President Trump cited protecting American business interests as a key reason for exiting the accord. Photo by Win McNamee/Getty Images

Column: The economics (and politics) of Trump's Paris withdrawal

Economy

President Trump cited protecting American business interests as a key reason for exiting the accord. Photo by Win McNamee/Getty Images

The announcement on June 1 by President Donald Trump that he will withdraw the United States from the Paris climate agreement was misguided, and the justifications Trump provided were — at best — misleading and, to some degree, simply untruthful. Withdrawing from the Paris agreement will be damaging both to the United States and the world. Sadly, Trump's withdrawal announcement makes clear that the president has little understanding of the nature of the agreement, the process for withdrawal, or the implications of withdrawal for the United States, let alone for the world.

What Does President Trump's announcement actually mean?

The president's comments were confused and confusing. He said that the country "will withdraw from the Paris climate accord, but begin negotiations to re-enter either the Paris accord or an entirely new transaction on terms that are fair to the United States. We are getting out. But we will start to negotiate, and we will see if we can make a deal that's fair. And if we can, that's great."

The notion of renegotiating the Paris agreement is a nonstarter. Within hours of the president's announcement, the idea of renegotiation was rebuked by French President Emmanuel Macron, German Chancellor Angela Merkel, Italian Premier Paolo GentiloniBritish Prime Minister Theresa May and Canadian Prime Minister Justin Trudeau, among many other world leaders.

But what could Trump even mean by his assertions of the deal's "unfairness" to the United States, and what should we make of his statement that such unfairness could be addressed through renegotiation?

But what could Trump even mean by his assertions of the deal's "unfairness" to the United States, and what should we make of his statement that such unfairness could be addressed through renegotiation? According the Paris agreement's own provisions, there is a required three-year delay from November 2016 (when the agreement came into force) before any party (country) can even begin the process of withdrawing, and then there is another year of delay before that process is completed. So what the president actually announced — in effect — was the U.S. government's intention to begin the process of withdrawing some two and a half years from now.

Thus, the announcement was equivalent to stating that the U.S. will remain a party to the agreement for the time being (which it will). The administration could — in theory — submit a revised nationally determined contribution that is consistent with what the country can accomplish in emissions reductions (possibly a 15 to 19 percent reduction by 2025 compared with 2005, according to a recent Rhodium Group analysis, instead of the Obama nationally determined contribution of a 26 to 28 percent decline), due to the broad rollback of Obama-era climate regulations that Trump has initiated. The country-specific, nationally determined contribution is the key element that can be thought of as affecting "fairness" of the U.S. role under the Paris agreement, because it is only through the self-determined, voluntary, country-specific contributions that any national targets or actions are specified.

READ MORE: What will the world look like if the U.S. bails on the Paris climate deal?

Given that the administration had already begun the process of unraveling Obama-era climate regulations (that were to be used achieve the Obama nationally determined contribution), the announced withdrawal from the Paris agreement has no additional effects on U.S. emissions mitigation actions. Hence, it is fundamentally dishonest to claim as a justification for the withdrawal that this will reduce costs for the U.S. and save jobs.

Beyond the national targets and actions specified by the U.S. nationally determined contribution, there is one other aspect of pledged action under the Paris agreement that could be considered to affect fairness, and that is the set of pledges of financial contributions to the Green Climate Fund, to which industrialized countries have voluntarily pledged $10 billion since 2013 to help low-income countries reduce their greenhouse gas emissions and adapt to the effects of climate change. If the U.S. were to fulfill its original $3 billion commitment to the fund, this would amount to $9.41 per capita, ranking 11th among country pledges, starting with Sweden's at $59.31 per person. However, the president had previously announced that no funds will be going to the Green Climate Fund (beyond the $1 billion already delivered during the Obama administration). That makes the per capita U.S. contribution a bit more than $3, ranking close to the bottom of the list, only above South Korea's pledge of about $2 per capita. So with this financial element, as well as with regard to domestic emissions mitigation actions, withdrawal from the Paris agreement can have no real effects on the "fairness" of the U.S. role.

The Paris agreement was the answer to U.S. prayers

The very structure of the Paris agreement itself was and is the answer to U.S. prayers, going back to the Byrd-Hagel Resolution of 1997, in which the U.S. Senate – in a 95-0 vote – said that it would not ratify an international climate agreement that did not include the large emerging economies (China, India, Brazil, South Africa, Mexico and Korea). After more than 20 years of negotiations, an important breakthrough came with the signing of the Paris agreement, which increased the scope of participation from countries accounting for just 14 percent of global emissions (under the current, second commitment period of the Kyoto Protocol) to countries accounting for 97 percent under the Paris agreement.

Furthermore, in addition to including almost all countries, the Paris agreement answered another U.S. demand by granting countries the right to determine their own targets and their own paths of action (through their respective nationally determined contributions).

