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Two Cautions on the Trump Energy/Environment Executive Orders

AEIdeas

January 24, 2025

The Trump “Day One” executive orders on energy and environment policies are worthy of applause because they implement a shift toward market forces in place of central planning as the dominant institution driving resource allocation in the various energy sectors. At the same time, two of the executive orders are problematic: the exit from the Paris climate agreement, and the declaration of a “national energy emergency.”

Trump is correct that the Paris agreement, negotiated as part of the United Nations Framework Convention on Climate Change (UNFCCC), is an absurdity. The promises by individual governments for reductions in greenhouse gas (GHG) emissions—the “Nationally Determined Contributions” (NDCs)—are wholly voluntary, and cannot be otherwise. And so the emissions paths promised in the NDCs not been fulfilled, and for the most part global emissions in 2022 are substantially higher than those in 1990 and 2005. Some of the NDCs are meaningless even theoretically; the Chinese commitment is for a “peak” in its GHG emissions by 2030. How high will that “peak” be? No one knows. What will the Chinese emissions path be after the “peak?” No one knows.

The more fundamental problem is that almost all of the NDCs are reductions in future GHG emissions relative to a “business as usual” (BAU) baseline, that is, a future emissions path unconstrained by policies. That BAU baseline is closely correlated with assumptions about future economic growth, particularly in the less-developed economies. If the economic growth assumption driving the BAU emissions path is too optimistic even by only a small percentage, then actual future GDP—and GHG emissions—will be lower than assumed in the BAU baseline. This means that a given economy might satisfy its NDC with no change in underlying emissions behavior. NDC fulfilled!

The proponents of the Paris agreement never tell us the prospective climate effects of the NDCs collectively. What temperature effect would the agreement have by the year 2100? If we apply the Environmental Protection Agency climate model, under assumptions that exaggerate the future effects of the notional GHG reductions, the global temperature reduction would be 0.109°C. Under assumptions far more consistent with those reported in the peer-reviewed literature and by the Intergovernmental Panel on Climate Change in its latest assessment report: 0.066°C. Given the normal variation in the surface temperature record, those effects would not be detectable.

The problem with the Trump exit from the Paris agreement: It is only the third best among the available alternatives. The best approach would be to submit the entire UNFCCC framework to the US Senate for ratification. Doing so would end the Obama/Biden fiction that it is not a treaty but instead a mere administrative agreement. And forget ratification if “two thirds of the Senators present concur.” With the current party makeup of the Senate, it is doubtful that the UNFCCC framework would receive even 40 votes.

The second-best policy would be a pullout from the entire UNFCCC. Trump has chosen the third-best option—the exit from the Paris agreement—because it is the easiest.

Then there is the Trump declaration of a “national energy emergency.” What is the precise nature of the “emergency?” Trump argues that “The energy and critical minerals (“energy”) … capacit[ies] of the United States are all far too inadequate to meet our Nation’s needs.” Unless self-sufficiency is the goal—one wholly inappropriate, as it ignores the cost dimension of the domestic vs. foreign supply mix—that statement in the Trump executive order is deeply problematic. US production of crude oil is at an all-time peak. The same is true for natural gas. Perhaps fossil energy production would be higher still were some perverse policies reversed. That is not an “emergency,” and if the effects of perverse policies represented an “emergency,” no sector of the US economy would be in a nonemergency situation.

The real emergency is to be found in the US electric power system, now massively distorted by climate policies, large subsidies for expensive and unreliable solar and wind electricity, and facing a crisis of long-distance transmission created precisely by those policy distortions. Large-scale power supply interruptions are looming large in extensive sections of the US, about which the Trump EOs offer less warning. Yes, there is the (temporary) end to offshore leasing and permitting for wind projects. Yes, there is the policy directive “to eliminate the ‘electric vehicle (EV) mandate.’”

But those are wholly inadequate to deal with scale of the costly and unreliable mess that is the US electric power grid created by the political proponents of the “clean energy transition.” (There is nothing “clean” about it.)

We will see how the Trump policy initiatives play out. But it is useful to begin with the correct approaches, which the Trump executive orders do for the most part, but not entirely.