Professor Frank Jotzo
Candidate Trump promised to "cancel" the Paris Agreement, promote coal, oil and gas, and has started the process to dismantle carbon emission regulations since taking office. Taking stock of progress and prospects on climate policy after the Trump administration’s first 100 days suggests that Trump will set back the United States transition to cleaner energy and the effects will be felt internationally.
But his tenure is unlikely to derail the global climate change effort and the shift to cleaner technologies that is already underway, and it strengthens China’s opportunities to lead the global clean energy agenda.
The Trump administration could submit a notice of intent to withdraw from the Paris Agreement on climate change, and the United States would then exit the agreement after a four-year waiting period. The United States also looks set to renege on its commitments to provide funding for climate change action in poor countries and to ramp up spending on clean energy.
It would reduce the Paris Agreement’s standing and could encourage other nations to follow suit. But the Agreement is and will remain in force, and the national pledges to reign in emissions that all countries have made remain unaffected. And it provides a clear opportunity for China to lead the global climate change effort.
Pulling out would diminish America’s influence over what other nations do in the climate change arena. Trump wants deals, and American energy industries want the administration to exercise maximum leverage internationally. Secretary of State Tillerson in his confirmation hearing acknowledged the importance of having a seat at the international climate negotiations. The United States could stay in the Paris Agreement but ignore its pledges and play a spoiler role or try to use it to promote its interests in fossil fuel industries.
So it comes as no great surprise that the Trump administration is reported to be considering to remain in the Paris Agreement, demanding that the international community to support efforts to make fossil fuel technologies cleaner. This could be a bigger help to America’s coal, oil and gas industries than the United States exiting the international climate change negotiations. But it would make it harder for the world to achieve strong climate action, which requires a large scale shift to carbon-free technologies.
Climate change policy is no longer in the realm of environmental policy and marginal economic change. With clean technologies becoming competitive with the established hydrocarbon-based energy system, climate policy means large-scale industrial change. With that comes opportunity in new industries on a scale that could be similar to the information technology revolution.
In 2014, the United States and China made a joint declaration that paved the way for the Paris Agreement. It framed climate change action both in terms of an environmental necessity and an economic opportunity that requires action by all countries. With Trump’s election, China can take undisputed leadership of the global low-emissions transformation agenda. China pushes towards a cleaner energy and industrial system and is already the world’s largest manufacturer of renewable energy equipment.
A global clean energy transition now has better prospects than anticipated just five years ago, because of technological progress and changes in economic structure. Coal, the most emissions intensive fuel, is on a declining trajectory. Global coal demand fell in 2016. The United States saw a particularly large drop of 11 per cent in coal use, due to substitution to gas and renewable power. Global carbon dioxide emissions from energy use have been flat now for three years. Emissions are steadily declining in the United States, and are now at the level they were in 1992, though with an 80 per cent larger economy.
Oil use continues to grow globally, but its longer term future is in doubt on account of climate change concerns coupled with technological progress. A shift to electric vehicles, partly driven by US car companies, could cut out much of the world’s oil demand in decades to come. And while natural gas is less intensive in carbon emissions than the other fossil fuels, it too has little long term future in a world that takes strong action on climate change.
The energy industries of the future are renewables and nuclear power, coupled with electric transport, smart electricity grids, new forms of energy storage and advanced energy saving technologies.
China sees a major opportunity in this change. China has become by far the largest producer of wind turbines and solar panels, industries that are growing very rapidly and will continue to grow for a long time. The large majority of annual global investment in electricity supply is now in renewable power. Renewable energy technology has matured technologically and is becoming cost competitive with fossil fuel based energy.
China is positioning to take a lead role not just in manufacturing but also in developing clean energy technologies, and thereby capturing profits from innovation. Climate policy could indeed benefit China, not just environmentally but economically.
The change is not only driven by climate change concerns but also by efforts to reduce urban air pollution, which is causing enormous health damages in particular in the megacities of the developing and industrialising world.
Trump has a clear agenda of dismantling environmental regulations including ones aimed at reducing greenhouse gas emissions, and his administration has started that process. He has appointed an opponent of environmental regulation and climate change action as head of the Environmental Protection Agency (EPA) and slashed its budget.
