Trump Has Officially Ruined Climate Change Diplomacy for Everyone

The Paris Agreement became a milestone in the fight against climate change by binding all countries, no matter their level of economic development or emissions profile, to a unified process for decarbonization. The agreement’s momentum, however, has now been halted by a countervailing force. Call it the “Trump effect.”

It has become increasingly clear that Donald Trump’s presidency hasn’t just led to the withdrawal of the United States from the landmark agreement. It has also halted the rest of the world’s efforts.

To understand how damaging the Trump effect has been to global decarbonization, it’s important to understand how the Paris Agreement was supposed to work—and how important an actively engaged United States was to the effort. The overall goal is well known: to keep global temperatures “well below 2 degrees Celsius above pre-industrial levels.” The individual pledges made by countries, however, lacked collective ambition. That’s why countries also agreed to an “ambition mechanism,” under which they would take on increasingly demanding targets following global progress assessments every five years.

The architects of the agreement hoped that meeting existing pledges—even weak ones—would catalyze faster deployment of green technologies, leading to economies of scale, reduced technology costs, and positive spillovers that all would benefit from. This may sound somewhat theoretical, but in fact it is how previous successful efforts at decarbonization have worked in practice. For example, Germany’s widespread deployment of solar photovoltaic technology in the 1990s and 2000s spurred dramatic cost reductions that have opened a door to decarbonization across the world, from Mexico to India. Meeting any pledges under the Paris Agreement could therefore open up new space for parties to take on more robust commitments over time.

At least that was the hope. There are three distinct channels, however, through which the Trump effect is damaging this institutional process.

First, the rollback of environmental regulations burdensome to the fossil fuel industry, including major Obama-era policies to fight climate change, has increased the attractiveness of investing in the dirtiest fossil fuels. The risk that these investments could be “stranded” by committed climate policy has been reduced. For institutional investors making judgments between different projects, this increases the attractiveness of the dirtiest projects vis-à-vis low-carbon alternatives.

We can already see the impact. Following the 2015 Paris deal, in 2016 there was a falloff of investment in the dirtiest fossil fuel projects, including coal and tar sands, as investors became increasingly concerned that global leaders were serious about meeting climate objectives. However, the Trump effect reversed this trend in 2017, as North American investors poured resources into carbon-intensive, financially risky, and environmentally destructive fossil fuel projects. We can see the mirror image when it comes to investment in renewables: 2016 was a bumper year, but in 2017 the Trump effect reversed the momentum.

It is true as some have argued that market fundamentals—in particular cheaper renewables and gas—along with ambitious state and city efforts will ameliorate some of the damage of the Trump effect, but at the very least, one should expect years of stasis, litigation, and uncertainty. Given the size of the U.S. economy, slower deployment flattens learning curves for green technologies globally, making it costlier for other parties to the Paris Agreement to take on more ambitious pledges in the future.

Second, the U.S. decision to withdraw has created political and moral cover for further defections from the agreement. Russia and Turkey have abandoned plans to ratify, while Australia reversed a decision to implement measures to comply with its Paris pledge, all citing Trump’s withdrawal decision. Most significantly, the newly elected president of Brazil, Jair Bolsonaro, has promised to withdraw from the Paris Agreement, also pointing to the precedent established by Trump.

It is true that other major players including the European Union, India, and China remain committed to the Paris Agreement and are on track to achieve their pledges. But the critical question was always whether these three players would take on more ambitious commitments in 2020, which they already have the technical ability to achieve and had already hinted at a willingness to accept. They are unlikely to take the political risks of announcing a more challenging target in the absence of a similar commitment from the United States. In this manner, the Trump effect could be grinding the Paris “ambition mechanism” to a halt.

Finally, the Trump administration’s behavior is souring goodwill between developing and developed country parties at ongoing negotiations. The Trump administration reneged on a pledge to the Green Climate Fund, leaving an outstanding liability of $2 billion, and has opposed stringent rules for reporting on financial commitments. These decisions have aggravated distrust between developed and developing countries.

So there is no shortage of evidence that Trump’s decision has applied a worldwide brake to the Paris Agreement. Uncertainty has already altered the risk profiles associated with green versus fossil fuel technologies; commonly held perceptions of fairness have been violated, creating moral and political space for future defections, while the likelihood that other key players will increase their ambition has receded; and goodwill between developing and developed countries has diminished.

What are the prospects for the Paris Agreement within the context of this damage? While the agreement may be listing badly, it is a mistake to suggest that it is about to sink, or that all parties are failing to live up to their commitments. In fact, the most important players—China, India, and, in particular, the EU—are honoring their commitments. Major economies and institutional investors have, to some extent, adopted a wait-and-see posture in advance of the U.S. presidential election in 2020.

But it’s equally a mistake to see withdrawal as the aberrant act of an unconventional president. In fact, it was widely supported across the Republican Party and the wider conservative movement and reflects broader and deeper structural factors within the U.S. political economy, including the entanglement of fossil fuel interests and politics.

Furthermore, the U.S. withdrawal fits neatly into a pattern established by Republican administrations extending back nearly four decades: President Ronald Reagan famously declared open war on solar energy and was determined to reverse as many environmental regulations as possible in service of the drilling and mining lobbies; the George H.W. Bush administration delayed the agreement of a climate treaty in the late 1980s and at the 1992 Rio Earth Summit refused to commit to specific emissions reductions; and a decade later President George W. Bush renounced the Kyoto Protocol.

In the short run, the Paris Agreement can resist the Trump effect—indeed, it was designed to do so. But in the medium and longer term, it will continue to be assailed by instability and uncertainty until the underlying structural factors in the U.S. political-economy can be addressed.