Positive Political Economy Archives - An Economic View of the Environment

Early Impacts of Trump 2.0 on Domestic Climate Policy

In my podcast series, “Environmental Insights: Conversations on Policy and Practice from the Harvard Environmental Economics Program,” I’ve had the pleasure of engaging in conversations with environmental economics scholars who have also had significant experience in the policy world. My guest in the most recent episode is a great example of this, because I was joined by Joseph Aldy, my colleague at the Harvard Kennedy School, where he is the Teresa and John Heinz Professor of the Practice of Environmental Policy. Joe’s research focuses on climate change policy, energy policy, and regulatory policy, and, importantly, from 2009 to 2010, Joe served as Special Assistant to President Barack Obama for Energy and Environment, which game him significant experience both in the economics and the politics of climate change policy. You can listen to our complete conversation here.

This was Joe’s second visit to the podcast, the first having been in November of 2019, in what was the 7^th of 66 episodes we’ve now produced. I believe he was the first guest to come back for a return visit, and the reason why I double-dipped was that when I decided to ask someone to assess what has happened and will happen in the second Trump administration’s first 100 days, particularly in regard to domestic environmental, energy, and climate policy, Joe Aldy was my first choice. (I emphasize domestic policy, because I’ve already written in two recent blog essays about what to expect in the international domain, but not in the domestic domain: The Evolving China-USA Climate Policy Relationship; and What Trump’s Exit from the Paris Agreement Will Really Mean.)

We’re about half-way through the first 100 days of this new administration (although it feels like it’s already been several years). So, before we discussed Joe Aldy’s expectations for the next two to four years, we focused on what has already happened.

Aldy begins by describing how the Trump administration has moved quickly on many fronts using numerous executive orders, rolling back regulatory policies, and creating a National Energy Dominance Council to confront what it has termed a “national energy emergency.”

“It’s a little bit of a challenge to say we’re actually dealing with a kind of energy emergency that was described by the President because we’re producing more energy now than we ever have. When we look at the fact that we’re at record highs in oil production, gas production, and renewable power production on the supply side, we’re not necessarily facing what one might think of as an emergency when it comes to energy.”

Aldy goes on to note that he is alarmed, however, by some of the brazen early moves the administration is making in the energy and climate space.

“We see efforts going on now that I think are potentially more fundamental in undermining the ability of the federal government to regulate greenhouse gas emissions. Tasked on day one to EPA was to assess the prospect of undoing the Endangerment Finding under the Clean Air Act. That’s the necessary foundation [for] the EPA [to exercise its] authority to regulate greenhouse gas emissions,” he says. “They’re moving in that direction, and a lot of this is going to end up in the courts.”

But Joe contends that the courts may not be so sympathetic toward the administration.

“Part of the response from those who want to slow this kind of retrenchment when it comes to clean energy and climate policy is to litigate, and some of what is happening is happening so fast. I mean, we saw this in Trump 1.0 where some things they try to do very quickly. What they did was not consistent with the process that is established under law that you’re supposed to follow, or you will be found to have been in the language of the Administrative Procedure Act that governs how we implement the administrative state, ‘arbitrary and capricious.’ You lose in the courts on process grounds, not even on the merits.”

Aldy also argues that the administration seems to be pursuing a number of countervailing objectives using a variety of tools that will cause unintended consequences.

“The prospect of tariffs generally really interact with an agenda focused on trying to advance oil and gas development in the United States. If we are going to put tariffs on imported steel [the price of oil extraction will go up],” he remarks. “So, [when] importing crude oil, natural gas, or electricity from Canada… with tariffs, [it will] make [those] more expensive domestically and affect… both the business case for using energy as well as the domestic politics about energy.”

The clean energy tax credits contained in the Inflation Reduction Act may also be in jeopardy, Aldy observes, although he admits there may be pushback from some Republicans representing areas where the tax credits have positive economic impact. And those may be key votes, Aldy says, when the president’s proposed tax cuts come before Congress.

“I think there were more than a dozen Republicans who voted against the tax bill, the Trump tax cuts of 2017, in the House of Representatives. They can’t lose a dozen votes this time. It’s a much tighter margin. And so, there’s a question about, is there sufficient support for sustaining at least some clean energy tax credits going forward?”

Importantly, Joe notes that even if the administration is successful in efforts to slow down the clean energy transition, it won’t be able to stop it altogether.

“The clean energy economy in the U.S. is so much more advanced now that signing executive orders doesn’t affect the 30-plus gigawatts of solar that was installed last year. It doesn’t affect the fact that we have been installing more wind power every year for the past decade than we have natural gas in terms of incremental capacity investment. All… the people who recently bought EVs, they’re still going to drive their EVs. We’re still going to produce power from these renewable power facilities,” he argues.

