The Signal Donald Trump Is Sending with His Decision Is Disastrous

Signed by almost 200 countries, the Paris Climate Agreement represents a milestone in the global fight against climate change. US President Donald Trump recently announced that the United States would withdraw from the climate agreement. The European Union still believes in adhering to the pact and intends to exceed its climate goals. ZEW environmental economist Sebastian Voigt offers his thoughts on the potential impact of the US withdrawing from the agreement and the consequences this might have for global climate policy.

The reactions to Donald Trump’s decision to pull the US out of the climate agreement range from “very concerning” to “not so bad”. What is your assessment?

I’m of two minds. It is true that a large number of US states and municipalities are planning to stick to their own climate targets. There are also many companies interested in measures to counteract climate change, partially because they would benefit from decreasing energy costs. It remains to be seen whether, despite Trump’s decision, the pledges made in the Paris Agreement will be at least partially fulfilled. However, whichever way you choose to look at it, the signal the US President is sending is disastrous. Over the coming years, the United States will no longer be present at the highest levels of international climate policy – whilst remaining the second largest emitter of greenhouse gases worldwide.

Will the departure of the US lead to closer cooperation between Europe and China?

I personally do not expect that there will be any cooperation in the form of bilateral treaties between Europe and China beyond the parameters of the Paris Agreement. There will, however, be more cooperation on the economic level, for example, on issues closely linked to environmental policy. We can already see this in the areas of photovoltaics and electromobility, for instance. There is already a great deal of cooperation in research supported by EU research funding, for example in the sharing of knowledge and experience regarding emissions trading. I think this kind of cooperation is likely to increase in the future.

China has done an about-turn in terms of climate policy. Is the People’s Republic now becoming a shining example for climate policy?

I wouldn’t go that far. On the one hand, China’s climate ambitions are also a side-effect of their efforts to reduce the incredibly high-levels of air pollution in Chinese cities. This pollution is causing harm to the local population and has the possibility to create political problems domestically for the Chinese government. Given that the smog problem largely results from the mining and combustion of coal, savings will inevitably be made here. On the other hand, there are also concrete economic reasons for China to implement tougher climate energy policies: namely, to reduce energy costs and to increase competitiveness. Regardless of the motivation for the change in policy, we will certainly see some improvement on the current situation. I wouldn’t say China was a shining example, though I wouldn’t use the term to describe Europe either.

What steps should the EU now take in the fight against climate change?

The EU has already decided on a timetable up until the year 2050. The focus of this plan is on reducing greenhouse gas emissions, with emissions trading still being the EU’s most important climate policy tool. By 2030 emissions are to be reduced by 40 per cent compared to 1990 levels, and by at least 80 per cent by 2050. These goals would have still come into effect if the Paris Agreement had not been ratified. But it is emissions trading where there is the greatest need for action. The currently low prices of emission certificates are a problem, particularly in the long term. Low prices mean there is no incentive for the necessary investment in more energy efficient technologies, for example. After 2030 in particular, the EU could face some difficulties in reaching its emissions target. One measure intended to bring about an increase in the CO2price is the Market Stability Reserve, which is set to be introduced in 2019. However, many experts doubt that this will lead to any noticeable change in prices. A more effective measure could be the introduction of a CO2tax. This is unlikely to be implemented at the EU-level, however, since it would set an unwelcome precedent for an “EU tax”. The EU therefore needs to find another way to incentivise investment that will help Europe achieve its ambitious climate goals.