Trump on the Paris Agreement

Trump made two claims about the Paris Agreement, a global accord aimed at addressing climate change, that require context:

Trump said that the U.S. “pays billions of dollars” for the Paris Agreement, but China, Russia and India have paid “nothing.” The U.S. has pledged $3 billion, but so far has paid $1 billion. The agreement requires developed countries, such as the U.S., to help developing countries, including China and India, with mitigating climate change. Russia has not ratified the agreement.
He said that “the agreement could ultimately shrink America’s GDP by $2.5 trillion over a 10-year period.” But that estimate is over 20 years, not 10, and it comes from a conservative think tank. Another analysis described the potential economic impact as “modest” and the cost of delaying action as “high.”

Trump made his claims at a rally in Harrisburg, Pennsylvania, on his 100th day in office, April 29.

Trump, April 29: Our government rushed to join international agreements where the United States pays the costs and bears the burdens while other countries get the benefit and pay nothing. This includes deals like the one-sided Paris climate accord, where the United States pays billions of dollars while China, Russia and India have contributed and will contribute nothing. Does that remind you of the Iran deal? How about that beauty, right? On top of all of that, it’s estimated that full compliance with the agreement could ultimately shrink America’s GDP by $2.5 trillion over a 10-year period. That means factories and plants closing all over our country. Here we go again. Not with me, folks. Those are the facts, whether we like them or not.

The Paris Agreement entered into force on Nov. 4, 2016. It primarily aims to keep global average temperature “well below 2°C above pre-industrial levels,” but preferably “to limit the temperature increase to 1.5°C” above pre-industrial levels. The planet has warmed about 1 degree Celsius already, according to NASA.

U.S. ‘Pays Billions’ for Paris Agreement?

The Paris Agreement builds upon the United Nations Framework Convention on Climate Change, a treaty which entered into force in March 1994. With 197 countries taking part in the UNFCCC, it has “near-universal membership” across the globe.

The main aim of the UNFCCC is to stabilize greenhouse gas concentrations “at a level that would prevent dangerous anthropogenic (human induced) interference with the climate system,” a task that “should be achieved within a time-frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened, and to enable economic development to proceed in a sustainable manner.”

Industrialized countries, which the UNFCCC calls Annex I countries, are expected to do the most to cut emissions because “they are the source of most past and current greenhouse gas emissions,” according to the UNFCCC. Annex I countries include the U.S. and Russia.

Under the UNFCCC, industrialized countries are also expected to help fund climate change initiatives in developing countries, or Non Annex I countries, which include China and India. The Paris Agreement itself follows much of the same logic, and it uses funding mechanisms set up under the UNFCCC.

Those funding mechanisms include grants and loans managed by the Global Environment Facility, which funds climate initiatives as well as projects related to other environmental issues, such as biodiversity, forests and chemical waste.

Countries could also contribute funds to the Green Climate Fund, a separate program for the transfer of funds from industrialized to developing countries. So far, this fund has backed 43 projects that help developing countries mitigate and adapt to climate change, such as projects to improve their renewable energy sectors.

To “pay” for the Paris Agreement, countries would contribute money to the above funds, in addition to spending money to combat climate change within their own borders.

But when we asked the White House for support for Trump’s claim that the U.S. “pays billions of dollars” for the Paris Agreement while China, Russia and India have paid and will pay “nothing,” White House spokesman Steven Cheung specifically referred us to the Green Climate Fund.

The U.S. has promised to contribute $3 billion to this fund, but as of March 3 it has contributed only $1 billion. The fund’s website states that the U.S. contribution is “[s]ubject to the availability of funds.”

Even if the U.S. does provide $3 billion to this fund, it still wouldn’t have contributed the most on a per-capita basis. Sweden has already contributed $581 million, which is nearly $60 per person — the largest per-capita contribution of any country. And Luxembourg has pledged, but not fully contributed, nearly $94 per person, which would make it the largest. In fact, the U.S. ranked 11th in its pledged contribution per capita, after a number of European countries and Japan.

Meanwhile, China and India haven’t contributed to the Green Climate Fund. Of the 43 governments that have pledged money to the fund, only nine represent developing countries, the fund’s website says.

Russia hasn’t contributed any funds either, but it also hasn’t ratified the Paris Agreement or submitted an outline of what actions it will take to play a part in achieving the accord’s primary aim, namely, to keep global temperatures below 2 degrees Celsius above pre-industrial levels. This outline, what the UNFCCC calls a country’s “nationally determined contribution,” might include actions such as increasing its share of renewable energy or quantifying how much it will cut emissions overall. The U.S., for example, has pledged to cut emissions to 26 percent to 28 percent below its 2005 level by 2025.

China, India, Russia and the U.S. were all donors in the latest funding cycle for the Global Environment Facility. Out of a total of $4.43 billion for the 2014 to 2018 cycle, U.S. funds made up 14.7 percent, or just over $651 million; China contributed 0.54 percent, or almost $24 million; Russia gave 0.4 percent, or $17.7 million; and India provided 0.32 percent, or just over $14 million. The U.S. contributed the second most overall, topped by Japan, which contributed 16.34 percent, or almost $724 million.

