Why The U.S. Pulling Out Of The Paris Accord Was A Real Mistake


Last week, President Trump followed through on one of his campaign promises – to pull out of the Paris Accord. Since he has been prevented from implementing several of his campaign promises, he was under pressure to follow through on at least one of them. The irony is that few of his core supporters had any idea of what the Paris Accord was and why the US was involved. Below I explain what the Accord is and why the US should not have pulled out.

Why the US Pulling Out of the Paris Accord Was a Real Mistake

Global Warming: A Primer

 a. Evidence of Warming

There is general agreement the earth is warming. And while temperatures can vary widely by year or region, data do support the warming hypothesis. NOAA has recorded 2015 as the hottest year since records began in 1880. The 16 warmest years ever recorded are also in the 1998–2015 period. 2015 was characterized by one of the strongest El-Niños and record warmth in the global oceans with an annually averaged temperature for ocean surface waters around the world that was 0.74 °C higher than the 20th century average.

b. Emissions

So the earth is getting warmer. The real policy question is whether man’s actions are part of the reason for it. The vast majority of scientists say yes, pointing to man-created growing CO2 emissions as evidence of it.

Table 1 provides data on CO2 emissions by country. The US was the leading emitter until China took over in the first decade of the 21st Century. But there are some hopeful signs. Global emission growth has at least leveled off. And China’s emissions declined for the first time in 2015. China is working hard to reduce emissions for two reasons:

  • China is a resource-poor country and
  • Country leaders are worried about citizens’ complaints about high air pollution levels.

European countries have led the way in reducing emissions, down overall by 11% since 2010. The US, with rapidly growing and low cost natural gas supplies, has also lowered CO2 emissions. The US and other countries with large fossil fuel reserves lead the list of countries with the largest emissions per capita.

Table 1. – CO2 Emissions from Fossil Fuel and Cement Production 1970-2015 (MT (Gg) CO2 per year)

Source: Netherlands Environmental Assessment Agency

c. Is There a Causal Link?

So the world is getting warmer and manmade COemissions are up. The fact that both are growing does not mean one caused the other. But keep in mind, scientists can rarely definitively prove anything. Instead, they look at data and when there appear to be regular linkages, they infer causality. And here, most climate scientists believe man’s actions are contributing significantly to global warming.

Policy Implications

We can’t be sure manmade activities are causing temperatures to rise, so what should we do? It would appear prudent to prepare for what global warming is expected to bring – more violent storms and rising sea levels.

But there are reasons to do more:

  • Mining fossil fuels is dangerous, expensive, and we still do not know the long term effects of fracking.
  • There are limited supplies of all fossil fuels.
  • The combustion of fossil fuels generates dangerous air pollutants.

This all suggests it would be beneficial to find ways to make more use of the non-polluting “green” energies. Now, renewable are still only 15% of total energies, but they are growing far more rapidly than any other source. And technologies are advancing. The cost of solar panels in 2013 was about 100 times lower than the cost of solar panels in 1977. And the real missing ingredient to turning this all around is finding something that can store large amounts of electricity. Such an invention would have huge implications. The periodic energy supplied generated by wind, tides, and solar could generate electricity that could then be stored for use when needed.

Why Trump’s Pulling Out of Accord Makes No Sense

Fossil fuels pollute the atmosphere and are probably contributing to global warming. And it is quite evident that the momentum for renewables and new technologies to support them are advancing rapidly worldwide. Admittedly, The Paris Accord and the Green Climate Fund are voluntary vehicles to support more rapid implementation of green energies. But why should the US pull out? It makes no sense. When we do, the US loses its influence over how pressure is applied to laggard countries and how the $1 billion it has already contributed is used.

Table 2. – Green Climate Fund Commitments

Source: Green Climate Fund

Coal is a special case. Trump said the Paris Accord allows China to build hundreds of additional coal plants while the United States can’t. This is pure nonsense. The Accord is voluntary. And as it happens, China just canceled the opening of 103 coal plants. The US? Trump is working to open new coal mines. This is backward looking. US policy should be to facilitate training and support for ex-coal miners to get them out of the coal business.

