Looking Back, Looking Forward: Implications of Trump 2.0

            This is a blog essay I have been dreading having to write, because I knew that writing it would be painful, if not downright depressing.  However, I also felt that it is a blog essay that I am obliged to write. 

Why Am I Obliged to Write This Essay?

Three reasons.  First, back in October 2016, as that year’s Election Day approached, I came out of my political closet (as a long-time bipartisan and moderate independent), and revealed my great concerns, indeed fears, of what a Trump presidency would mean – not just for environmental and climate change policy, but for a much larger set of issues with profound consequences domestically and internationally (This is Not a Time for Political Neutrality).  I wrote about “what a Trump presidency would mean for my country and for the world in realms ranging from economic progress to national security to personal liberty,” based on Trump’s “own words in a [2016] campaign in which he substituted impulse and pandering for thoughtful politics” … and “built his populist campaign on false allegations about others, personal insults of anyone who disagreed with him, and displays of breathtaking xenophobia, veiled racism, and unapologetic sexism.”

Second, just a week after Trump’s surprising win over Hilary Clinton, I turned my focus in this blog to considering carefully the implications of the (first) Trump administration for environmental, energy, and climate change policy and action (What Does the Trump Victory Mean for Climate Change Policy?).  I’m pleased to say that much (but not all) of what I feared that first Trump administration would bring did not occur, for four reasons, among others:  (a) the incompetence of the administration, particularly in regard to producing regulatory changes that would withstand legal challenges (Reflecting on Trump’s Record); (b) some Trump appointees provided guardrails protecting the country from the President’s worse instincts; (c) the (Democratic) Congress provided significant checks; and (d) dedicated, expert staff in the various departments and agencies (and even in the Executive Office of the President) were determined to resist the undoing of decades of sound public policy.

Third, in January 2021, just days before the inauguration of President Biden, I wrote in some detail about what I expected the consequences to be for domestic and international climate change policy of the then forthcoming Biden administration.  For better or for worse, much of what I anticipated, did indeed subsequently come to pass (Climate Change Policy & Action in the Biden Administration).

            So, now with Trump 2.0 two months away, I feel obliged to offer my thoughts about the forthcoming administration’s implications for climate change policy and action.  I need not point out that none of the four reasons I listed above to explain why much of what I feared from the first Trump administration did not occur, apply for the second Trump administration.

A Very Important Caveat Before Turning to Climate Change Policy

            I want to acknowledge that my major reactions to the Trump victory and my major concerns about the forthcoming Trump administration are not about climate change policy or even environmental policy more broadly, but about: the future of American democracy; global security (the future of NATO and the stability of the European Union); the real economic consequences of across-the-board tariffs (consumer costs, inflation); tax cuts for the rich; mass deportations; and leadership by uninformed demagogues – Matt Gaetz as Attorney General, RFK Jr as Secretary of Health and Human Services, Peter Hegseth as Secretary of Defense, Elon Musk on economic policy and business regulation, and so many others.  The four I name are not just bad appointments, but absolutely appalling ones, who share the one characteristic that apparently matters – blind loyalty to the authoritarian who has been elected President.

            But my expertise is not in the study of democratic institutions, international affairs, macroeconomics, or immigration policy, but in the study of environmental and climate change economics and policy.  So, I will turn to this now, and I will be brief, partly because we will learn much over the coming two months, as more cabinet-level and then lower-level nominations are announced.  My other reason for being brief is that, as I suggested at the outset, it is painful to write this essay, and so I want to finish writing as quickly as I can.  I apologize for that.

International Climate Change Policy

            In terms of the international dimensions of climate change policy, that is, cooperation with other countries in addressing a fundamentally global commons problem of massive magnitude, the focus needs to be on the United Nations Framework Convention on Climate Change (UNFCCC), the Paris Agreement, and the annual Conferences of the Parties.  Having just returned from COP29 in Baku, Azerbaijan, my next blog essay will focus on that and will appear in a week or so, after COP29 has adjourned and the outcome has become clear.  So, for now, I will stick to some broad observations about the consequences of Trump 2.0 for the international domain.

            In short, it is 2016 all over again, when Trump stated during the campaign that he would withdraw the United States from the Paris Agreement, and then announced the “withdrawal” on June 1, 2017.  As I wrote at the time (Trump’s Paris Withdrawal: The Nail in the Coffin of U.S. Global Leadership?), the Paris Agreement itself specifies that the soonest any Party to the Agreement can initiate withdrawal is three years after the Agreement comes into force, followed by a one-year delay before withdrawal takes effect.  Hence, Trump’s announcement did not take effect until November of 2020!  For almost the entirety of Trump 1.0, the United States remained a Party to the Paris Agreement, and dedicated staff from the U.S. State Department continued to participate in the ongoing negotiations in meaningful ways.

Hence, the United States was out of the Paris Agreement for just a few months – from November 2020 until a month after Inauguration Day, January 20, 2021, when President Biden filed the paperwork for the U.S. to rejoin 30 days later.

