The Poison Pill in the Paris Agreement on Climate by David Montgomery


The knee jerk combination of vitriol, psychoanalysis, and tears with which the media greeted President Trump’s decision to withdraw from the Paris Agreement on Climate Change has blinded reporters to the really interesting facts that just a little digging would have revealed. The Paris Agreement only allows parties to increase their promised emission reductions, so as it is now written and interpreted it provides no way for President Trump to correct unwise commitments made by his predecessor. This poison pill is what forces President Trump to withdraw from the Paris Agreement rather than unilaterally revise the US commitment.

In many ways, the Paris Agreement was a step forward in the negotiating process.  Unfortunately, the commitments made by President Obama were strategically unwise, probably unlawful, and excessively costly for what they would accomplish. Therefore, for a long time my favored option was to remain in the Paris Agreement while altering the severity and form of the U.S. commitment.

It was only late last week that reports on President Trump’s decision process revealed that my preferred solution, and probably President Trump’s, was impossible under the terms of the agreement. The wording of the Paris Agreement only allows national commitments to be made more ambitious, not less.

Thus the United States could have upped the ante, moving from a commitment to reduce emissions by 26-28% in 2025 to a commitment to reduce emissions by, say, 40%, but it could not change the number to anything less than 26%. Nor could the US replace its quantitative commitment with statement of intentions to adopt policies like carbon taxes that cannot guarantee a specific outcome.

As long as the Paris Agreement does not allow the President to modify the U.S. commitment up or down, my opinion tips toward favoring President Trump’s decision to take the only possible route to void the commitments made by his predecessor. I have several reasons for that conclusion.

First, by ratifying the Agreement without Senate approval, President Obama violated the separation of powers set up by the Constitution. He claimed that he could use his authority to enter into Executive Agreements to ratify the Paris Agreement. Until President Obama, Executive Agreements were only used to implement laws passed by the Congress or treaties approved by the Senate. According to a friend who negotiated some while in the State Department, Executive Agreements “deal with details so mind-numbingly boring that Congress would neither want nor be able to deal with them.”

For example, he negotiated an Executive Agreement that US forces could enter a particular Southeast Asian country using their military orders in lieu of passports, on both military and civilian flights. That is a far cry from making a commitment to take actions with major effects on the US economy that Congress had consistently voted against. The Paris Agreement is in substance a treaty and the President improperly violated his obligation to get the advice and consent of the Senate to treaties. That had to be fixed, and a dangerous precedent for unconstitutional exercise of Presidential authority removed.

The second major flaw in the design of the Paris Agreement is that it gives the countries most responsible for future climate change an opportunity and an incentive to back out when it is their turn to take on costly burdens. Suppose the US and Europe do meet their commitments through 2025, and those actions significantly reduce the chances that there will be catastrophic consequences of climate change. China, India and others made no commitments to start deviating from their currently planned emissions growth until 2030. If in 2030 they decide that the reduced likelihood of catastrophe is sufficient protection from climate change, and that meeting their commitments would have an unacceptable cost, they could simply withdraw from the agreement and enjoy the benefits gained by our costly efforts. There would be nothing we could do about it.

The third thing President Obama got wrong is making an absolute commitment to a specific numerical target for emission reductions. While the Paris Agreement made the important step forward of eliminating previous insistence by the international community on targets and timetables, Obama unilaterally brought them back in the US commitment. He should have stated his intentions in a way that recognized the Constitution and sovereignty of the United States. That is, a President can describe the policies he intends to propose and give an estimate of their effect on emissions, but he must do so in a way that recognizes the unavoidable truth that future Congresses and Presidents might adopt different policies. That is the only honest thing for a President to do and it is the only one that does not involve an unacceptable sacrifice of US sovereignty.

Finally, the cost of sticking with Obama’s commitments would have been too high. On this I agree fully with the Administration’s reasons, and had reached the same conclusion myself while working on the NERA study cited by the President. Being mentioned by the President has put my colleagues in the crosshairs of the anti-Trump know-nothings and their worshipers in the media. My NERA colleagues have been demonized for being cited by President. (Me, too, but I don’t give a damn because I’m retired and the Trump-haters can no longer hurt my career or livelihood). In any other era, being singled out for citation by the President from a host of studies with similar conclusions would be the highest honor an analyst could get. Better than an Academy Award. But hate for Trump is so deep that it blinds reporters to obvious facts and prevents them from even reading what they vilify. I call them know-nothings because those who demonize NERA have not even bothered to read the report. All a Trump-hater needs to know is that Trump found NERA’s work helpful. Therefore, even if the study is dead right, its authors must be destroyed.

The press has also uncritically repeated false allegations by politically motivated opponents of the President’s decision. Let’s look at them.

Claim: NERA looked only at a worst case. Fact: the study contains 5 cases and shows how inferior Obamas choice of overbearing regulations is to a carbon tax. Claim: NERA failed to include jobs generated by renewable energy. Fact: the methodology guarantees they are all in there. The problem is that they are not enough to make up for all the jobs lost due to higher costs and slower growth. Claim: NERA ignores how renewables make electricity cheaper. Fact: NERA got it right by using the same official government estimates of technology costs that were used in studies made in the Obama Administration that reached the same conclusions. Claim: NERA assumes industry wont change to lower costs. Fact: NERA assumes industry chooses the absolutely lowest cost ways to comply, even though no real business would have the required perfect information and foresight to achieve. The list of patently false misrepresentations of the study Trump cited could go on and on.

It is particularly ironic that NERA is accused of choosing a worst case for analyzing the Paris Agreements, when all it did was assume that the regulatory policies instituted and explicitly planned by the Obama Administration were put in place. Just because policies are dumb doesn’t mean analysts should assume something else to make them look better.