READ MORE: What leaving the Paris accord could mean for U.S. and the world

And the third of three U.S. wishes was also granted by the Paris agreement, by providing for transparency around how countries report their emissions and demonstrate progress toward their respective targets.

Thus, the Paris agreement was truly the answer to bipartisan U.S. prayers going back at least 20 years and was eminently "fair" to the United States. What, then, can renegotiation possibly accomplish that would make this president happy? Perhaps one option would be to simply rename precisely the same agreement the "Mar-a-Lago Accord" (or simply the "Trump Agreement")! That might change this president's mind.

A rebuke to countries around the world… and to U.S. businesses

Mr. Trump's decision is a remarkable rebuke to countries and heads-of-state around the world, as well as corporate leaders in the United States, and some key senior officials of the administration, including Secretary of State Rex Tillerson. However, the announcement does attempt to fulfill the president's campaign pledge to "cancel" the agreement that he claimed would "destroy American jobs."

This broad support [for the Paris agreement] was due to a simple reality – leaders of successful businesses make decisions not on the basis of ideology, but based on available evidence.

But dropping out of Paris will have no meaningful employment impacts. Again, Trump had already begun the process of undoing domestic climate regulations from the Obama administration. More to the point, the much-talked-about coal jobs are not coming back. The losses that have taken place over decades are due to increased productivity (technological change) in the coal sector and, more recently, market competition from low-priced natural gas for electricity generation.

Support for Trump to keep the United States in the Paris agreement was broad-based within U.S. private industry — from electricity generators, such as PG&E and National Grid, to oil companies, such as Chevron, ConocoPhillips, Exxon-Mobil, BP and Shell (the last two having large operations within the U.S.), and a very long list of manufacturers, including giant firms such as General Motors and General Electric. Even some of the largest coal producers, such as Arch Coal, Cloud Peak Energy and Peabody Energy, told the president about their support for the U.S. remaining in the agreement. This broad support was due to a simple reality – leaders of successful businesses make decisions not on the basis of ideology, but based on available evidence.

Damages to U.S. international relations

The potential damages to U.S. international relations are immense, but should we be surprised? After all, this is the same president who withdrew from the Trans-Pacific Partnership days after inauguration, thereby handing over economic leadership in Asia to China; and the same president who just last month dismissed and diminished NATO and insulted our key European allies, thereby granting Russian President Vladimir Putin one of his greatest wishes. Former Mexican President Vincente Fox may have summed it up best with the shocking yet realistic assessment that "the United States has stopped being the leader of the free world."

READ MORE: Is the Paris climate accord unfair to the U.S.? Putting Trump's claims in context

At a time when the U.S. wants and needs cooperation from a large and diverse set of countries around the world on matters of national security, trade and a host of other issues, it is counter-productive in the extreme to willingly become an international pariah on global climate change, but that is what Trump has accomplished.

Defining U.S. climate policy geographically, rather than by federal government action

Of course, this is not the end of all climate change policy action in the United States. Climate policies in CaliforniaOregonWashington and the Northeast will remain in place and quite possibly 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, important tax credits for wind and solar power continue to receive bipartisan support in the U.S. Congress. But it is highly unlikely – in the absence of a significant economic recession — that those policies (plus others from cities across the country) will be sufficient to achieve the climate targets that made up the Obama administration's anticipated contribution under the Paris agreement.

Trump's core and a sad bottom line

For Trump's core supporters, the move was probably perceived in very positive terms. As Cary Coglianese, a professor of law and political science at the University of Pennsylvania, has said, "For Trump supporters it looks like he's delivering on a campaign promise — it looks like he's standing up for Americans against the rest of the world." The opposition to Paris among Trump's electoral core (and a considerable share of congressional Republicans) is linked with their admiration for his "America First" battle cry, which seems to build on nostalgia for an earlier (and whiter) America with its long-gone manufacturing-based economy, plus doses of xenophobia, hostility to immigration, fear of globalism and opposition to multilateral agreements of any kind.

The announcement by President Trump that he will withdraw the United States from the Paris climate agreement was based neither on real science nor sound economics.

The president's announcement of withdrawing from the Paris climate agreement will indeed appeal to his core constituency, and thereby may help galvanize his base, and that may be the central White House objective at this time when the administration is facing grave questions and challenges from congressional hearings and Justice Department investigations. As Ban Ki-moon, former secretary-general of the United Nations, and I wrote in April in The Boston Globe, "reducing emissions will not be cheap or easy, but the greatest obstacles are political."

The announcement by President Trump that he will withdraw the United States from the Paris climate agreement was based neither on real science nor sound economics. Rather, it was confused, misguided, and — in some ways — dishonest. Sadly, that makes it consistent with much of this president's behavior — in a variety of policy realms — during the campaign and since he assumed office.

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