            Now, however, the statutory three-year delay period has long since passed, and so assuming that Trump files the withdrawal papers on January 20, 2025 (which is likely, given the much more careful preparations his supporters have been making for the past year), one year later the U.S. will be alone among the community of nations as a non-Party of this fundamental and path-breaking Agreement (after some delay, Iran and Algeria ratified the Agreement).  Furthermore, it is much less likely that Civil Service staffers at the State Department, EPA, or the Department of Energy will be able to continue their work, as Trump 2.0 seems determined to purge the upper ranks of the Civil Service of anyone other than Trump loyalists (by making these positions require political appointment).

            A more drastic action would be to withdraw the United States not just from the Paris Agreement of 2015, but from the umbrella agreement, the United Nations Framework Convention on Climate Change (UNFCCC, 1992).  Ironically, this requires only a one-year delay to become effective after filing paperwork.  During Trump 1.0, serious consideration was never given to this more significant move, perhaps because the UNFCCC was ratified (by voice vote with apparent unanimity) by the U.S. Senate in 1992 and signed by Republican President George H.W. Bush.

Now, 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 will debate, is whether withdrawal 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 withdrawal is not mandated nor even mentioned in the U.S. Constitution.  But Presidents have previously withdrawn from treaties unilaterally.  That said, this apparently remains a debated issue in U.S. constitutional law.

In the meantime, a key question is what will the effect of U.S. withdrawal from the Paris Agreement – or more broadly, the election results and the promise of Trump 2.0 – have on other countries’ climate stances and policies.  As of now, it seems 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 victory may have emboldened Saudi Arabia to be much more strident in its defense of fossil fuels at COP29 (more about this in my next blog essay).

Domestic U.S. Climate Change Policy

            It is already evident that the key appointments in the energy, environment, and climate change space in the new administration will be held by individuals with histories of strident opposition to climate policies and equally strong support for fossil fuels.  Examples include Trump’s choice for Secretary of Energy – Chris Wright, a fracking booster and climate skeptic, Lee Zeldin as Administrator of the Environmental Protection Agency, and a number of others.

            It also seems clear that the new administration will try to roll back many provisions of the Inflation Reduction Act (IRA), and perhaps some provisions of the Bipartisan Infrastructure Act.  Actual repeal of the statutes is unlikely, due to Senate filibuster rules (i.e., the necessity of 60 votes, more than Republicans will control).  In the face of this, the Biden administration is rushing to finalize regulations, and to get IRA money (explicit subsidies) out the door.  Beyond this, the White House has considerable latitude to defund elements of the IRA, since nearly all are explicit or implicit subsidies.  The methane fee will be a particular target.

On the other hand, the protectionist elements of the IRA, including domestic content standards, will be harder to roll back, because of bipartisan support.  Furthermore, fully 80% of investments in the first two years of IRA implementation went to Republican Congressional districts, whether locations for electric vehicle plants in Georgia, battery factories in South Carolina, or others.

It is also important to recognize that the tremendous reductions that have been experienced over recent years in U.S. carbon dioxide (CO2) emissions were not due to government policies, but largely a result of exogenous technological change and market forces, namely the development of horizontal drilling and hydraulic fracturing (fracking), which resulted in opening up new, low-cost, unconventional sources of both natural gas and oil.  This is what led to the massive substitution in U.S. electricity generation from major reliance on coal to major reliance on gas.  Added to this are the very significant decreases experienced over the past few years in the costs of renewable sources – both solar and wind.  None of this will go away.

Finally, the November election brought a small, but meaningful bit of positive climate policy news when Washington State voters decided not to repeal the state’s Cap-and-Invest (cap-and-trade) program.  Linkage discussions with California and Quebec will soon commence, if they have not already.  Overall, this is a reminder of the fact that the next four years (at least) will again be a period when sub-national climate policy is increasingly important in the USA.  For the time being, this is the best I can do at trying to offer a somewhat positive end to this essay.  I wish I could do better.

Share

An Experienced Economist Reflects on Government Service, Carbon Pricing, and Climate Policy

Having served as the Deputy Assistant Secretary for Climate & Energy Economics in the U.S. Department of the Treasury in 2021-2022, Catherine Wolfram has some particularly relevant insights to offer on the development and implementation of climate change policy in the most recent episode of my monthly podcast.  Wolfram is the Cora Jane Flood Professor of Business Administration at the Haas School of Business at the University of California, Berkeley, currently on leave at the Harvard Kennedy School.  In the podcast, we discuss her time in government service and her thoughts and hopes for a carbon pricing scheme.  You’ll find this and much more in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” a podcast produced by the Harvard Environmental Economics Program.  I hope you will listen to our complete conversation here.

In this new podcast episode, Catherine Wolfram, who earned her PhD in Economics from MIT, begins by reflecting on her service in the Biden Administration, and she does so in very positive terms, saying that it was an “honor and thrill of a lifetime.”

