The Economic Cost Of Leaving The Paris Climate Agreement

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President Trump addresses U.S. military troops and their families at the Sigonella Naval Air Station, in Sigonella, Italy, Saturday, May 27, 2017. (Luca Bruno/AP)
President Trump addresses U.S. military troops and their families at the Sigonella Naval Air Station, in Sigonella, Italy, Saturday, May 27, 2017. (Luca Bruno/AP)

President Trump will reportedly pull the United States out of the 195-country Paris Agreement on climate change. Trump has argued that the agreement would cost the country trillions and put factories at risk.

Here & Now's Jeremy Hobson explores the potential economic impact of both staying in and leaving the accord with Roberton Williams (@Roberton3Will), professor at the University of Maryland and director of academic programs for Resources for the Future, a nonpartisan group that studied the deal.

Interview Highlights

On what the Paris Agreement would mean for the U.S. economy

"It depends a lot on the details. What matters for the economy is not just what the target is for carbon emissions, for greenhouse gas emissions, but how you achieve it. So it makes a difference whether you use a policy like carbon tax or tradable permits, those are more efficient than traditional regulation. It makes a difference, the details of that, that if you use a carbon tax and you use the revenue in a pro-growth way, you get a smaller hit to the economy, or a gain to the economy. Whereas if you use it in some non pro-growth way, it tends to be more negative. But in general the effects are small, that if you look at the aggregate numbers, the effect would be lost in the noise."

On the agreement's impact on U.S. job numbers

"It's noticeable, but small enough that you wouldn't even see it in the numbers. And the reason for that is it's really, the effect would be much more of a job shift, rather than a job gain or a job loss. You'd see... all of the modeling, the work I've done with my colleague Marc Hafstead, suggests you'd get significant drops in jobs in some of the industries you'd expect, like coal mining. You get significant gains in green jobs: renewable energy and things like that. And then you get much smaller effects, or small gains and losses, in a range of other industries throughout the economy. But it's mostly jobs moving, rather than jobs leaving or arriving. So it's not a gain or a loss, it's a shift."

On advocates who say the deal would be good for the U.S. economy

"It will be good for parts of the U.S. economy, and it will be bad for other parts of the U.S. economy. That if you're a coal miner, this isn't gonna be good for your job. If you're somebody in the solar industry, it's going to be very good for you. If you're the typical person in the economy, you wouldn't notice much difference. But that shift still matters, that we need to think about doing something to make sure that the coal miners are taken care of. But it's worth keeping in mind, a lot of the coal jobs... coal jobs are going away anyway. And essentially none of that is due to climate policy, that it's a range of other things — technological changes, shifts in where they mine the coal, natural gas. And those trends are likely to continue. So a lot of those jobs are going to be going away anyway. Taking action on climate would accelerate that, and that has real effects, and causes real harm to coal miners and coal-mining communities, and any policy would need to do something about that. But that's not the only effect. There's that effect, and there are gains elsewhere. So the net effect is pretty small."

On what the economic effects of pulling out of the agreement would be

"You can separate the effects of doing something to reduce greenhouse gas emissions — and that's what we've modeled — from the effects of pulling out of the agreement. Because there's the option of staying in the agreement and not actually doing anything, which is one of the other options the Trump administration was considering. And one of the problems we have, we're much better at modeling the cost of doing something to reduce emissions than we are modeling the cost of doing nothing. We don't know very well how other countries are gonna react. If other countries react by doing less to fight climate change, that has very real costs. That unchecked climate change could have very serious costs for the U.S. economy. But knowing exactly how big that is is really hard.

"This could also, pulling out of the agreement, could hurt U.S. standing around the world, that if we're not willing to cooperate with other countries on this, maybe next time we want them to cooperate with us, they won't be willing to do so. And that could have very serious costs for the U.S. economy. But those things are much, much more difficult to model. So we have a much better sense of the costs of staying in and doing something, than we have with the costs of pulling out of the agreement, or staying in and doing nothing."

This article was originally published on May 31, 2017.

This segment aired on May 31, 2017.



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