“I think that we’re going to see more and more business investment, because the business case for clean energy is getting better and better, even if the policy environment is getting more uncertain,” he says. “It means that the worst-case scenario, at least in terms of what happens to our emissions and our energy economy, is basically like stasis. We need to accelerate if we’re going to be up to the challenge of the problem, but I think we will just find ourselves treading water for a while. The challenge is whether or not there’s really bad spillovers to other countries.”

For this and much more, please listen to my complete podcast conversation with Joe Aldy, the 66th episode over the past five years of the Environmental Insights series, with future episodes scheduled to drop each month. You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program. Previous episodes have featured conversations with:

Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency
Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change
Andrei Marcu, founder and executive director of the European Roundtable on Climate Change and Sustainable Transition
Paul Watkinson, Chair of the Subsidiary Body for Scientific and Technological Advice (SBSTA) within the United Nations Framework Convention on Climate Change
Jos Delbeke, professor at the European University Institute in Florence and at the KU Leuven in Belgium, and formerly Director-General of the European Commission’s DG Climate Action
David Keith, professor at Harvard and a leading authority on geoengineering
Joe Aldy, professor of the practice of public policy at Harvard Kennedy School, with considerable experience working on climate change policy issues in the U.S. government
Scott Barrett, professor of natural resource economics at Columbia University, and an authority on infectious disease policy
Rebecca Henderson, John and Natty McArthur University Professor at Harvard University, and founding co-director of the Business and Environment Initiative at Harvard Business School.
Sue Biniaz, who was the lead climate lawyer and a lead climate negotiator for the United States from 1989 until early 2017.
Richard Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology.
Kelley Kizier, Associate Vice President for International Climate at the Environmental Defense Fund.
David Hone, Chief Climate Change Adviser, Shell International.
Vicky Bailey, 30 years of experience in corporate and government positions in the energy sector.
David Victor, professor of international relations at the University of California, San Diego.
Lisa Friedman, reporter on the climate desk at the The New York Times.
Coral Davenport, who covers energy and environmental policy for The New York Times from Washington.
Spencer Dale, BP Group Chief Economist.
Richard Revesz, professor at the NYU School of Law.
Daniel Esty, Hillhouse Professor of Environment and Law at Yale University.
William Hogan, Raymond Plank Research Professor of Global Energy Policy at Harvard.
Jody Freeman, Archibald Cox Professor of Law at Harvard Law School.
John Graham, Dean Emeritus, Paul O’Neill School of Public and Environmental Affairs, Indiana University.
Gernot Wagner, Clinical Associate Professor at New York University.
John Holdren, Research Professor, Harvard Kennedy School.
Larry Goulder, Shuzo Nishihara Professor of Environmental and Resource Economics, Stanford University.
Suzi Kerr, Chief Economist, Environmental Defense Fund.
Sheila Olmstead, Professor of Public Affairs, LBJ School of Public Affairs, University of Texas, Austin.
Robert Pindyck, Bank of Tokyo-Mitsubishi Professor of Economics and Finance, MIT Sloan School of Management.
Gilbert Metcalf, Professor of Economics, Tufts University.
Navroz Dubash, Professor, Centre for Policy Research, New Delhi.
Paul Joskow, Elizabeth and James Killian Professor of Economics emeritus, MIT.
Maureen Cropper, Distinguished University Professor, University of Maryland.
Orley Ashenfelter, the Joseph Douglas Green 1895 Professor of Economics, Princeton University.
Jonathan Wiener, the William and Thomas Perkins Professor of Law, Duke Law School.
Lori Bennear, the Juli Plant Grainger Associate Professor of Energy Economics and Policy, Nicholas School of the Environment, Duke University.
Daniel Yergin, founder of Cambridge Energy Research Associates, and now Vice Chair of S&P Global.
Jeffrey Holmstead, who leads the Environmental Strategies Group at Bracewell in Washington, DC.
Daniel Jacob, Vasco McCoy Family Professor of Atmospheric Chemistry & Environmental Engineering at Harvard.
Michael Greenstone, Milton Friedman Distinguished Service Professor of Economics, University of Chicago.
Billy Pizer, Vice President for Research & Policy Engagement, Resources for the Future.
Daniel Bodansky, Regents’ Professor, Sandra Day O’Connor College of Law, Arizona State University.
Catherine Wolfram, Cora Jane Flood Professor of Business Administration, Haas School of Business, University of California, Berkeley, currently on leave at the Harvard Kennedy School.
James Stock, Harold Hitchings Burbank Professor of Political Economy, Harvard University.
Mary Nichols, long-time leader in California, U.S., and international climate change policy.
Geoffrey Heal, Donald Waite III Professor of Social Enterprise, Columbia Business School.
Kathleen Segerson, Board of Trustees Distinguished Professor of Economics, University of Connecticut.
Meredith Fowlie, Professor of Agricultural and Resource Economics, U.C. Berkeley.
Karen Palmer, Senior Fellow, Resources for the Future.
Severin Borenstein, Professor of the Graduate School, Haas School of Business, University of California, Berkeley.
Michael Toffel, Senator John Heinz Professor of Environmental Management and Professor of Business Administration, Harvard Business School.
Emma Rothschild, Jeremy and Jane Knowles Professor of History, Harvard University.
Nathaniel Keohane, President, C2ES.
Amy Harder, Executive Editor, Cypher News.
Richard Zeckhauser, Frank Ramsey Professor of Political Economy, Harvard Kennedy School.
Kimberly (Kim) Clausing, School of Law, University of California at Los Angeles
Hunt Allcott, Professor of Global Environmental Policy, Stanford Doerr School of Sustainability.
Meghan O’Sullivan, Jeane Kirkpatrick Professor of the Practice of International Affairs at Harvard Kennedy School.
Robert Lawrence, Albert Williams Professor of International Trade and Investment, Harvard Kennedy School.
Charles Taylor, Assistant Professor of Public Policy, Harvard Kennedy School.
Wolfram Schlenker, Ray Goldberg Professor of the Global Food System, Harvard Kennedy School.
Karen Fisher-Vanden, Professor of Environmental & Resource Economics, Pennsylvania State University
Max Bearak, climate and energy reporter, New York Times
Vijay Vaitheeswaran, global energy and climate innovation editor, The Economist