At the end of March, Trump started the process to abolish the Clean Power Plan, Obama’s signature climate change policy. The Clean Power Plan mandates limits on carbon dioxide emissions from the United States' power plant fleet, to be implemented by the states. The regulations would accelerate the shift that is underway from coal fired power stations and towards gas and renewable power. Without the Clean Power Plan or an alternative, the United States are unlikely to achieve its pledged target of a 26 to 28 percent reduction in national emissions by 2025 compared to 2005.
Trump ordered a “review” of the Clean Power Plan, starting the process to replace it with weaker or ineffective regulations. The Trump administration cannot simply remove the Clean Power Plan without replacement, because earlier decisions upheld by the Supreme Court mandate the EPA to regulate carbon dioxide emissions. The process is cumbersome but it is expected that Trump will be able to neuter Obama’s carbon regulations.
Trump’s executive order also requires the EPA to review all environmental regulations and safety standards for their effects on jobs. The presumed next step is for many environmental regulations to be rescinded,
as Trump pledged during his campaign. Trump has also made strong statements of support for the incumbent oil, gas and coal industries, and recently approved the controversial Keystone XL oil pipeline.
The framing of the White House communications around the regulatory changes is squarely in terms of jobs, not in terms of opposition to environmental regulation on ideological grounds. Trump was flanked by coal miners when he signed the executive order, in a clear signal of support for his core constituencies working in traditional industries in the relatively less well-off states.
A group of conservative elders has advocated for a federal carbon tax or ‘carbon dividend’, with revenue to be distributed to the American people, and border tax adjustments to shield American industries from carbon-intensive imports. Such a scheme, or any type of ‘carbon flavored tax reform’, could fit with Trump’s primary stated objective of strengthening United States industries and creating jobs. The idea is that Democrats could support a legislative change to fully abolish carbon regulations in return for a carbon tax. But the prospects seem very slim now that Trump has embarked on the process to rescind Obama’s clean power plan through the regulatory route.
Several US states have been taking their own climate change action and will continue to do so. Chief among them is California, where a state-wide emissions trading scheme has been in operation since 2013, alongside many other policies that cut energy use and shift energy supply to renewables. California’s goal is to cut the state’s carbon emissions by 40 percent below 1990 levels by 2030. Northeastern states have had a cap-and-trade scheme for the power sector in place for seven years.
State-based policies are likely to continue. California’s government has made it clear that Trump’s stance will not affect California’s climate change program, which was developed irrespective of federal policy in the first place.
Canada also provides a stark contrast to the Trump administration’s approach. The Province of British Columbia has had a carbon tax since 2008, Quebec has a cap-and-trade scheme linked to California’s, and Alberta recently put a carbon levy in place. Overlaying these, the national government is planning a national floor price on carbon. Trump will surely not be influenced by what the Northern neighbours do. But neither does Canada seem inclined to take cues from the new US administration.
Globally, climate change policy does not take the central role that it occupied in the lead-up to the 2015 Paris climate summit. But many countries are working on the implementation of their pledges for emissions reductions by 2030 that underpin the Paris Agreement.
Most importantly, China is accelerating its shift away from coal and towards zero-carbon energy sources. China’s coal use is falling, and its overall carbon emissions are plateauing, despite continued strong economic growth. It is quite possible that China will outperform its Paris pledge to peak its carbon emissions by 2030. President Xi has made it clear that China remains committed to the clean energy agenda, which is manifestly in China’s own economic and strategic interest.
The situation is many large developing countries is mixed. Governments may not have a strong appetite for environmental policies, but clean energy technologies by now often present a more attractive overall package. In India for example, electrification proceeds not only by expansion of coal power but also through new solar power plants.
Europe, the world’s traditional champion of climate change action, is preoccupied with Brexit and its internal cohesion more generally, and a shift in power relations in its region. But still it pursues an ambitious climate change policy, and Germany drives the agenda on energy transition towards low-carbon systems. As president of the G20, Germany is pushing to make clean energy a high profile element of this year’s G20 process.
The Trump administration is likely to find itself internationally isolated on climate change policy, while locking US industrial systems into last century’s technologies and delaying an economic transition that is underway globally. It is not a scenario that is built to last – and if it does last, it is unlikely to work out to America’s long term advantage.