Energy & Environment

How inaction on climate change puts America’s economy at risk

Climate Change
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The election of Emmanuel Macron as president of France may have created an unlikely set of beneficiaries: U.S. climate scientists and clean energy innovators. A video produced early in Macron’s campaign has gained new steam since his election earlier this month and is being shared eagerly on social media.

In the video, Macron extends a bold invitation to those interested in fighting climate change and innovating new green technologies, saying, “Please, come to France, you are welcome. We like innovation. We want innovative people. We want people working on climate change, energy, renewables, and new technologies. France is your nation. ”

{mosads}Macron was picking up on what Americans know well. President Trump has clearly shown through his speeches and his executive orders that he is not willing to fight climate change and believes that the fight against climate change will cost Americans jobs. Trump has argued that moves toward green energy represent a “threat to American prosperity.”


Yet as Macron’s video encouraging American scientists to jump ship clearly points out, it is abandoning the fight against climate change that will take away U.S. jobs. The economic risks of ignoring the emerging global market for clean energy are real. By abdicating its leadership role on global climate change and backing away from policies that support the Paris Climate Pledge, the Trump administration is — perhaps unwittingly — removing incentives for American companies to compete and innovate at the forefront of clean energy. And its actions to defund education and research in fundamental areas and limit immigration will further undermine U.S. potential as a crucible for invention and commercialization.

The rest of the world will not wait. In 2016, China invested $103 billion in clean energy, compared to a paltry $44.1 billion in the U.S. — and this was under the climate-friendly Obama administration. The market for clean energy technology is global, and China is eager to tap it. Meanwhile, the group of leading U.S. renewable energy providers will focus elsewhere for market growth, and may even relocate to the largest markets. Locating in lead markets with highly demanding users can sharpen competitive edge, while remaining in a stagnating market with fading or uncertain support can erode it.

Around the globe, new environmental (including climate) policies are driving local demand for a clean energy transition. For many, this energy transition will be motivated by the localized energy-linked environmental challenges — such as air quality — that plague the urban centers of developing countries. This is as much a matter of economics as it is environment — in China, estimates place environmental damage costs as high as to 10 percent of its GDP. Benefits of incremental clean energy additions will very likely outweigh the costs incurred. Technologies that enable this transition will be in high demand.

The Paris Climate Agreement, which was ratified last fall, is comprised of specific actions that countries plan to take to mitigate the greenhouse gas emissions causing climate change. Should the U.S. step away from the table, the international community will look ever more to China — and indeed France and the rest of the European Union — for leadership. Chinese and EU leadership, which looks likely, would have a major shaping influence on the rest of the world’s climate change actions as U.S. soft power on global environmental policy further wanes.

History suggests we are making a big mistake. A White House budget report under the Obama administration provided evidence that among all types of regulations benefits exceeded cost by the largest margin for environmental initiatives. The recently enacted Mercury and Air Toxics Standards was estimated to cost $8.1 billion annually, but benefits came in at $28 billion to $77 billion. The same regulation was estimated to have modest net positive impact on employment, precisely because of the new jobs in the pollution abatement and control industry.

Clean energy has the potential to be much larger. Policy, for instance in the form of a price on carbon dioxide, would prompt a reorganization of economic activity towards cleaner sources of energy. Once policy sends a clear signal, if past is prologue, American businesses will rise to the challenge and, in doing so, prepare to lead in a future low carbon world.


Valerie Karplus is assistant professor of global economics and management at the MIT Sloan School of Management.

The views expressed by contributors are their own and are not the views of The Hill.

Tags climate Donald Trump economy Environment Paris agreement

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