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

The Evolving China-USA Climate Policy Relationship: The Future of All Societies May Depend Upon It

Last night, I was privileged to deliver an after-dinner speech at Harvard’s Loeb House for the close to 100 attendees at the “Harvard-Tsinghua Workshop on Climate Change, Carbon Neutrality, and Energy System Transformation,” sponsored by the Harvard China Project, which was itself founded 30 years ago and still chaired by the legendary Micheal McElroy, Gilbert Butler Professor of Environmental Studies, Harvard Paulson School of Engineering & Applied Sciences and Department of Earth and Planetary Sciences, and led with Executive Director, Chris Nielsen. I was asked to discuss “The Evolving China-USA Climate Relationship,” which is what I did.

My comments in my after-dinner talk seemed to be well received by the audience, and prompted some interesting questions and follow-up discussion, so I thought I ought to share my commentary with the readers of this blog. Hence, this brief essay draws on my equally brief speech.

I discussed one of the most consequential relationships shaping the future of our planet: the evolving climate policy dynamic between China and the USA. These two nations, the world’s largest economies and biggest carbon emitters, hold the key to global efforts to combat climate change. How they cooperate — or fail to do so — may determine not just their own environmental futures, but the future of all societies.

I tried to provide some historical context, because I believe that in order to understand where we are today, we need to look at where we’ve been. For much of the 20th century, the U.S. and China approached climate change in vastly different ways. The U.S., as an early industrialized nation, contributed significantly to historical emissions but also played a leading role in scientific research on climate change. China, on the other hand, industrialized later but very rapidly, surpassing the U.S. in annual emissions in the mid-2000s.

But, despite differences, there have been moments of intense collaboration. One of the most significant was surely the lead-up in 2014-2015 to the Paris Climate Agreement, including joint announcements of emission reduction targets by Presidents Xi Jinping and Barack Obama, which helped pave the way for the historic 2015 accord, in which nearly 200 countries pledged to limiting GHG emissions.

So, why did China and the USA take on such co-leadership? I attribute it to a convergence of their perspectives: their annual CO₂ emissions converged in 2006; their cumulative emissions are gradually converging, the future date of which will largely depend on relative rates of economic growth; both countries have huge coal reserves; and both countries have featured sub-national, emissions trading policies.

This partnership has not been without serious setbacks, however. Political shifts have influenced the trajectory of climate diplomacy. During the first Trump administration, cooperation began to collapse. To some degree, climate policy problems at that time (and since) were collateral damage of geopolitical tensions regarding international trade, human rights, democracy in Hong Kong, independence of Taiwan, security in Asia, and other issues. But to a considerable degree, the lack of cooperation was intentional with Trump’s announcement in 2017 to withdraw from the Paris Agreement, which did not take effect, of course, until November 2020.

