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The World BusinessMirror
Editor: Lyn Resurreccion • Monday, June 5, 2017 A7
Trump’s climate move has broad econ fallout
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resident Donald J. Trump’s decision to abandon the Paris climate accord— and his broader unwillingness to fight climate change—will have broad economic consequences.
Exactly what those consequences will be, though, depends on many things. It’s not just the political decisions that will matter, but also the pace of scientific advances around renewable energy, the vicissitudes of commodity markets, and the investment decisions of businesses, governments and individuals worldwide. The very discussion rapidly turns to questions that are as much philosophical as economic. How much do you value existing jobs versus different jobs that might be created? And how much do you value the future versus the present? Consider a relatively narrow question involving the economics of climate-change mitigation: How much will the Obama administration’s Clean Power Plan, a key element of its efforts, increase the electricity prices that Americans pay? Industry-funded research from Nera Economic Consulting estimated that it would increase retail electricity bills by 0.3 percent in the 2020s; the Environmental Protection Agency (EPA) estimated a 2- percent to 3-percent increase in 2020 and a decrease by 2030; and Synapse Energy Economics and M.J. Bradley and Associates both projected a significant decrease in electricity costs, as much as 17 percent by 2030. In this case, not only is the extent to which the plan will affect power bills uncertain, but also the direction. In these forecasts, it matters a great deal how quickly prices fall for generating solar and wind power; how much energyefficiency programs reduce demand for electricity; the future price of natural gas; and how aggressively states cooperate to
2.7M
The number of jobs that will be lost by 2025 as one of the economic impacts of regulating greenhouse gases achieve emissions targets. This challenge of projecting the consequences of climate action gets all the harder when you go from a narrow question like the cost of electricity a few years down the road to broader questions about jobs, incomes and GDP. Any credible effort to combat climate change endangers millions of jobs involved in the extraction and processing of fossil fuels. But the reality of the modern economy is that industries are constantly in flux, and the workers who lose jobs may well find better ones. The Nera study, for example, with its pessimistic take on the economic impacts of regulating greenhouse gases, projects that the efforts will cost the US economy 2.7 million jobs by 2025 and 31.6 million by 2040. But that’s the way the labor market works in general, with some sectors expanding at any point in time and others contracting. Right now, the retail sector is bleeding jobs as physical stores give way to more online shopping. The information-services sector shed more than a million jobs from 2001 to 2012. The share of jobs in manufacturing
Paris exit isolates Trump from C-Suites to capitals
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he response to President Donald J. Trump’s announcement he was exiting the Paris climate accord and wanted to renegotiate on his terms was immediate: The leaders of France, Germany and Italy said no. On Wall Street, corporate executives pilloried the businessman president. Goldman Sachs’s CEO tweeted for the first time, calling the move a setback for the world. Tesla Inc.’s Elon Musk and Bob Iger of Walt Disney Co. quit a White House advisory council in protest. Even the mayor of Pittsburgh—a city Trump highlighted as a beneficiary of his decision to turn his back on the global pact—vowed to abide by the Paris Agreement. Trump’s decision leaves him more alienated than ever, isolated on the world stage and increasingly embattled at home. Trump retweeted a flurry of praise about his move last Friday morning, all delivered by political allies, from Vice President Mike Pence to Republican House Majority Leader Kevin McCarthy. Scott Pruitt, Trump’s environmental chief, said exiting doesn’t mean the US is disengaging—just that Trump had put America’s interests first. “Paris represents a bad deal for this country; it doesn’t mean we’re not going to continue the discussion,” Pruitt said at a White House briefing last Friday. Coming against the backdrop of sprawling probes into ties between Russia and Trump’s campaign, the backlash threatens to sap the president’s power when he needs it most to advance domestic priorities, such as tax reform and a health-care overhaul, while confronting an increasingly bellicose North Korea. It’s a dramatic change in fortunes for the president after just 133 days in office. Business leaders no longer seem to fear Trump’s tweets; foreign leaders have moved from attempts to find rapport to direct confrontation. Consider that in earlier days, a tweet about Ford Motor Co. shipping US jobs to Mexico prompted the automaker to announce it was abandoning plans to build a $1.6-billion plant there. Days after his election, Trump called the top executive of United Technologies Corp. and told him not to move jobs from a Carrier factory in Indianapolis to Mexico. Carrier partially
