Paris Climate Agreement Archives - An Economic View of the Environment

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.

Thinking About Interactions of Taxes, Trade, and Climate Policy

Climate change policy proposals frequently take the form of tax policies, but other types of climate policies will also interact with tax law and policy, and for that matter with international trade law and policy. In the latest episode of my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” I had the opportunity to explore such interactions with an economist with great expertise in taxation, particularly the international aspects of taxation. Because my guest was Kimberly (Kim) Clausing, the Eric M. Zolt Professor of Tax Law and Policy at the School of Law of the University of California at Los Angeles. In addition to her research and scholarly credentials, it’s important to note that she served in the Biden administration in the U.S. Department of the Treasury as the Deputy Assistant Secretary for Tax Analysis. You can listen to our complete conversation here.

Before joining the UCLA Law School faculty (and before her time in government), Professor Clausing was on the faculty of Reed College and Wellesley College, having previously earned her BA degree in economics at Carleton College and her PhD in economics at Harvard. I’m pleased to note that she is participating in the Harvard Salata Initiative on Reducing Global Methane Emissions (in a research/outreach project with Catherine Wolfram on (Methane Emissions and Trade”)

Kim Clausing was at the U.S. Department of the Treasury during the first two years of the Biden administration, and she maintains that climate policy has been a priority for President Biden and his administration since day one.

“In fact, on day one, they rejoined the Paris Climate Agreement. They worked with climate at the center of their work in every part of that administration, including the Treasury [Department],“ she says. “The legislative achievements… were substantial, even though they were very difficult and hard fought. The infrastructure bill has some climate provisions in it, but also the Inflation Reduction Act, which I think is probably the biggest contribution we’ve seen to emissions reduction in the legislative sphere, and certainly in my time following these [issues].”

Kim Clausing acknowledges that the Inflation Reduction Act was far from perfect, as it contained a disparate set of objectives (and was based almost exclusively on subsidies designed to reduce carbon emissions, a political necessity).

“There are good arguments for subsidizing. We didn’t quite have the number of senators that are required to look at the cost side of this equation. It’s something that I’m hopeful that maybe we could do down the road, and I think there’s a moment coming ahead where that might happen. But the approach that we had is the approach that was feasible with a very delicate balance in Congress that was available.”

Clausing argues that trade policy and climate policy can be complementary, if done correctly.

“Some of the most hopeful progress that I can think of is using the carrot of trade and trade liberalization and market access to really encourage countries throughout the world to do more emissions reduction. And I think done correctly and done in a non-discriminatory fashion… I think that can be an incredible force for good,” she says. “An example of a non-discriminatory approach is the European approach where they are charging their firms for emissions allowances, and then they, in parallel, charge importers for that same amount of carbon content in particular industries [via the EU Carbon Border Adjustment Mechanism]. And so that basically incentivizes producers and governments in places like China and India and throughout the world to think about the carbon content of their production and goods like steel and aluminum because they know that if they want to send it to Europe, it’s going to face that carbon border adjustment.”

Clausing notes that many countries that haven’t priced carbon in the past are now considering doing so (and for good reason).

“They’d rather collect the revenue themselves than pay it to the Europeans if they’re exporting. But even those direct effects, while they may not be very big in many country cases, I think it’s a good time for a lot of countries to look at revenue sources that meet fiscal concerns that they might have that can enable them to shift their comparative advantage in a greener direction.”

More broadly, Kim talks about her 2020 book, “Open: The Progressive Case for Free Trade, Immigration, and Global Capital,” which she says was inspired by her desire to provide a fact-based defense of traditional American liberalism vis-à-vis trade and immigration policy.

“I wrote that book kind of in a flurry about a year after President Trump was elected as an attempt to sort of take basic economic intuition and understanding in the field of international economics and convey it to a popular audience,” she explains. “I’m really proud of [the book] in part because I think these arguments aren’t made enough these days. I think that there is this sort of move towards nationalism and America first kind of thinking. And so, I think we do need voices to sort of explain the economics in terms that people can understand, not just in the American Economic Review, but in a broader context.”

For this and much, much more, I encourage you to listen to this 58^th 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:

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.
Richard Zeckhauser, Frank Ramsey Professor of Political Economy, Harvard Kennedy School.

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

Thinking about the Institutional Dimensions of Climate Change Policy

Most economists tend to neglect the institutional and political dimensions of proposed climate change policies, whereas political scientists, policymakers, and stakeholder groups frequently give primary attention to these considerations. This is demonstrated by my recent podcast conversation with Navroz Dubash, professor at the Centre for Policy Research in New Delhi, and a Coordinating Lead Author of the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. You can listen to our conversation in the latest episode of my podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.” Our full conversation is here.

In these podcasts, I converse with leading experts from academia, government, industry, and NGOs. Navroz Dubash fits well within this group, as a respected international expert on the politics of climate change policy and governance, the political economy of energy and water resources, and the regulatory state in the developing world. In addition, he was previously a senior associate at the World Resources Institute and a policy analyst at the Environmental Defense Fund.

In discussing pragmatic frameworks necessary for the implementation of effective climate change policy, Dubash explains why international institutions are absolutely essential.

“Climate change in a sense is now a problem with a clock. We have a ticking clock if you’re going to meet two degrees, and even more so if you meet [the goal of limiting the increase in global temperatures below] 1.5 degrees. It’s not enough for every country to do what they can. We have to be measuring progress against what is determined to be necessary by science. So, we have to have some process through which policies and actions are assessed and evaluated.”

This is where, Dubash says, international institutions and rules have a critical role to play.

“What is the mechanism through which future [emissions reduction] targets translate into current action? There needs to be some kind of interlinking mechanism through which we both decide what target is reasonable, as well as think back to what we have to do today in order to achieve those targets. And if there are obstacles to that action, how we overcome those obstacles? All of those tasks really require institutions,” he says.

I ask Navroz to talk about the differences between China and India, since they are sometimes (incorrectly) lumped together in conversations about climate change. He describes the differences in the context of both countries attempting to reduce their emissions in line with the goals of the Paris Climate Agreement.

“In a sense, China has now over the last 20 years built up its infrastructure to the point where it can start thinking about in a sense what the transition is to a low carbon future. India has actually not built up its infrastructure. And we are an interesting place because our emissions are likely to grow for a while longer in order to meet development needs. Now, the trick is going to be how can India do this with a shallower increase in emissions than China exhibited?,” he says. “To unwind a coal or fossil economy actually will have ripple effects throughout the larger political economy of India. And so that it’s not just the economic costs that matter, but also the transaction costs.”

Navroz Dubash remarks that the long-term potential for climate policy to succeed depends heavily on the internal politics in nations that have voluntarily pledged under the terms of the Paris Agreement to reduce their carbon emissions in coming years.

“I think the positive part of Paris for me was that it essentially recognized that progress on climate change is not going to come because of hectoring or peer pressure at the international level. It’s going to come because national politics in country after country shift, where countries find ways of telling a story about how low carbon futures are good for them economically and can sell that politically to their own people. And Paris basically gave countries space to figure out how to tell that story and make it happen.”

For this and much more, I hope you will listen to my complete conversation with Navroz Dubash, the 31^st 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:

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.

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