Financial Times - Politics fuels Donald Trump’s retreat from Paris climate accord
the media pirateJune 3, 2017. Rana Foroohar.
The door is still open for US business to pursue clean energy and carbon reduction.
America’s abandonment of the Paris climate accord is best understood as a classic piece of Trumpian political theatre. The president claimed he wanted out of Paris because it would kill jobs in coal country and in American factories. While that argument is bunk, the real political message Trump wanted to deliver to his base — that he will stand up to those hypocritical Chinese who are building more coal plants even as they talk about leading on emissions cuts, as well as to Europeans who pontificate about global warming from posh salons kept safe by American military might — was made quite sharply. In political terms, it does not really matter if anything he says is true. It plays well among the home audience.
In economic terms, however, the president, or more accurately Steve Bannon and others in the America First policy camp, are making a terrible decision if they think a nationalist energy strategy based on the dirtiest fossil fuels will make America stronger or safer.
For starters, the majority of coal jobs in the US were lost not since the Obama administration but between the 1950s and 1970s, as the industry shifted to more advanced mining techniques. Just as factory jobs have been automated, so has human-centric coal work given way to huge mechanised strip-mining operations.
More recently, coal has been in decline because of competition from cheaper, cleaner natural gas. While you might be able to make a jobs-based argument to build out infrastructure that would increase refinery capacity for homegrown natural gas and bring it to Midwest factories, we have not heard any coherent strategy around that.
Meanwhile, it does not make any sense at all to think about connecting the dots between coal energy and rust belt manufacturing, since the cost of electricity used in factories in the US was already quite low relative to other countries, even before the shale boom.
There is no reason to think that these energy dynamics will change. The 2003 to 2015 boom in commodities of all kinds — oil, natural gas, thermal coal, iron ore and copper — was a function of both Chinese demand and central bank monetary easing, which pushed a lot of hot money into these markets. Those dynamics are now changing, as the US Federal Reserve has pulled back from quantitative easing and China has slowed down, in part because its policymakers understand they have to move to a less industrial demand driven (and energy intensive) economic model.
According to McKinsey Global Institute figures, the natural resource sector lost $2tn in shareholder value in 2015 alone, as global spending on commodities plummeted by 50 per cent. At the same time, renewables are reaching critical mass as technology drives down the cost of solar and wind energy. All this will push the global economy away from fossil fuels and towards renewables, not for regulatory reasons, but because of technological innovation and cost savings. MGI estimates that a combination of decreasing demand (a result of things such as automated cars and smart grids), increasing efficiency (from sensors and machine-to-machine technologies that better manage energy consumption), and a switch to clean energy sources will save the world $900bn- $1.6tn between now and 2035.
The companies that make and use those technologies will stand to gain quite a bit. That is why Tesla and SpaceX founder Elon Musk and Apple chief executive Tim Cook, along with the majority of other big business leaders, are protesting against Mr Trump’s decision to leave the Paris Accord. “Climate change is real,” tweeted Mr Musk. “Leaving Paris is not good for America or the world”.
Most corporate value lives in Silicon Valley (the top 10 per cent of corporations taking 80 per cent of the private sector wealth pie are mostly big, intellectual property-rich technology companies). The clean tech jobs being created there are the kind the president should be supporting to make America great again. “Trump is supposed to be a business friendly president,” says Vishal Sikka, chief executive of Infosys. “He has to realise that the business opportunity in areas like solar panels, green battery technology and wind farms is huge.”
Whether he does or not is anyone’s guess. But conservative business leaders do. Entrepreneur Ted Halstead, head of the Climate Research Council, is pushing an alliance of mostly Republican business leaders who want to move forward with a carbon reduction plan involving regulatory rollback, but also a carbon tax that would pay dividends to consumers, as well as an international carbon border adjustment that would penalise countries like China if they do continue to use dirty coal. While liberals won’t like anything that undercuts the Environmental Protection Agency, they would likely support the latter points.
All this underscores an important part of Mr Trump’s rejection of Paris. He did not reject climate change science, but rather a global alliance around the existing accord, thus splitting the difference between the Bannon camp and more moderate advisers like Gary Cohn.
He left the door open for business to push its own agenda, and for conservatives and liberals in America to duke it out, at home, over the framework for any new climate change programme. He also pandered successfully to his own base. The economics of pulling out of Paris might be dicey. But for Mr Trump, it was all about politics.
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