relented, agreeing to keep 1,100 jobs in the US in exchange for $7 million in tax breaks and incentives from the state. (Even so, 1,300 jobs are still going to Mexico.) And in her first visit with Trump in Washington, German Chancellor Angela Merkel gamely tried to shake Trump’s hand during a photo opportunity, offering an optimistic assessment of the meeting despite the president’s persistent criticisms of her country. “I’ve always said it’s much, much better to talk to one another and not about one another, and I think our conversation proved this,” she said afterward. There is none of that fear and trembling now. After Trump’s announcement on Paris, Ford issued a statement asserting that “we believe climate change is real and remain deeply committed to reducing greenhouse-gas emissions”. Company Chairman Bill Ford, the man Trump once described as “my friend”, broke with the president over his executive order on immigration. Even the initial deal came with a caveat: The company is still moving some auto production to an existing factory in Mexico, in addition to plowing $700 million into a plant south of Detroit. Although Carrier hasn’t announced a change to its plans, other companies are moving production south. Trump’s moves have alienated allies who game out how to one-up the president. In his first meeting with Trump, French President Emmanuel Macron squeezed Trump’s hand so hard that the American’s knuckles turned white. And when the two chatted before cameras, Macron spoke only French. He switched to English for his remarks with UK Prime Minister Theresa May. After Trump’s announcement on Paris, Macron tweeted, “Make our planet great again,” and assured American scientists, engineers and entrepreneurs they could find a second homeland in France. And last Friday, the French Foreign Ministry tweeted its edit of a White House video on the Paris accord, complete with on-screen rewrites of the Trump administration’s claims, including one transforming “this deal was badly negotiated” to “this deal was comprehensively negotiated”. Bloomberg News
Protesters demonstrate against President Donald J. Trump’s withdrawal from the Paris climate accord, at the San Francisco Federal Building on June 2. Jim Wilson/The New York Times
has been falling pretty much continuously since World War II. So the real question is not whether some jobs involving fossil fuels will go away if greenhouse gases are regulated more stringently; what matters is whether the jobs that emerge to replace them will pay better or worse. If no jobs emerge at all and unemployment rises, then that’s a failure of macroeconomic stabilization—which is to say, it’s the Federal Reserve’s fault for keeping interest rates too high. There’s a parallel with trade policy. Major trade deals have minimal effects on the overall number of jobs, and increase incomes on average, but may have a particularly large job-reducing effects in particular locations and among particular workers.
In other words, it’s one thing to say that jobs drilling for oil and mining coal will go away even as jobs installing solar panels will be created. That sounds comforting—but if different people in different locations are doing those jobs, there can still be disruption. And beyond the complexity of modeling how climate policies will affect the economy, and the judgment call of how much value to assign to preserving existing jobs, there is an even bigger question. In pessimistic forecasts of the impact of climate change, the cost to adapt to a warming planet will eventually be huge, potentially including vast expenditures to try to protect cities from rising seas, adjusting agriculture to new climate patterns, and countless other changes to business and the economy.
We don’t know exactly when those costs will arrive, how big they will be and how much the kinds of climate action contemplated as part of the Paris Agreement would shift the risk patterns. To use a business concept, we have to apply some kind of “discount rate” when thinking about future climate economic impacts. A dollar today is worth more than a dollar tomorrow and a lot more than a dollar in 100 years. But what discount rate you set determines how much more. So the question for the economy is not just how much more an aggressive climate policy would cost today; it’s how it would change those costs in the decades ahead, and how, as a society, we count the value of time. New York Times News Service