Despite the pending U.S. withdrawal from the Paris Agreement and the rollback of major climate-related policies, U.S. carbon emissions have continued to decrease. It appears that the influx of cheap shale gas and other market forces play a big role, along with (remaining) public policies against coal-fired power plants and in favor of renewables. Going forward, the question is really whether, in the coming years, the U.S. can continue on its path to lower emissions in the absence of meaningful climate policies.
- According to the International Energy Agency, global energy-related CO2 emissions flatlined in 2019 at 33 gigatons, even though the global economy grew by 2.9%. In part, this is due to mild weather (saving energy for heating and cooling) in a number of large economies and economic slowdown in several developing economies (e.g. China). Energy-related emissions have actually dropped in Europe (5%) and the United States (2.9%), and this is mostly due to the influx of natural gas and renewables in power generation (which accounts for ~40% of total emissions). In the U.S., the carbon intensity of its energy mix has declined steadily over the last 30 years (down by 12%).
- Along with cleaner power generation, the overall energy intensity of the U.S. economy has dropped 40% from 1990 levels. The latter appears especially relevant and multiple aspects play a role here: offshoring manufacturing (i.e. effectively exporting emissions) and the growth of the services sector, yet there’s also a clear shift away from coal to more energy-efficient natural (shale) gas turbines, more fuel-efficient vehicles.
- As with other bi- and multilateral international deals, President Trump has argued that the Paris Agreement is disadvantageous to the U.S., as it would (mildly) force government to take action that could hamper economic growth and result in higher consumer prices. It is, however, questionable whether the U.S. withdrawal from “Paris” will really have an impact on U.S. emissions, as it doesn’t include any binding norms. Yet, it is a testament to this administration’s desire to freeze or roll back climate targets and it will send a message to the rest of the world as well. Also, the U.S. is unlikely to continue to contribute to the global Green Climate Fund that is to support developing nations in their efforts to reduce GHG emissions.
- The Trump administration has rolled back several Obama-era climate-related regulations. Most importantly, this includes the substitution of the Clean Power Plan, which placed (state-specific) limits on emissions from power generation, with the much weaker Affordable Clean Energy act. As for transportation, the administration has frozen the Corporate Average Fuel Economy (CAFE) standards and manufacturers no longer have to reduce emissions from passenger cars by 5% per year. In addition, the state of California is no longer allowed to set its own (typically stricter) standards.
- President Trump has been called a “climate nihilist” for whom every utterance about climate change is informed by political interests; anything to please his donors or his voters. With respect to the latter, Republican voters are likely to demand more climate-related action. By now, almost two-thirds of Republicans actually believe in climate change and two surveys (one from Pew and another from the American Conservative Coalition) found that between 52 and 67% of young Republican voters indeed want the GOP to do more about climate change.
- Like Trump, the secretary of the EPA and former coal-industry lobbyist Andrew Wheeler is not an outspoken climate change denier, but he continues to stress that the problem should be left to the free market and improved technology, rather than solutions dictated by government. The same holds true for other Republicans who maintain that government can support technology development, but that it should not impose any limitations on business.
- Individual states and cities continue to take action against climate change. Recently, more than 250 American mayors have pledged to power their cities with 100% renewable energy by 2035.
Since Donald Trump took office, the United States has shaken off its climate-leadership feathers. Before Trump, being the global superpower and one of the top polluting nations, the U.S. participated in global climate negotiations and, indeed, took steps to reduce its own carbon footprint. In fact, starting shortly after the turn of the millennium, the United States has slowly but surely reduced it carbon emissions. And even though some of the progress can be attributed to offshoring of production and temporary economic downturn, there’s a structural trend of decarbonization of the American economy. And even today, despite the fact that the rhetoric on climate change has shifted completely and much weaker regulations have been implemented, the American economy continues to emit less and less CO2. Together, these dynamics raise the question whether stringent policies are really needed to further reduce its carbon footprint and, as a follow-up question, whether this trend can continue even if President Trump is elected for a second term.
The major gains, if not the only gains, were realized in the power sector. Here, the big story is the (market-driven) rise of shale gas, which has offered a relatively low-cost and stable alternative to coal. At the same time, the balance has also shifted in favor of natural (shale) gas due to environmental norms in relation to, for instance, mercury emissions (which are not directly related to climate change) that raised the operating costs of coal-fired power plants. The Clean Power Plan, which was the major climate-specific tool to push out coal in the future, has probably played a lesser role in recent years. Also, renewable power generation has obviously grown rapidly, but has “only” accounted for about a quarter of the reduction of coal (and some 8% of total power supply). Going forward, the new Affordable Clean Energy act will hardly affect the power sector and current plans to weaken the previously mentioned mercury (and other toxics) standards could indeed halt the decline of coal. More structural, policy-driven, progress should come from states or cities. In other sectors, such as the transportation sector, no absolute reductions have been achieved, but there is still a slowdown in emissions’ growth that could be taken as a sign of the (partial) decoupling of economic growth from carbon emissions.
the market can only fix problems that are reflected in market prices
So if it’s not government pulling the strings on climate action, can the invisible hand of the free market take care of this problem? It probably can, but only to a certain extent. First, businesses will continue to look for cheaper means of production and this will also entail ways of saving energy (e.g. more efficient airplanes in aviation) or finding cheaper sources of energy that today include (relatively clean) natural gas and sometimes renewables. Second, consumers increasingly demand more climate-friendly goods and services and this will be a trigger for, at least some, businesses to deliver just that (e.g. vegan food, sustainable clothing and low-emission vehicles). Third, and perhaps most interestingly, recognizing that change is necessary and inevitable in the long run, industries tend to prefer steady and predictable policies that allow them to develop solid strategies and plan their investments. This is why a handful of car manufacturers have struck a deal with the state of California to continue to develop cleaner cars despite the federal government weakening its (CAFE) standards. These companies assume that future governments (and consumers both in the U.S. and elsewhere, as well as foreign governments) will expect them to produce low- and zero-emissions vehicles anyway and, to them, it makes no sense to halt ongoing efforts because of a temporary hiatus in American regulations (although their ambitions are lower than the original CAFE norm).
These drivers will push the U.S. to a lower carbon footprint, but in the end, they will only lead to a further optimization of the current system along the lines of ecological modernization. The real problem here is that the market can only fix problems that are reflected in market prices (e.g. high fuel costs), while the costs of climate change will take effect too far away and over too-great a timespan and will remain externalities without active public intervention (e.g. taxes, emissions trading schemes, environmental standards or other performance targets).
- Republican lawmakers facing pressure to “do something for the environment” are most likely to seek legislation that directly favors American citizens without “hampering” business. This will include support schemes for cleantech and limited environmental norms in relation to air and water pollution. Reforestation is also a favored measure among Republicans, including Trump himself.
- In the absence of meaningful federal action, (blue) states and cities (e.g. NYC) are likely to take more action of their own accord. Yet, it is to be expected that the White House will try to limit their room for maneuvering.
- While a lot of emissions have been “exported” with offshoring production to emerging economies, the digital economy will result in higher domestic emissions once again. Today, the ICT sector accounts for about 1.5% of the global carbon footprint, but this may rise to 14% in 2040, much of which will come from local data centers.