Paris Discord

By: Dr. M. Ray Perryman
Published in syndication June 07, 2017

Add another divisive decision to President Trump's tally: pulling out of the Paris Accord. Depending on your perspective, you may have been horrified or relieved. In either case, more uncertainty has been created.

The Paris Accord came out of a 2015 United Nations Climate Change Conference. More than 190 countries participated in the agreement, which involves voluntary reductions in emissions levels. Most countries tied pollution reductions to financial payments, and richer nations (including the United States) agreed to pay billions into a fund to assist poorer countries in achieving their goals.

Clearly, protecting the environment is essential to human health and wellbeing, quality of life, and the economy. I have studied the economics of the issue, and believe me, the costs of harmful levels of pollutants are very high in terms of additional needs for health care, reduced productivity, and premature mortality (among other things). These effects are in addition to the potential longer-term harms of climate change, which could be devastating. Pulling out of the major initiative designed to deal with environmental challenges on a global scale was, not surprisingly, a controversial move. It took us out of the company of the major countries in the world on this issue, and into a group inhabited only by Syria and Nicaragua (the latter of which did not join the Accord because it did not go far enough).

Nonetheless, there are some legitimate arguments on the other side of the issue. Some studies found that the Paris Accord was poorly structured and would be unlikely to result in meaningful improvement. Also, some of the targeted industries, such as coal-fired power generation facilities, have already come a long way in the United States, and enhanced technologies have dramatically lowered emissions. In addition, diversity in fuels used to generate electric power is a good thing in that it can help keep overall costs lower if prices for one input fuel rise and provide assurance of ample supplies under a variety of conditions. Moreover, if complying with the Paris Accord led to the significant increases in electricity costs for families and business which some researchers projected, the economy would suffer.

One of the biggest criticisms of the Paris Accord was that President Obama agreed to voluntarily reduce US carbon emissions by a large amount (more than one fourth) in a relatively short period of time. It would have been a very difficult and expensive goal to achieve, and a portion of these costs would have been passed along to consumers. At the same time, other nations with large pollution problems agreed to relatively little in terms of reductions. This imbalance was a potential source of concern, although the goal was primarily aspirational and likely would not be achieved in any case.

The real question is "what happens next?" In the decision to withdraw, President Trump said that he plans to "begin negotiations to reenter either the Paris Accord or a really entirely new transaction on terms that are fair to the United States" and that he will "work to ensure that America remains the world's leader on environmental issues." If a new agreement can be reached, that will be good news indeed, as the stakes are very high. As a practical matter, however, it is very difficult to bring 200 countries together when the major partner has shown itself to be unreliable.

As a side note, one argument I have seen put forth is that pulling out of the Paris Accord will harm US green energy industries by curtailing their innovation and development. However, I don't see this as a likely scenario. Many Americans and companies are committed to purchasing power generated from green sources, and that reality has little or nothing to do with the Paris agreement. Demand for green energy will drive innovation and expansion in the industry, and products and technologies will find ready buyers in domestic and international markets. Most major energy producers are diversifying and seeking better environmental properties for traditional fuels.

Many of our closest allies and trading partners are unhappy with the US pulling out of the Paris Accord, as are millions of Americans. This factor could lead to added problems in trade and other economic issues. We need to be showing leadership in improving the environment, as there is much to be done. Whether the agreement was the best way to deal with climate issues can be credibly debated, but there is little doubt that global progress on the environmental front may be harder to come by with the United States abandoning its key seat at a very important table.