US on climate change: large costs, small (if any) benefits

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 After the G7 meeting held in the lovely town of Taormina, in Sicily, the most beautiful place in the world according to Sir Winston Churchill, it became clear that the worst expectations about the US climate change policy could materialize. 

Leaders from Germany, Japan, France, Canada, the UK and Australia expressed their opposition to the US President on an unusually blunt manner. The final communique states that “understanding this process, the heads of state and of government of Canada, France, Germany, Italy, Japan and the United Kingdom and the presidents of the European Council and of the European Commission reaffirm their strong commitment to swiftly implement the Paris Agreement.”

Avoiding dangerous climate change is, together with eliminating extreme poverty, the biggest challenge of our generation. There is solid evidence that climate change results predominantly from the combustion of fossil fuels and that it is not enough that CO2 emissions stop growing, they must decline steeply from current levels. Technology and markets came to the rescue to solve the problem, abundant cheap natural gas substituted coal in power generation and the cost of solar and wind declined precipitously. The cost of electricity storage is also declining fast. Energy efficiency is increasing all around the world. Prospects for electric vehicles are bright.

US CO2 emissionsA a result of all of the above, world CO2 emissions stopped increasing and remained unchanged for 3 consecutive years. The US and China are the 2 largest CO2 emitters. In the US, CO2 emissions peaked in 2007, ironically under the George W. Bush presidency, and declined thereafter. There is no way that this trend will change because that would imply using less US produced natural gas in power generation and that US car manufacturers would produce less efficient engines. At the same time that the US administration changes its stance on climate policies, China committed to peak its CO2 emissions in 2030 or before if possible and everything indicates that they will peak well before.

Pew climate change

Global warming is a so- called global externality the solution of which requires a global agreement. Although climate awareness is lower in the US and China than in most other places presidents Obama and Xi Jinping played an extremely important role to achieve the COP 21 global deal on climate change.

Cop 21 The decision of the US  administration to pull out from Paris COP 21 is bad for the world, but much worse for the US.

In substance, the global impact will be very small and the costs for the US will be substantially higher than the benefits.

COP 21 is essentially an energy deal with 3 pillars, the so-called NDRC (national commitments to reduce CO2 emissions), a revision (ratchet) mechanism and financial resources to help poor countries making their adjustment. If the US decides not to contribute to the climate finance mechanism, the gap can be easily filled by other countries.

It does not make any sense that the US offers China the possibility of being the champion of climate change and Europe a strong reason to reunite.



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