“I would say the high point was definitely the work on the price cap on Russian oil. That was the main thing that I spent time on in the last 10 months of my time at Treasury, and was absolutely fascinating from so many different perspectives,” she says. “I learned a lot about foreign diplomacy, or I should say that I observed foreign diplomacy in action.”

During her time at the Treasury Department, Congress passed the Inflation Reduction Act, important legislation that authorizes $391 billion in spending on energy and climate change initiatives, making it the most important climate legislation ever enacted in the United States.

“A lot of the Inflation Reduction Act is being implemented through tax credits, and that’s Treasury’s purview, so [although] it was not my office within Treasury (it was another office, the Office of Tax Policy), I … [attended] many meetings about what started out as the Build Back Better Act and became the Inflation Reduction Act. So, that was really fun to see, and is certainly a momentous piece of legislation,” she remarks.

Despite the reliance on subsidies (tax credits) in the Inflation Reduction Act, Catherine says that she remains optimistic about the potential role of carbon pricing in climate change policy.

“I would not call carbon pricing dead,” she argues. “I could see it coming back in some form, maybe not the economy-wide carbon price that textbooks favor, but maybe something that starts, for instance, with the industrial sector … on a more limited scale.”

More broadly, Wolfram expresses optimism that the international community will figure out creative ways to adopt climate policies that will make a positive difference.

“I think if the G7 countries can get together and figure out how to put a price cap on Russian oil, [then] hopefully the G7 countries can get together and figure out good ways to use their presence in the international trade community to address climate change.”

However, Catherine also expresses concern about the possibility that an overreliance on tax credits and government subsidies in the design of climate policy could set back efforts to impose effective carbon pricing.  

“I worry that there’s a future that evolves where the European Union gets pressure from its industry, and loses enthusiasm for its carbon price, and so the competitive pressures from industry that are seeing these subsidies over in the U.S., and thinking of moving to the U.S., that causes the EU to backtrack on climate policy, just because we have these different approaches to reducing emissions.”

For this and much, much more, I encourage you to listen to this 44th episode 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:

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

Share

Insights about Climate Change Policy from Europe, New Zealand, and the USA

Suzi Kerr, the chief economist at the Environmental Defense Fund (EDF) and founder of Motu Economic and Public Policy Research, a think tank in her home country of New Zealand, shares her perspectives on climate change policy in the latest episode of our podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”  I hope you can find time to listen to our conversation here.

In these podcasts, I converse with leading experts from academia, government, industry, and NGOs.  I’m pleased to say that my long-time colleague and friend (and former student), Suzi Kerr, fits well in this group with her abundant experience in academia and NGOs.

Dr. Kerr was involved in the early design of New Zealand’s successful emissions trading system (ETS), which began in 2008, and is similar in some ways to California’s cap-and-trade system, about which I have written many times at this blog and elsewhere.

“It was the second [ETS] in the world and it’s economy wide. It’s what we call upstream, so it covers…basically all fossil fuels and most other emissions in New Zealand. And one of the highlights I think is that it covers the forestry sector, and New Zealand is still probably the one that covers that most comprehensively.  A lot of what we were trying to do was experiment and learn so that others could learn from our experience.”

As Europe prepares to begin implementation in 2023 of its Carbon Border Adjustment Mechanism (CBAM), intended to mitigate carbon leakage and protect competitiveness while remaining in compliance with World Trade Organization (WTO) rules, Kerr expresses her belief that while the CBAM is lower cost to taxpayers and provides advantages over output-based allocation measures, there are many challenges standing in its way.

“The logistical issues of bringing in a CBAM are huge. If we all had carbon pricing, it would be pretty easy, but we don’t. We have a whole mix of policies in different countries. Some have carbon pricing, but [other nations have] other policies. That complexity is huge, and the other issue is equity across countries. Does it really make sense for us to be charging countries who have low policy stringency because they’re very poor?,” she says. “I think it’s critically important that the EU couple any introduction of CBAM with really active support for the poorest countries so that they are supported to have a climate transition rather than expected to do that entirely on their own.”

In the U.S., the Biden Administration has announced its new nationally determined contribution (NDC) under terms of the Paris Agreement, with a pledge to cut greenhouse gas emissions by 50 to 52 percent below 2005 levels by 2030.  I ask Suzi Kerr whether this target is achievable, given domestic U.S. politics.  She responds that she judges the pledge to be credible, but difficult to achieve.

“The research and the modeling all says it can be done. It’s certainly possible and a lot of it can even be done at very low cost. Whether it will be done is a much more challenging question and that’s where it gets really hard – actually implementing the policies that are effective. Even if you have the political will, that’s a difficult thing,” she remarks. “In general, history teaches us that policies are almost always less effective than we think they’re going to be.”

My complete conversation with Suzi Kerr is the 27th episode in 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:

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

Share