There are ways to reduce greenhouse gas emissions that are much cheaper than the regulations Obama planned and issued. But none of them can be done on the sole authority of the President, or meet the hard and fast commitment Obama made on emission reductions. The choices Obama did make, to go around Congress with Executive agreements and broad interpretations of authority to regulate, would have led to the regulatory morass and immutable targets that most economists agree constitute the worst possible way to attack climate change.

For example the carbon tax, which I support, would not guarantee 26-28% emission reductions and requires Congressional approval, but it lowers cost tremendously. Even better, it provides a safety valve if it turns out more costly to meet the targets than we now guess and automatically gets larger reductions if it turns out cheaper. What is there not to like about that? The pessimists on technology get assurance about costs and the optimists can count on even faster progress than under regulations. But to choose such an approach, the existing US commitment to a hard and fast target has to be torn up. If changing our commitment to a more rational and less costly policy like a carbon tax is not allowed under the Paris Agreement, then President Trump’s decision to exit is the only responsible one.

This is a real shame, Some good could be done through the Paris Agreement, but it is not likely without the sensible intervention of US negotiators to veto the self-serving statements and policies that will be advanced by countries (and staff of international organizations) with less interest in climate than in enriching their bureaucrats and elites. Surprisingly, even in the Obama Administration US negotiators were pretty good at this task. It was in the big head-of-state meetings that things went awry.

Participation in meetings under the Paris Agreement is also important for coordinated action that is consistent with national interests and effective in dealing with the consequences of climate change. Even if national interests do not lead to keeping temperature increases below levels that some self-appointed moralists believe constitute “dangerous human interference,” more limited emission reductions can reduce even further the already low probability that climate change will cause very bad things to happen. And coordinated international action is absolutely necessary to make the poorest and most vulnerable populations more resilient and able to adapt to change that will be likely to occur.

But the fault is in President Obama’s poison pill, not President Trump’s decision to exit the Agreement. These good consequences of continued engagement in the Paris Agreement must be weighed against the cost to the US of adhering to badly chosen commitments that violate Constitutional principles. That is the kind of prudential judgment that we elect Presidents and members of Congress to make.

Since exit is itself a lengthy process, perhaps the Paris Agreement can still be revised to remove the foolish provision that commitments may only be increased. That would allow the President to correct his predecessor’s errors while continuing to be part of a potentially useful process. This is exactly what the President stated his intention to be: “I’m willing to immediately work with Democratic leaders to either negotiate our way back into Paris, under the terms that are fair to the United States and its workers, or to negotiate a new deal that protects our country and its taxpayers.”

David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.

Letters to Editor

  1. Carol Voyles says:

    You are obviously well-versed on this subject, as one of the authors of the NERA study, and it is encouraging to see that nearly everyone can agree on the value of a carbon tax.

    Your assertions that the costs of the Paris Agreement’s goals are too high, and that our president did not have the authority to enter into such an agreement would seem to be undercut by the fact that the terms make it more of an agreement to simply keep talking and trying to work together. Each country determines its goals, meets with the others, and reports its progress, but there is NO ENFORCEMENT MECHANISM, and the agreement is NON-BINDING. While goals have been set, it is essentially an agreement to keep talking.

    It is also troubling to see cost data in the NERA study footnoted with: “Model does not allow alternative fuels to come online beyond the baseline levels….and did not allow provision for alternative, e.g. electrical, vehicles.” Seems a rather restrictive set of parameters. Clean energy costs costs are coming down, we will hopefully be using more, and we will be creating jobs with the overdue overhaul of our energy delivery infrastructure.

    • David Montgomery says:

      Thank you for this comment, let me try to respond to your two points without writing another column. I agree that one purpose and the primary benefit of the Paris Agreement is that it creates a much more productive framework to keep talking. It is the provision that no country can weaken (or implicitly retract) its “Nationally Determined Contribution” that forces the choice between continuing with what I think is the wrong kind of commitment or exiting the agreement completely. If we consider “Resist” movement’s legal challenges to President Trump’s executive actions, I think there is a real danger that the US courts would give the Paris Agreement the force of law as a binding treaty obligation.

      The NERA footnote could have been more clearly worded. First, it applies only to motor vehicles, we have substantial expansion in use of renewables for electricity generation. For motor vehicles, the baseline includes 10% ethanol in motor fuel; it does not include increases in electric vehicles because with projected battery technology and fuel prices they are never economic choices without specific policy mandates. But, if we had a carbon tax it would provide incentives for electric vehicles and infrastructure if future costs do come down sufficiently.

      I hope that is responsive.

  2. Robert A. Potter says:

    What Montgomery fails to take into consideration is the harm done by Trump to the effort to get the world seriously involved in climate change. Blaming President Obama is the default answer for all of Trump’s thoughtless and unwise moves. In fact, any Obama action will predict exactly what Trump will do: the opposite. Let us not forget the conditions under which President Obama struggled–an unrelentingly uncooperative Congress. Besides, one knows that Trump never actually thought about climate change and we can be certain that he has no inkling of the issues and what lies in store for the planet if we fail to address them in a decisive manner. The Paris agreement is a positive step that our ignorant President has squandered in a thoughtless and destructive manner.

    • david montgomery says:

      Point made, about replies that ignore what I wrote. Who cares what President Trump thinks about climate change, if withdrawing from Paris is good policy? There is nothing “ignorant” about rejecting the Paris Agreement as an unconstitutional attempt to bind the US in an international agreement, because it is excessively costly, and because it did a lot for China before China does anything for us. The latter is not leadership, it is naivete about the fate of unenforceable agreements.

      And, there is nothing in the Constitution that empowers a President to exercise undelegated authorities when an elected Congress refuses to implement his policies. Your “uncooperative Congress” is my “expression of the will of the voters against the President’s policies”

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