U.S. Chamber of Commerce’s Energy Institute Misleads on Climate Action Costs: 3 Things to Know

World Resources Institute, 31 May 2018, excerpt:

All evidence (see further down) suggests that the president was wrong in claiming that adhering to our target would hurt the U.S. economy and destroy jobs. He was also wrong in claiming that the Agreement allowed large developing countries like China to do nothing to cut their emissions until 2030. In reality, China has already made significant strides to decarbonize its economy and is on pace to achieve its Paris targets by 2030. Similarly, India now has some of the most ambitious renewable energy targets on Earth, and is on track to meet them.

Since the president’s announcement, this landmark pact aimed at tackling climate change has only gained traction. No other country is signaling it will follow the United States’ lead in withdrawing. Meanwhile, thousands of American businesses, cities, states and organizations are ramping up efforts in an attempt to help fill the gap.

Progress Toward Paris Agreement Builds Internationally

The international response to President Trump’s withdrawal announcement started even before it happened. Chinese President Xi declared in January 2017 that China would “fully honor its obligations” under the climate agreement, which he described as a “milestone in the history of climate governance.” Other leaders followed suit, calling the Agreement “an article of faith,” and their commitments steadfast and “unwavering.”

These responses built steady momentum to the G20 meeting last July in Hamburg, Germany, when the other 19 leaders declared the Paris Agreement “irreversible,” underscoring the world’s determination to move forward and isolating President Trump as a global outlier.

Other countries are very concerned about the consequences of climate change, and are taking major strides to address it. In just the past year, seven countries committed to phase out fossil fuel vehicles, more than 20 agreed to end their use of coal, and New Zealand and the UK announced plans to reach net-zero emissions by 2050, among other actions. It’s clear that the world remains determined to forge a lasting, fair agreement that can rise to the climate challenge.

Leaving the Paris Agreement Leaves US Behind

In the meantime, while the United States is marginalizing itself on climate and other international issues, China is more actively providing global development assistance – and, as a consequence, eroding U.S. influence around the world. Former Secretary of State Rex Tillerson finally recognized this predicament, warning African countries last March that deals with China could threaten their sovereignty. Regardless of the merits of this claim, this concern went unheeded in the administration as President Trump fired Tillerson shortly after his return home.

The economic opportunities that the United States is losing out on by rejecting the Paris Agreement are enormous. The International Finance Corporation estimates that the Paris pledges from developing countries alone have opened up global investment opportunities worth $23 trillion. Another recent study argues that meeting the most ambitious targets under the Paris Agreement would save $20 trillion for the world economy by the end of the century. 

Non-Federal Climate Action Ramps Up in the United States

Just as international actors are moving forward without the Trump administration, so too are an array of non-federal actors in the United States, many of whom have banded together to try to fulfill the U.S. climate pledge to the Paris Agreement. U.S. states, businesses, cities and others are signaling their support by joining We Are Still In, the U.S. Climate Alliance and the U.S. Climate Mayors. WRI and partners produced the America’s Pledge phase one report last November, showing that if these more than 2,700 non-federal actors were their own country, they would be the third-largest economy in the world, behind the United States and China. Individually, their actions continue to mount:

  • In January, Maryland became the 17th member of the U.S. Climate Alliance, with Republican Governor Hogan leading the state’s effort to develop a comprehensive plan to reduce emissions 40 percent by 2030.
  • States and cities continue to lead on renewable energy. The New Jersey legislature revised its Renewable Energy Standard last month to derive 50 percent of its power from wind and solar by 2030, with new efficient energy provisions expected to save residents $200 million a year. Michigan will likely have a ballot measure in November to increase renewables by 2030, while Connecticut just finalized a new comprehensive energy strategy that includes increasing renewable energy to 40 percent of its power by 2030. In Virginia, the number of solar jobs has increased by 65 percent in the last year alone, while expanded energy efficiency measures helped employ more than 75,000 people. Meanwhile, more than 65 U.S. cities have adopted 100 percent clean energy goals through the Ready for 100 initiative.
  • At the beginning of this year, Ford announced its plan to nearly double its investment in electric vehicles in the next five years. Its competitor, General Motors, plans to add 20 new battery electric and fuel cell vehicles to its portfolio by 2023.
  • Carbon pricing continues to deliver value and expand. The Regional Greenhouse Gas Initiative (RGGI), a multi-state cap-and-trade program for reducing power plant emissions, generated $1.4 billion in net economic value from 2015 to 2017, and created more than 14,500 new jobs. Power plant CO2 emissions have dropped by half in the years since the program launched in RGGI states. New Jersey and Virginia are expected to join the initiative in the coming year.

America’s Pledge will release a new report this September at the Global Climate Action Summit in California, with analysis from WRI and other partners that will examine these and other recent developments to see what U.S. states, cities, businesses and others can do to help achieve the United States’ 2025 climate goal.

Everyone Needs to Step Up

According to the terms of the Paris Agreement, the earliest the United States can fully exit will be one day after the U.S. 2020 election. The president has suggested that the United States might stay in if he can renegotiate a better deal, but in reality, there can be no renegotiation: Unlike NAFTA, where the United States can force two parties back to the table, one country cannot compel more than 190 nations to rehash a deal that took many years to reach.

But while the United States remains in the Paris Agreement, it has, as WRI’s Distinguished Fellow and former U.S. Special Envoy for Climate Change Todd Stern puts it, ceded its place as a “strong, leading, credible voice in the ongoing negotiations.” This is a shame given the role the country played in creating this Agreement.

