good time to consider how the State can best demonstrate leadership on this global stage.  Action by all key countries, including the large emerging economies – China, India, Brazil, Korea, and South Africa – will be necessary to meaningfully address the climate problem.  Significant multinational contributions will be necessary to avoid having California’s aggressive in-state actions be for naught.  Absent such multilateral action, ambitious California policies do little or nothing to address the real problem.

But California can play a very important role by showing leadership – in two key ways.  One is to demonstrate a commitment to meaningful reductions in (greenhouse gas) GHG emissions.  In this regard, California has more than met the bar, with policies that are as aggressive as – if not more aggressive than – those of most countries.

The other way is to show leadership regarding how reductions of GHG emissions can best be accomplished – that is, in regard to progressive policy design.  California has a sophisticated GHG cap-and-trade system in place, which while not perfect, has many excellent design elements.  Countries around the world are now planning or implementing cap-and-trade systems, including in Europe, China, and Korea.  These countries are carefully watching decisions made in California, with particular attention to the design and implementation of its cap-and-trade system.  California’s system, possibly with a few improvements, could eventually be a model for even larger systems in other countries.

Can California Provide a Good Model of Progressive Policy?

Unfortunately, California’s climate policy has not relied heavily on its cap-and-trade system to achieve state targets.  Furthermore, rather than increasing reliance on this innovative market-based climate policy over time, recent proposals have doubled-down on the use of less efficient conventional policies to achieve GHG reductions. While some of these so-called “complementary policies” can be valuable under particular circumstances, they can also create severe problems.

One example of this is the attempt to employ aggressive sector-based targets through technology-driven policies, such as the Low Carbon Fuels Standard (LCFS).  In the presence of a binding cap-and-trade regime, the LCFS has the perverse effect of relocating carbon dioxide (CO2) emissions to other sectors but not reducing net emissions, while driving up statewide abatement costs, and suppressing allowance prices in the cap-and-trade market, thereby reducing incentives for technological change.  That is bad news all around.  These perverse outcomes render such policies of little interest or value to other regions of the world.

The magnitude of the economic distortion is illustrated by the fact that allowances in the California cap-and-trade market have recently been trading in the range of $12 to $13 per ton of CO2, while LCFS credits have traded this summer for about $80 per ton of CO2.

While reduction in transportation sector GHG emissions is clearly an important long-run objective of an effective climate policy, if the approach taken to achieving such reductions is unnecessarily costly, it will be of little use to most of the world, which has much less financial wealth than California and the United States, and will therefore be much less inclined to follow the lead on such costly policies.

The Path Ahead

With China now the largest emitter in the world, and India and other large developing countries not very far behind, California policies that achieve emission reductions through excessively costly means will fail to encourage other countries to follow, or even recognize, California’s leadership.  On the other hand, by increasing reliance on its progressive market-based system, California can succeed at home and be influential around the world.

Can the WTO Take a Lesson from the Paris Climate Playbook?

As readers will know from my previous entry at this blog (“Paris Agreement — A Good Foundation for Meaningful Progress”, December 12, 2015), I was busy with presentations and meetings during the 21st Conference of the Parties (COP-21) of the United Nations Framework Convention on Climate Change (UNFCCC) in Paris last December. However, I did have time to reflect on the process that was leading to the then-emerging Paris Agreement, including a series of discussions with my Harvard colleague – Professor Robert Lawrence, a leading international trade economist –who was back in Cambridge.

He and I realized that negotiators in a very different realm – international trade – could benefit from observing the progress that was being made in the international climate policy realm in Paris. This led to a co-authored op-ed that appeared in the Boston Globe on December 7, 2015 (“What the WTO Can Learn from the Paris Climate Talks”).

For many years, climate negotiators have looked longingly at how the World Trade Organization (WTO) was able to negotiate effective international agreements. But ironically, the Paris climate talks and the WTO negotiations, which were set to take place the following week in Nairobi, lead to the opposite conclusion. Trade negotiators can now emulate the progress made in the climate change agreements by moving away from a simplistic division between developed and developing countries.

For years, global climate change policy was hobbled by this division. Readers of this blog will be familiar with this issue. In the Kyoto Protocol, only developed countries committed to emissions reductions. Developing countries had no obligations. The stark demarcation made meaningful progress impossible, partly because the growth in emissions since the Protocol came into force in 2005 has been entirely in the large developing countries. Even if developed countries were to eliminate their CO2 emissions completely, the world cannot reduce the pace of climate change unless countries such as China, India, Brazil, Korea, South Africa, Mexico, and Indonesia take meaningful action.

The WTO negotiations, launched in 2001 in Doha, have remained at an impasse because of similar problems. They are tied up because nearly all the obligations assumed by WTO members depend upon whether they claim to be developed or developing. And since countries are allowed to self-designate, countries such as Singapore, South Korea, and the Gulf oil states seek to be treated the same as Ghana, Zambia, and Pakistan.

When developing countries accounted for a relatively small share of world trade, it was easy to grant all of them special treatment. But it has become impossible for developed countries to agree to additional liberalization without meaningful market-opening concessions by the large emerging economies, which will account for the majority of world trade growth in the future. Even though some have already liberalized unilaterally, many of these countries avoid making concessions at the WTO by claiming treatment as developing nations.

In the climate arena, the big break came in Durban, South Africa, in 2011, when countries agreed to achieve an outcome that was applicable to all parties. In Paris, the countries of the world adopted the Paris Agreement, which includes: bottom-up elements in the form of Intended Nationally Determined Contributions (INDCs) – national targets and actions that arise from domestic policies and circumstances; and top-down elements for oversight, guidance, and coordination. Now all countries are involved in protecting the climate system “on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities.”

Whereas the current commitment period of the Kyoto Protocol covers countries (Europe and New Zealand) that account for no more than 14 percent of global emissions (and zero percent of global emissions growth), INDCs submitted for the Paris agreement cover 186 countries, representing 96 percent of global emissions. This dramatic, path-breaking expansion of the scope of participation is the key reason for optimism about the Paris Agreement.

In the trade sphere, a similarly nuanced approach with differentiated responsibilities that reflect different capabilities could be adopted by the WTO. Instead of all countries having to subscribe as either developed or developing countries, the WTO could finally move beyond the North-South divide that is embodied in almost every draft proposed in the current Doha round.

The climate talks have shown that simplistic classifications of countries are a prescription for impasse. Robert Lawrence and I concluded that unless the WTO learns this lesson, it may become increasingly irrelevant, as coalitions of the willing turn to regional agreements to make what progress they can on international trade liberalization.