So, climate negotiations persisted, with China and the U.S. co-chairing the Enhanced Transparency Framework negotiating stream of the UNFCCC throughout the Trump years. And the U.S. position did not seem to affect other countries’ commitments: China proved happy to evolve from co-leadership to sole leadership; and India did not retrench. Only Brazil did so, among the major emitters, but that was because of the election of Jair Bolsonaro, not because of Trump’s actions.

Of course, in recent years, we’ve seen renewed commitment to climate action. The Biden administration re-entered the Paris Agreement, establishing ambitious climate goals, including net-zero emissions by 2050. Likewise, China pledged to peak emissions before 2030, and achieve carbon neutrality by 2060. And at the G20 Summit in Bali, Indonesia in 2022, just before COP27 in Sharm El-Sheikh, Egypt, the two Presidents met and signaled – without much detail – their renewed cooperation on climate change. Then, a year later, just before COP28 in Dubai, U.A.E. in 2023, the two Presidents signed their “Sunnylands Statement,” signaling that they might indeed return to co-leadership on global climate change.

But important impediments remained, Biden accepted parts of Trump’s “America First” approach, creating his own “American Manufacturing First” theme of industrial policy, highlighted by (protectionist) investment and production subsidies for a range of climate technologies and strategies in the Inflation Reduction Act (as China has employed for many years!).

Today, domestic politics, economic competition, and mutual distrust continue to create serious roadblocks. And with the second Trump administration, we’ve gone from bad to worse. The U.S. imposed new tariffs on imports from China, and China quickly responded with countermeasures. And this time, Trump’s withdrawal from the Paris Agreement will be completed in just one year, not four years. Also, this time, U.S. withdrawal may have significant effects on other countries. For example, Indonesia, Argentina, and even New Zealand have talked about withdrawing. Equally important, India and a number of other major countries did not bother to meet the February 10^th deadline for submitting new targets under Paris.

Much of that may sound quite pessimistic, so I tried to offer a somewhat positive conclusion. Eight years ago, the annual climate talks took place in Marrakech, Morocco, just a week after Trump had been elected the first time in November 2016. I was invited to speak in the China Pavilion, as I have been each year. There was much lamenting on the panel about the 4-year Trump presidency that was about to begin, and I was last on the panel to speak. My Chinese host and moderator introduced me with, “Now, we hope that Professor Stavins can bring some good news from the United States.” I did not know what to say, so after a long pause, I stated, “When you get to be my age, you realize that four years is not a long time.”

Where does this leave us in 2025? At present, civil society, businesses, subnational governments, and academics can continue to play critical roles in fostering collaboration between China and the United States, as Harvard’s China Project has done for many years. And, in any event, climate policy developments will continue, such as with ambitious new targets — and the Carbon Border Adjustment Mechanism — from the European Union, which may lead to an international “carbon-pricing club.”

In conclusion, I’ve tried to suggest in these brief comments that the evolving relationship between China and the U.S. on climate policy is complex, shaped by history, shaped by competition, shaped by domestic politics, and – we hope – perhaps shaped by an urgent need for action. As the two largest carbon emitters, these nations have a strategic, even a moral responsibility to lead the world toward a sustainable future. The path ahead will not be easy, and I will add – as an economist – that it will not be cheap. But if these two global powers can again find common ground in addressing climate change, as they have in the past, then they can set a remarkable, effective precedent for rest of the world. The future of all societies may depend upon it.

What Trump’s Exit from the Paris Agreement Will Really Mean

One week ago, the Salata Institute for Climate and Sustainability at Harvard University published an essay I wrote for its Climate Blog. My topic was “What Trump’s expected exit from the Paris Agreement will mean.” In fact, Trump filed papers yesterday with the United Nations to initiate the process of withdrawal. Hence, my essay from last week is (unfortunately) very relevant, and so I’m reproducing it in full here for readers of my blog, An Economic View of the Environment.

What Trump’s expected exit from the Paris Agreement will mean

Jan 13, 2025

By Robert N. Stavins

At noon on Monday, January 20, Donald Trump will take the oath of office for his second term as president. It is reasonable to anticipate that one of his first actions will be to file papers with the United Nations to initiate withdrawing the United States from the Paris Agreement of 2015.

In short, it may be 2017 all over again, when Trump moved to exit the agreement – a legally binding accord requiring signatories to publish plans for reducing planet-warming emissions. As I wrote at the time, the Paris Agreement included an initial statutory delay of four years from the date of the agreement coming into force in November 2016, meaning the U.S. remained a party for almost the entirety of Trump’s first term. Dedicated staff from the State Department continued to participate in the ongoing negotiations in meaningful ways, including co-chairing with China the Enhanced Transparency Framework negotiating stream. Ultimately, the U.S. was out of the Paris Agreement for just a few months – until shortly after President Biden’s inauguration in early 2021.