Huge pools of money are watching what happens with the Paris Accords and the growth of green energies. The US should be part of the accord and work with the private sector to hasten the growth of new green technologies. Trump pulled the US out of the Accord, thinking it would appeal to his basically ill-informed core supporters. It was a mistake. This decision will work against the interests of all Americans.

Investment Implications

History tells us it is a very tricky business to pick winners and losers during a global energy transition. All we really know is that a lot of money will be made and lost. Table 3 provides a few of the publicly traded companies “in the game.” The company on that list of greatest interest to me is Brookfield, a huge Canadian real estate company. It has some holdings that will benefit from the growth of renewables. It should be kept in mind that the largest oil companies are not “sitting on their hands.” With almost unlimited investible funds, they are watching where they can make money as renewables grow.

Table 3. – Publicly Traded Companies with Renewable Energy Exposure

Disclosure: None.

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Gary Anderson 7 years ago Contributor's comment

According to main stream scientists, global warming cannot be stopped by the Paris Accords. While I am no fan of Trump, odious as he is, if Paris won't work it is stupid to stay in.

Carl Schwartz 7 years ago Member's comment

But wouldn't leaving only accelerate #GlobalWarming?

Gary Anderson 7 years ago Contributor's comment

So what? It is going to happen anyway? Why throw good money after bad?

Elliott Morss 7 years ago Contributor's comment

Let's assume for the moment that man is not causing global warming. We should still plan to reduce dependence on fossil fuels.

Several reasons:

1. there is a limited supply of fossil fuels meaning that some time in the future, we will run out of them.

2. The mining of fossils fuels is dangerous with many thousands of deaths annually.

3. The burning of fossil fuels generates pollutants that also cause a large number of deaths every year.

There are also predictions that as a result of global warming, ocean levels will rise and more violent and dangerous storms will occur, In light of these predictions, precautions should be taken. And at the very least, the Federal govt. should stop subsidizing flood insurance in high risk areas.

Gary Anderson 7 years ago Contributor's comment

That may be. But in the grand scheme of things it won't matter, Carl. But it will destroy our sovereignty, and will cost permanent jobs while creating temp jobs that will soon go away. A quick boom followed by a real bust. I wrote about it here: www.talkmarkets.com/.../trump-and-the-big-renewable-energy-effort

Elliott Morss 7 years ago Contributor's comment


Was the Marshall Plan the result of global brainwashing? I think not. The US spent huge sums to get both allied and axis powers back on their feet after WW2.

Was it global brainwashing that led to the US funding the creation of the UN?

And when Kennedy created the Peace Corps. Was he brainwashed?

I think these 3 acts were the US at its best.

Pulling out of the Paris Peace Accord was conceding world leadership to others - not a good idea.

Gary Anderson 7 years ago Contributor's comment

Except for the UN, those were acts of sovereignty. Maybe the UN was in a way as the US was dominant. But certainly, Paris is a withdrawal of sovereignty. Apples and oranges. Guess we won't agree on this.

Elliott Morss 7 years ago Contributor's comment

Gary: Thanks for your comment. I agree the earth will get warmer over at least the next decade as developing countries become more energy intensive. Nevertheless, the Paris Accord can bring pressure to bear on countries to reduce global emissions. It will also serve as an incubator for accelerated technologies. The US has already invested $1 billion in its climate fund and by leaving loses and say over how it is used.

There is also the point about the US abnegating its world leadership role. for more on this, see www.project-syndicate.org/.../paris-comes-to-pittsburgh-by-laurence-tubiana-2017-06

David Reynolds 7 years ago Member's comment

That's a good point, Elliott.

Gary Anderson 7 years ago Contributor's comment

I think it is a matter of globalist brainwashing. It probably would never be ratified by congress anyway. This is because most of the land mass of the US, not the population centers, does not trust the direction of globalism and for good reason.