While we wait for a new approach in U.S. federal leadership, every party—from the biggest U.S. state to the smallest city—needs to step up their game. At the same time, signatories to the Paris Agreement are quickly facing a deadline to enhance the ambition of their 2030 climate targets by 2020. A positive response to this call would definitively prove that President Trump cannot stop global progress on this issue by himself. Altogether, a determined U.S. effort, supported by an international community resolved to move forward, can lead the way.

U.S. Chamber of Commerce’s Energy Institute Misleads on Climate Action Costs: 3 Things to Know


A wide body of research shows that well-designed policies achieve reductions in greenhouse gas emissions at reasonable costs. A recent article from the U.S. Chamber of Commerce’s Institute for 21st Century Energy (“Chamber Energy Institute”) uses a NERA Economic Consulting study as evidence that meeting U.S. climate change commitments under the Paris Agreement will cause economic hardship, particularly in the manufacturing sector. High-profile opponents of climate action— such as U.S. Sen John Barrasso — are using the results of this study to attempt to make a case for withdrawing the United States from the global climate accord.

As part of our ongoing effort to promote credible and independent economic modeling, WRI reviewed the Chamber Energy Institute’s article and the associated NERA study. We found that the Chamber’s conclusions are based on a decarbonization pathway that is unrealistic and unnecessarily costly. Rather than providing support for the Chamber Energy Institute’s claim, the NERA study in fact provides further evidence that a market-driven approach can enable the United States to achieve its emissions-reduction targets at a relatively low cost.

Here are three things you need to know:

1. The Chamber Energy Institute’s claims are based on a highly unrealistic and unnecessarily expensive pathway to achieving the U.S. 2025 target.

Perhaps the most basic rule of cost-effective decarbonization is to first take advantage of the lowest-cost opportunities to reduce emissions, leaving the more expensive reductions for a later date, when technological advances may uncover more affordable opportunities.

In the United States, the largest near-term opportunities for cost-effective emissions reductions include switching to cleaner electricity sources and improving energy efficiency in homes, businesses and vehicles. The lowest-cost pathways to the U.S. 2025 emissions target (reducing emissions 26 to 28 percent below 2005 levels by 2025) should therefore focus more on achieving emissions reductions from these cost-effective actions, and less on emissions reductions from other sources, such as the industrial sector.

In fact, a recent analysis by the non-partisan Resources for the Future (RFF) shows that the United States can meet its 2025 target with relatively modest emissions reductions from a growing industrial sector. The organization applied a carbon tax across all sectors at the level needed to achieve the country’s economy-wide target in 2025, and found that emissions reductions came disproportionately from electricity and transportation. Emissions from industry decreased by 14 percent between 2005 and 2025.

By contrast, the Chamber Energy Institute focuses on one scenario from the NERA study in which the industrial sector is forced to achieve emissions reductions of nearly 40 percent between 2005 and 2025. Achieving the economy-wide target by disproportionately focusing on industrial sector emissions reductions means ignoring cost-effective opportunities to reduce emissions in other sectors.

The Chamber Energy Institute’s claims are akin to chartering a helicopter for your morning commute and then complaining about how expensive it is to get to work.

2. The full NERA study shows that the United States can achieve its 2025 targets at a relatively low cost.

While the article by the Chamber Energy Institute focuses on one scenario from the NERA study, the full study also includes an alternative pathway to achieving the U.S. 2025 target that combines regulatory measures with a national carbon market. In contrast to the scenario described above that mandates in which sectors emissions reductions must occur, a carbon market encourages emissions reductions to take place whenever and wherever they can be achieved most cost-effectively.

Not surprisingly, NERA shows far superior economic outcomes for this scenario, with U.S. GDP decreasing by half of one percentage point compared to a no-policy scenario in 2025. That’s equivalent to a change in the GDP growth rate from 2.5 percent percent to 2.44 percent per year. If NERA had assumed a more productive use of revenue from the carbon price, and had not assumed a considerable slowdown in clean energy innovation (see point #3 below), economic outcomes could improve further. Most importantly, costs of this magnitude pale in comparison with the potential costs of inaction on climate change.

The finding that well-designed carbon pricing policies can achieve emissions reductions with no substantive impact on economic growth is consistent with independent economic studies. That’s why a group of prominent Republicans recently proposed a carbon price as one part of its “pro-growth” plan to address climate change.

3. The NERA study assumes that innovation in clean energy slows considerably, which makes climate action appear artificially costly, particularly for 2040 results.

The pace of clean energy innovation is highly influential in determining the costs of climate action, because the shift away from fossil fuels becomes less expensive as the costs of low-carbon technologies fall. The past decade has seen dramatic advances in clean technologies, including reductions in solar energy costs of more than 10 percent per year. Strong action on climate change would create additional incentives for innovation as investors gain confidence in the future profitability of low-carbon solutions.

Yet the NERA study fails to account for a realistic pace of clean energy innovation. A recent Department of Energy (DOE) analysis showed decarbonization pathways for three levels of technological progress: two cases with plausible levels of innovation, and a third case with minimal innovation that, according to DOE, “may underestimate advances” but “provides a useful baseline…” All of NERA’s scenarios use only the lower innovation case, assuming only minimal advancements in existing clean technologies over the upcoming decades. NERA also rules out the emergence of new technologies like carbon capture and storage over the next 23 years because they are not cost competitive today.

NERA’s estimates of 2040 economic impacts apply only to a future in which businesses, entrepreneurs and scientists fail to innovate over the coming decades. If, instead, innovation continues at its recent pace or accelerates due to the additional incentives for clean energy innovation in a decarbonizing world, the economic benefits would be far better.