US President, Donald Trump has decided that the United States will withdraw from the Paris Climate Agreement (COP21). The world disillusioned, responds, considering this a big mistake.
What exactly is this all about? In December 2015 at the climate conference in Paris (COP21) an agreement was reached that has now been signed by 200 countries. The Paris Agreement consists of legally binding agreements being made about the emission of greenhouse gases in order to limit global warming to 1.5 or 2 degrees Celsius above the pre-industrial level. The agreement requires member states to draw up national climate plans that are sufficiently ambitious and in which the target levels are reduced with each new plan. Furthermore, the developed countries are expected to financially help developing countries reduce their own emissions. Former President Obama had made these last two items a condition of the agreement.
During the campaign, but also as president, Donald Trump stated repeatedly that the US had to leave the Paris Climate Agreement. He has kept his word… saying no, unless new negotiations were possible. Syria, Nicaragua and the US are the only 3 countries not to ratify the climate agreement. The US, nevertheless, has promised to reduce CO2 emissions by 2025 by approximately a quarter in comparison to the 2005 levels. However, Trump considers this a bad agreement. Bad for American jobs, bad for the American economy and bad for the competitiveness of American companies. America First, therefore. This decision was not completely unexpected. An executive order had already been signed at the end of March on the internal approach to the climate rules. It was a sort of ‘America First’ energy plan with enormous emphasis on protectionist job creation. The new president approved the Keystone XL pipe line from Canada to Texas, and the Dakota pipe line, which runs through the heart of Indian Territory, is ready for use. It appears as if oil, gas and coal has been given free rein.
In spite of this, it appears that the rest of the world considers the climate agreement irreversible. The United States is responsible for 14% of worldwide CO2 emissions. This puts it in second place behind China and ahead of India. China, India and the EU have all confirmed their commitment and definitely want to continue together as pioneers. The American decision is naturally significant; however, the negative impact on energy transition is relative. Various American states, like Washington, New York and California, disagree with their President and want to continue implementing the climate agreement. The State of New York, for example, has high ambitions and wants to reduce its CO2 emissions by 80% in 2050. Many American companies, even in the most polluting sectors like Oil & Gas and Metals & Mining want to continue the ongoing transformation to green technology. Renewable energy, natural gas, and sun and wind will ensure job creation, innovation and long-term value. As an example: in the first quarter of 2017 almost 50% more electric cars were sold in the European Union than in Q1 2016. This is in itself a nice development, with the related positive effect of an increased demand for lithium batteries, recycled aluminium and catalytic converters. Companies, including American ones, are making the turnaround. They are adapting their business model, opting to make it, or not to make it, sustainable. This is the only way to manage risks, to maximise opportunities and to remain competitive in the long term.
Investors in their turn are increasingly looking for sustainable solutions. Companies that integrate sustainability criteria in their business operations are preferred to companies that ignore the environment, society and good management. Climate change is one of the points of attention for ensuring the welfare of future generations while guaranteeing their economic prosperity.
It appears as if the effect of the American “no” has only been to further increase international and societal support for the climate agreement and further industrial sustainability.