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Climate change affects the world’s poorest first and worst. Yet it is a problem the whole world shares that can only be addressed through international cooperation. CGD’s work on climate finance looks at economic incentives that benefit us all—by helping developing countries work together with other governments, institutions, and corporations to reduce emissions.
President Trump’s recent decision to pull the United States out of the Paris climate agreement—what does it mean for the agreement? For the climate? And for the US? CGD senior fellows Scott Morris, director of CGD’s US Development Policy Initiative, and Jonah Busch, coauthor of the recent book on climate change Why Forests? Why Now?, join this week’s podcast to discuss.
When President Trump announced his decision to pull the US out of the Paris Agreement recently, CGD senior fellow Jonah Busch described the move in a CGD blogpost as a "shameful act of self-harm." Given the chorus of good intentions from other world leaders, as well as governors and mayors in the US, Busch offers advice for how they can step up on climate action, in this edition of the CGD podcast as well as in a follow-up, more forward-looking blogpost How Leaders Condemning Trump’s Paris Pullout Can Match Words with Deeds on Climate.
"It’s great that these many political leaders have signed on,” says Busch, “and I hope that they start turning these into climate action. If they do, they will go a long way toward filling the gap."
My other podcast guest, Scott Morris, senior fellow and director of CGD's US Development Policy Initiative, agrees with Busch’s characterization of the president’s decision as harming the US, which, he says, has traditionally shared a sense of common purpose with other countries.
“In my mind, the politics of this globally have very, very wide ramifications beyond climate—and that’s certainly not to sell climate short,” he says. “It’s a hugely consequential issue, but it really implicates a much wider issue where the modus operandi, particularly as a leader among nations, has been to work in this community of nations. And what we are seeing from this administration in the very justification for the withdrawal is a flat out rejection of that approach. And that really is deeply concerning for a wider range of issues.”
Last Thursday President Trump announced he’d withdraw the United States from the Paris climate agreement—a shameful act of self-harm. Condemnation has been swift, widespread, and gratifying. But if dangerous climate change is to be prevented then dissenting statements must be backed up with strong climate policies. Fortunately some countries, states, cities, and businesses are already matching words with deeds on climate. Here’s a rundown:
The greatest climate success story of the last decade is one many haven’t heard of because it’s not about energy, it’s about trees. While the most ambitious countries and states aspire to cut emissions 80 percent by mid-century, it’s worth noting that Brazil already cut deforestation in the Amazon by 80 percent between 2004-2014, making it the country that reduced emissions more than any other. It did so while growing beef and soy production, and it cost governments just one-third the cost of the Rio Olympics, as Frances Seymour and I describe in our book, Why Forests? Why Now?
In the wake of Trump’s announcement, a bipartisan group of governors from nine states formed a United States Climate Alliance aimed at meeting the US climate goals, chaired by the governors of California, New York, and Washington. Ten more governors have expressed support for the Paris Agreement but have not yet joined the Alliance (the most up-to-date list seems to be on Wikipedia).
State governments can match climate words with deeds by putting a price on carbon pollution. This is happening not just in California, where the legislature is vigorously debating alternative proposals for extending cap-and-trade as a cost-effective way to meet the state’s ambitious climate targets. Virginia’s Governor Terry McAuliffe has ordered a carbon cap on power plants. And several gubernatorial candidates in New Jersey have stated intentions for the state to rejoin the northeastern states’ cap-and-trade program, the Regional Greenhouse Gas Initiative (RGGI).
Since Trump’s announcement nearly 200 mayors and counting have adopted the Paris Agreement. To back words with deeds, they can make their cities higher-density with more alternatives to driving, as Josh Barro writes. Former New York City Mayor Michael Bloomberg contends that the US will meet the climate targets it set in 2015 on the basis of actions by states and cities alone; this seems overly optimistic, but certainly worth a try.
The list of captains of industry with harsh words for President Trump included Apple’s Tim Cook, Disney’s Bob Iger, General Electric’s Jeff Immelt, and Goldman Sachs’ Lloyd Blankfein. But even better than critical statements is demonstrating the profitability of climate-friendly businesses. An Elon Musk disassociation from Trump is fine; low-cost Tesla batteries and electric cars are far better. It’s worth noting that technological advances, while critically needed, are no substitute for strong public policies on climate change—both are needed.
Lost in the noise from the announcement, Exxon Mobil shareholders passed a resolution over management’s objections instructing the company to report on the impact of climate protection policies on their business. (The New York Attorney General is fast on the heels of Exxon Mobil for misleading investors on the costs of climate change.)
President Trump’s announcement told the world he doesn’t care to act on climate, but he’d been showing this for months by deprioritizing climate within executive agencies and issuing executive orders to unravel his predecessor’s achievements on clean power, fuel efficiency, methane emissions, pipelines, drilling on federal lands, and more. However, Trump has had less success pushing an anti-climate agenda through Congress. He has failed in efforts to roll back other Obama-era methane regulations and cut funding for clean energy research and the Landsat satellite program, for example. I hope climate supporters in Congress don’t just oppose Trump’s announcement through statements, like those from Senators Kamala Harris (D-CA) and Susan Collins (R-ME), but continue to fight to uphold critical functions of the federal government on climate through the remainder of President Trump’s time in office and beyond.
