President Barack Obama Saturday hailed the new climate agreement as a major achievement—one that could turn the tide on global warming. Republicans universally condemned the agreement and indicated they will fight it all the way. Some environmentalists praised it, others, including Bernie Sanders, said it was too weak and does not go far enough. It is a tale of two Americas. Putting aside the rhetoric, what does the climate accord reached Saturday really mean?
First off, this is the first time that nearly 200 nations have formally agreed that climate change is a threat; that mankind is largely responsible; and measures must be taken to slow the global warming that is the cause of climate change. It is the first time that both industrial national and developing nations have agreed on this. It is the first time that the planet’s worst polluters—China, India, Russia, and the United States have committed to reduce carbon emissions. The first step to solving a problem is to admit it exists and can be solved.
The agreement is not a Treaty meaning its provisions are not binding. It relies on good will and global pressure to insure compliance. Nevertheless, the agreement has mechanisms that will allow the world to know whether a nation is complying, or making a sincere effort to comply. It has provisions that require nations to review progress every five years, and take more aggressive action if they are falling behind.
Despite the fact that the Republican leader in the Senate, Mitch McConnell, said the agreement will be “shredded in thirteen months,” most of the policies that will allow the U.S to comply are already in place. Those policies could be reversed if a Republican takes office, but it is actually not likely. It would be costly on business and taxpayers to reverse course in thirteen months, and the U.S. and American businesses would pay a huge price in the international community if it reneged.
The average American will not feel an immediate effect from the deal. More fuel efficient cars are already on the road. More efficient electrical products are on the shelves. Innovation may result in even more efficient products, thus creating jobs. There may be more efforts to make buildings more energy efficient, thus creating jobs. And jobs could be created through the construction of a new energy infrastructure, the maintenance of solar and wind fields.
The ambitious targets for limiting the rise in global temperatures will help renewable energy companies by expanding their markets here, and around the world. This will likely make the renewable energy industry more attractive for venture capitalists. This is already happening. Renewable energy could become a major employer in the next few years and a larger player in the U.S. and global equity markets.
The agreement may hurt some companies like utilities and coal producers, who emit high levels of carbon dioxide. However, many utilities have already adapted, adding wind and solar to their generation mix. Laws in some states have resulted in an increasingly larger percentage of electricity coming from renewable sources. The new power plant emission rules could cause the 19th century coal industry to adapt developing better technology to capture carbon from burning coal. Or, they could take advantage of the wind and sun at their mines and shift to renewable energy generation instead.
Natural gas companies will see a short-term gain, which has been the case in recent years. Natural gas allows power plants to reduce emissions over coal. Eventually, gas producers will need to adapt to renewable energy, but countries like India and China need gas now to reduce the carbon from coal fired power plants. American companies could fill that need. Gas producers, however, need to control their methane leaks or any advantage they have in emissions will be lost.
If there is a big loser, it is oil companies. Already global oil prices are down due to reduced demand. Fuel efficient cars are part of that. The climate accord will pressure other nations to adopt stronger emission regulations and more fuel efficient cars and trucks. Perhaps oil companies will learn to adapt as well.
The Paris Conference saw industrial powers such as the U.S. and the European Union join with Pacific island nations. The U.S. and China traded brinksmanship for agreement in order to cut fossil fuel emissions. The real winner, however, is our grandchildren who may inherit a planet that is livable.