Why the U.S. Should Remain in the Paris Climate Agreement

            It was widely reported last week that a White House meeting scheduled for Tuesday, April 18th, was to consider whether the United States should remain a party to the Paris Climate Agreement.  At the last second, that meeting was postponed.  As of today, there is no public information about when it may occur.  All that is known is that the Trump Administration had indicated previously that it will make known its position on the Paris Agreement before the G7 Summit, which takes place in Italy in late May.

With that in mind – and with Earth Day being celebrated on April 22nd – I was pleased to co-author with Ban Ki-moon an op-ed which just appeared in The Boston Globe, “Why the US Should Stay in the Paris Climate Agreement” (April 21, 2017).  As you no doubt know, Ban Ki-moon was Secretary-General of the United Nations (2007-2016), but what you may not know is that he is currently my colleague at the Harvard Kennedy School, where he is the Angelopoulos Global Public Leaders Fellow.

Before the Secretary-General Emeritus and I produced the final version of our Boston Globe op-ed, we had written a considerably longer, more detailed essay on the same topic, and so in today’s blog essay, I’m pleased to provide below an expanded version of that longer essay, with hyperlinks added.  I hope you find this of interest.

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Why the U.S. Should Remain in the Paris Climate Agreement:  An Earth Day Message for President Trump

 by Ban Ki-moon and Robert N. Stavins

In the five decades since the first Earth Day was celebrated in 1970, remarkable economic growth around the world has inevitably been accompanied by significant environmental challenges.  While tremendous progress has been made to address concerns about air and water quality, hazardous waste, species extinction, and maintenance of stratospheric ozone, leaders around the world continue to struggle to address the threat of global climate change in the face of the steady accumulation of greenhouse gases in the atmosphere.

The Necessity of International Cooperation

There is broad scientific consensus that human-based emissions of greenhouse gases – including carbon dioxide (CO2) from fossil-fuel combustion and land-use changes – will change the earth’s climate in ways that will have serious environmental, economic, and social consequences. Sixteen of the warmest years on record have occurred since 2000, including 2016 as the warmest of all.  At the same time, winter arctic sea ice is at its lowest extent in recorded history.

Increased temperatures – which might be welcome in some places – are only part of the story.  More important are changes in precipitation, decreased snowpack, glacier melting, droughts in mid to low latitudes, decreased cereal crop productivity at lower latitudes, increased sea level, loss of islands and coastal wetlands, increased flooding, greater storm intensity, species loss, and spread of infectious disease.

These biophysical impacts will have significant economic, social, and political consequences. Estimates of economic damages of unrestrained climate change vary, with most falling in the range of 1 to 3% of world GDP per year by the middle of the current century.

In order to have a 50-50 chance of keeping temperature increases below 2o C (a long-term goal acknowledged by most national governments), it would be necessary to stabilize atmospheric concentrations at 450 parts per million, which in principle could be achieved by cutting global emissions by 60 to 80% below 2005 levels by 2050.

Reducing emissions will not be cheap or easy, but the greatest obstacles are political.  The severe political challenges are due to the fact that greenhouse gases mix in the atmosphere, and so the location of damages is independent of the location of emissions. Any political jurisdiction that takes action incurs the direct costs of that action, but the climate benefits are spread globally. Hence, for any country, the direct climate benefits of taking action will likely be much less than the costs, despite the fact that the global benefits may exceed, possibly greatly, the costs. Therefore, due to the global commons nature of the problem, meaningful international cooperation is necessary.

The Paris Climate Agreement:  A Breakthrough After 20 Years

The countries of the world have been struggling to come up with a solution since they agreed in 1992 to establish the United Nations Framework Convention on Climate Change (UNFCCC). After more than 20 years of negotiations, an important, historic breakthrough came with the signing of the Paris Climate Agreement in 2015, a path-breaking approach that increased the scope of participation from countries accounting for just 14% of global emissions (in the current, second commitment period of the Kyoto Protocol) to countries accounting for 97% under the Paris Agreement!

Contrary to some claims, China, India, Brazil, Korea, South Africa, Mexico, and the other large emerging economies do have obligations under this new approach.  Far from being a “bad deal” for the United States, as EPA Administrator Scott Pruitt has asserted, the Paris Agreement is actually the answer to U.S. prayers going back to the U.S. Senate’s bipartisan (95-0) Byrd-Hagel Resolution in 1997, which rejected the Kyoto approach and called for an agreement that would include not only industrialized countries, but the large emerging economies as well. That is precisely what the Paris Agreement has finally delivered!

Will the U.S. Remain Part of the Process?