It’s also important to mention that, per capita, the U.S. emitted more greenhouse gases than China and India combined in 2015, as we’ve written previously.

Each person living in the United States contributed 16.07 tons to the country’s total on average, while each person living in China and India contributed 7.73 and 1.87 tons on average, respectively. However, China still emits the most in total tons because its population is almost 1.4 billion people, while nearly 325 million live in the United States. Russia, on the other hand, emitted 12.27 tons per person on average in 2015, or the 5th most in total tons, after China, the U.S., the European Union and India.

Significant Economic Harm?

To support Trump’s claim that “full compliance with the agreement could ultimately shrink America’s GDP by $2.5 trillion over a 10-year period,” Cheung, the White House spokesman, pointed us to a March commentary piece on the Heritage Foundation’s website. That referred to work originally done by Heritage Foundation senior statistician Kevin D. Dayaratna and others in an April 2016 report. The Heritage Foundation’s mission is to “formulate and promote conservative public policies.”

Dayaratna and his group concluded that the Paris Agreement “will result in over $2.5 trillion in lost GDP by 2035,” which would be a 20-year period, not a 10-year period, as Trump said. GDP, or gross domestic product, is a measure of a country’s economic output.

We asked Roberton C. Williams III, a resource economist at the University of Maryland and a senior fellow and director of academic programs at the economic analysis group Resources for the Future, to review the Heritage Foundation’s report. He called the $2.5 trillion figure a “reasonable estimate,” given the numbers and methodology used in the report, but said it was “expressed in a misleading way.”

The standard, he said, is to express lost GDP as a percentage of total GDP. So the foundation’s total amount — $2.5 trillion in lost GDP by 2035 — would be equivalent to a 0.55 percent decrease on average in the total GDP per year, he calculated. Williams also emphasized that the annual 0.55 percent reduction in total GDP is not to be confused with a 0.55 percent drop in the real GDP growth rate, which was 1.6 percent in 2016. The total U.S. GDP was $18.6 trillion in 2016.

To estimate the effect of the Paris Agreement on U.S. GDP, Dayaratna and his colleagues at the Heritage Foundation plugged a carbon tax rate — which started at $36 (in 2007 dollars) in 2015 and increased 3 percent each year thereafter — into what they called the “Heritage Energy Model.” This model, the authors say, is a “clone” of the National Energy Model System used by the federal Energy Information Administration.

A carbon tax “directly sets a price on carbon by defining a tax rate on greenhouse gas emissions or – more commonly – on the carbon content of fossil fuels,” writes the World Bank. The specific carbon tax rate the Heritage Foundation authors used comes from the Environmental Protection Agency’s estimate for the social cost of carbon, which takes into consideration “long-term damage done by a ton of carbon dioxide,” including changes in agricultural productivity, human health and property damage.

Dayaratna and his colleagues say in their report: “Modeling tax changes as a substitute for quantifying the economic impact of regulatory proposals is a widely accepted practice.” Williams confirmed that this is in fact the case.

Williams told us economists consider multiple factors when choosing what specific carbon tax rate to use when estimating economic effects. Economists might use what he called a “politically viable” rate based on a carbon tax already proposed by a politician. They might also use a carbon tax rate associated with the social cost of carbon for a particular country or region, as the Heritage Foundation authors did. Or economists might use a carbon tax rate that would be needed to meet a specific emissions target.

When it comes to the Paris Agreement, Williams said going the third route makes the most sense; that is, calculating what carbon tax rate would be needed for the U.S. to meet its pledged emissions target of 26 percent to 28 percent below its 2005 level by 2025. In fact, Williams pointed us to a November 2016 report by Resources for the Future that did exactly that.

Yunguang Chen and Marc A.C. Hafstead, both fellows at the organization, found that a constant carbon tax of $21.22 (in 2013 dollars) starting in 2017 would allow the U.S. to meet its Paris Agreement target by 2025. The U.S. could alternatively use a carbon tax rate starting at $16.87 in 2017 and rising at 3 percent per year to meet its target. This, and similar carbon tax rates, would reduce the real GDP from 2017 to 2025 by between just under 0.10 percent and 0.35 percent per year, depending on how the revenue from the taxes are used and depending on the year. (See figure 4.) Those figures are lower than the equivalent 0.55 percent per year decrease in real GDP from the Heritage study.

The authors conclude that “the size of the 2025 carbon taxes and their corresponding economic costs are modest.” They also say that “the cost of delaying the implementation of a carbon tax is high.”

“Delaying implementation until 2020 raises the costs of using an economy-wide carbon tax to meet the 2025 targets by 12 percent relative to implementing the policy in 2017,” the report says. “Delaying until 2023 increases the costs relative to 2017 by over 29 percent.”

Geoffrey Heal, a resource and environmental economist at Columbia University, told us the cost of doing nothing would be “very expensive.”

“The Paris agreement will cost little or nothing and allowing climate change to proceed would be very expensive indeed,” Heal said, adding that “staying in Paris does not fully prevent climate change but it’s a good start.”

Editor’s Note: SciCheck is made possible by a grant from the Stanton Foundation.

Correction, June 7: This article originally said the U.S. had contributed $500 million to the Green Climate Fund. That’s wrong. The U.S. has contributed $1 billion.