Today, the statutory delay is 12 months, and so if Trump files withdrawal papers as soon as January 20, one year later the U.S. will be alone among the community of major nations as a non-party to this fundamental and path-breaking agreement (only Iran, Libya, and Yemen are non-parties of the agreement). Furthermore, it is much less likely that civil service staffers at the State Department, Environmental Protection Agency, or the Department of Energy will be able to continue their work, as Trump now seems determined to purge the upper ranks of the Executive Branch of anyone other than loyalists. At the very least, the U.S. delegation will have lame duck status for the year.

A possible – but unlikely – alternative to withdrawal

It is at least conceivable that instead of withdrawing, the Trump administration could choose to submit to the UN a revised and severely downgraded climate action plan as required under Paris – the Nationally Determined Contribution (NDC) – although a subsequent administration could unilaterally revise the NDC again. The option to downgrade the NDC rather than withdraw existed during Trump’s first term as well, but was obviously not chosen.

Whereas the original Obama-era NDC pledged to reduce U.S. emissions by 26-28% below 2005 levels by 2025, Biden updated this in April 2021 to 50-52% by 2030, and on December 19, 2024, the lame-duck Biden administration strengthened this to 61-66% by 2035. But it is highly unlikely the Trump administration would want to submit a downgraded NDC, given that such action could be interpreted as endorsing the overall legitimacy of the Paris Agreement, anathema to MAGA Republicans.

And an even more dramatic route

A more drastic action would be to withdraw not just from the Paris Agreement, but from the umbrella agreement, the 1992 United Nations Framework Convention on Climate Change (UNFCCC). This requires only a one-year delay to become effective. During Trump’s first term, serious consideration was never given to this more significant move, perhaps because the UNFCCC was ratified by the Senate in 1992 and signed by Republican President George H.W. Bush.

Now, however, some of the most passionate climate skeptics in Trump’s orbit want the U.S. to pull out of the UNFCCC as well. A key question, which legal scholars can debate, is whether withdrawal from a Senate-confirmed treaty requires Senate action, including a super-majority vote, which Democrats in the chamber could easily defeat. There seems to be some uncertainty. While Senate action is required to ratify treaties, Senate involvement in terminating ratified treaties is not mandated nor even mentioned in the Constitution. Several previous presidents have unilaterally exited from Senate-confirmed treaties.

Global impacts

In the meantime, a key question is how a U.S. withdrawal will impact other key countries’ positions. We know that after Trump’s first-term pullout the EU became more ambitious; China was happy to evolve from co-leadership with the U.S. to sole leadership; India did not retrench; and although Brazil backed off its pledge, that was because of the election of Jair Bolsonaro, himself a climate skeptic.

It may be that Trump’s election need not derail global climate action, but it is too soon to make firm predictions. It does appear that Trump’s November election victory emboldened Saudi Arabia to be much more strident in its defense of fossil fuels weeks later at COP29, even more than it had been previously at this annual meeting of UNFCCC signatories. The result, largely due to Saudi Arabia fighting any negative comments about fossil fuels in the final communique, was that COP29 did not repeat a call for a transition away from fossil fuels, let alone offer something stronger. EU and the U.S. negotiators wanted language about actions to achieve any goal, but that was likewise rejected. If, beginning in January 2026, the U.S. is not even a party, the negotiating effectiveness of countries such as Saudi Arabia will, if anything, be enhanced.

Finally, some may wonder what a U.S. exit will mean for the world of climate finance (who pays for climate damages and the energy transition – and how). It is helpful to recall that COP29 was labeled the “Finance COP,” because it was intended to focus on augmenting developed countries’ commitment made in 2009 (at COP15 in Copenhagen) to mobilize $100 billion per year by 2020 to support developing countries in addressing climate change, both for mitigation and adaptation. That commitment was eventually reached two years late. At COP29 developing countries received pledges of $300 billion annually, less than 25% what they sought. Will other donor countries fill a void created by U.S. withdrawal, or will it weaken others’ resolve to supply climate finance to developing countries? It will be some time before we know.

Bottom line

All in all, the real-world implications of the expected, forthcoming withdrawal of the U.S. from the Paris Agreement under Trump 2.0 may turn out to be less consequential than some observers have feared, despite the clear abdication of global leadership, and the great disappointment that will surely be felt by many in government, environmental advocacy, academia, and private industry. By far, the greater climate policy consequences will be in terms of extensive and severe downgrading of U.S. domestic climate and energy policy, whether via legislation, regulation, or both.