This is a pivotal moment.  President Trump’s recent executive order in which he laid out his plans to roll back much of the Obama administration’s climate policy, was silent on the Paris Agreement, reportedly reflecting disagreements among the President’s closest advisers.

During the campaign last year, the President said he would “cancel” the Paris Agreement.  But because it has already come into force, under its rules, any party must wait three years before requesting to withdraw, followed by a one-year notice period.  The United States is part of the agreement for the next four years. Any White House announcement of pulling out of the pact will have no direct effects for this Presidential term.

In theory, the President could try to bypass that four-year delay by taking the one-year route of dropping out of the overall UNFCCC — signed by President George H.W. Bush and ratified by the Senate in 1992. But that could require another two-thirds vote of the Senate, would be challenged in the courts, and would be unwise in the extreme, given that the U.S. would then be the only one among 197 countries in the world not to be a party to the Climate Convention. At a time when the United States wants cooperation from a diverse set of countries around the world on matters of national security, trade, and a host of other issues, it would be counter-productive in the extreme to willingly become an international pariah on global climate change.

Key Support Inside and Outside the Administration

Fortunately, key voices in the Administration have argued for remaining in the Paris Agreement. Secretary of State Rex Tillerson has stated that it is better for the U.S. to be at this table of ongoing negotiations. More broadly, Secretary of Defense James Mattis said in Congressional testimony that he views climate change as a national security threat.

Remarkably, support for the Paris Agreement is broad-based within U.S. private industry – from electricity generators such as PG&E and National Grid, to oil companies such as BP, Chevron, ConocoPhillips, Exxon-Mobil, and Shell, mining companies such as Rio Tinto, and a very long list of manufacturers, including giant firms such as General Motors. Even some of the largest coal producers, such as Arch Coal, Cloud Peak Energy, and Peabody Energy, have told the President about their support for the U.S. remaining in the Agreement. This broad support is due to a simple reality – leaders of successful businesses make decisions not on the basis of ideology, but based on available evidence.

True enough, there is also opposition from some especially vocal coal industry executives, and the President seems to have shaped his domestic climate policies around their interests, with his repeated pledge to “bring back coal.” But the job losses in coal mining over the past decades have been due to technological change (increased productivity) in the coal sector, and more recently by low natural gas prices, not by environmental regulations (particularly not by regulations – such as the Clean Power Plan – that have not even been implemented).

The Paris Agreement Provides Flexibility

The U.S. could stay in the Paris Agreement, and seek to revise the Obama-era numerical target of a 26% reduction in emissions below 2005 levels by 2025, an approach recommended by North Dakota Republican Representative Kevin Cramer. However, by 2016, energy-related emissions were already down by 14% below 2005, so it is not clear that the existing pledge even needs to be re-assessed. Also, state climate policies in California, Oregon, Washington, and the Northeast will remain in place, and likely be strengthened. And more than half of all states have renewable energy policies; just since election day, the Republican governors of Illinois and Michigan have signed legislation aimed at increasing solar and wind generation. At the Federal level, the important tax credits for wind and solar power continue to receive bi-partisan support in the Congress.

Putting it All Together

In summary, climate change is a serious threat, which requires international cooperation because of its global commons nature.  After twenty years of negotiations, the path-breaking Paris Climate Agreement, with its exceptionally broad participation, is the answer to long-standing, bipartisan appeals, and provides an excellent foundation for progress.

The President cannot “cancel” the Agreement, and it would take four years for the U.S. to withdraw. Pulling out of the foundational United Nations Framework Convention on Climate Change might be quicker, but would be unwise in the extreme, jeopardizing U.S. relationships with countries around the world on a host of pressing issues, ranging from national security to international trade.

Fortunately, key voices in the Administration have argued for keeping the U.S. in the Paris Agreement, and support from the business community is exceptionally broad and deep. If necessary, the U.S. can seek to revise the specific U.S. pledge under Paris made by the Obama administration, while remaining a party to the Agreement. But given the pace of emissions reductions already achieved, combined with ongoing state and Federal climate policies, it is not clear that those targets need to be changed.

Having considered this diverse set of considerations that should bear upon this U.S. decision, we find the arguments for the country remaining in the Paris Climate Agreement to be compelling. The truth is that in the 47 years since the first Earth Day, much has been accomplished.  But much of that remarkable progress could be undone in the short span of 4 years or less. We are confident – or at least hopeful – that this will not happen.

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Ban Ki-moon was Secretary-General of the United Nations (2007-2016), and is the Angelopoulos Global Public Leaders Fellow at the Harvard Kennedy School.  Robert Stavins is the Albert Pratt Professor of Business and Government at the Harvard Kennedy School, and was Coordinating Lead Author of the Intergovernmental Panel on Climate Change.

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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.

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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.

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