The pronouncements on climate from within the United States and around the world in the last few days have been inspiring; now let’s hope strong words lead to more strong actions.
Estimating latent demand for electricity can be tricky. Are some countries too poor to consume a lot more energy? Or is income growth being held back by a lack of reliable and affordable electricity? While there is a strong relationship between energy consumption and income, the direction of causality is often far less clear. One way to estimate unmet demand may be to try to compare pairs of countries—e.g., how much additional energy does Kenya need to reach the level of Tunisia?
Another way may be to look at all countries together and see how far any individual country is from the global trendline. So, here we plot per capita energy consumption against per capita GNI (PPP$) for all available countries in the World Development Indicators. A few things to note right away: we have data for 136 countries and the relationship is extremely tight (for those who care, the R^2 is 0.84). Then, we measure each country’s distance from the predictive line. This distance is one way to think about what any one country’s energy consumption should be given their income level.
In this graphic, countries above the line consume more energy than their incomes would predict, while those below consume less. Yes, yes…the data is highly imperfect, and a lot of factors beyond income like economic structure, endowments, fuel mix, climate, geography, policy, etc., all can influence energy demand and supply. But 0.84 is pretty tight and we are only looking for ballpark magnitudes.
A few things strike us when we look closer at the sub-Saharan countries:
Nigeria is the most underpowered. Per capita energy consumption is a whopping 79 percent below what its income level alone predicts. Further, if we make the (huge) assumption that all the Nigerian projects in the Power Africa pipeline reach completion, we estimate that this would close less than one-third of the present gap.
The other initial Power Africa countries are all below the line too: Tanzania (-60 percent), Ethiopia (-47 percent), Kenya (-44 percent), and Ghana (-18 percent). Sorry, no data on Liberia.
Southern Africa is a regional outlier. Of the seven sub-Saharan countries above the line, six are in the Southern African Development Community. Most of these countries still rely on very large hydroelectric projects built long ago (e.g., Kariba completed in 1959, Inga 1 in 1972, Cahora Bassa in 1974). Mozambique is over 400 percent “overpowered.”
Togo, the only West African country above the line, has seen a 50 percent increase in electricity since 2008, largely because of the opening of one large thermal plant (with the support of OPIC).
In sum: much more analysis is needed to better understand demand. But this simple exercise does reveal, especially in West and East Africa, that there is a lot of work left to be done to close the gap between power supply and demand.
Update: President Trump announced on Thursday, June 1st that the United States will withdraw from the Paris Agreement.
A decision by President Trump to remove the United States from the 2015 Paris climate agreement would be a shameful act of self-harm. The decision would hurt everyone in the world, and poor people most, by making it harder to avoid a future of bigger storms and fires, disappearing coastlines, and tougher crop-growing conditions. But the most severe and immediate harm would be to the United States, which by banishing itself from the community of nations trying to prevent dangerous climate change would irrevocably damage its global standing.
For those just tuning in, the Paris Agreement is the world’s main international effort to prevent and respond to climate change. It sets a long-term goal for global greenhouse gas emissions to peak as soon as possible, decline rapidly, and reach near-zero in the second half of the century. The government signatories—which as of today include all but Nicaragua and Syria—send a powerful collective signal that the future they want is low-carbon: energy without fossil fuels; agriculture without deforestation.
The Paris Agreement works by each country voluntarily taking actions to reduce climate emissions. In the US’ case these actions include the Clean Power Plan, fuel economy standards, methane regulations, and so forth, all of which Trump has been weakening through executive orders. The voluntary nature of the Paris agreement means they collectively get us only halfway to a stable climate, but it also means that there are no encumbrances that are avoided by leaving.
The Paris Agreement will go on as planned, with or without US participation. Indeed, the agreement was ratified by countries at record pace in order to have it come into force before a possible Trump Administration—in hindsight a prudent maneuver. And although there’s no substitute for strong federal climate policies, actions toward a safer climate will go on within the US too, with state-level climate policies and increasing adoption of renewable energy due to technological advances and falling costs.
Pulling out of the Paris Agreement hurts the US
A decision to leave Paris would harm the US in multiple ways. Americans would suffer more from climate-charged fires and floods. International rules on climate would be made without American input, meaning fewer opportunities for US companies to take advantage of a growing low-carbon economy. But the biggest loser from this decision would be the United States’ standing in the rest of the world, where climate change is seen as the world’s greatest threat by the most countries.
For years to come, millions of parents would attempt to explain to their children why Donald Trump didn’t want them to grow up on a planet with a stable climate. The global goodwill which the US has earned on climate would ebb to Europe and China, which have reaffirmed their commitment to climate action and the Paris Agreement regardless of what the United States does. It’s not just governments that would be more reluctant to deal amicably with the United States. Companies would be less likely to sign deals with American businesses than their overseas competitors. Individuals would choose to study, work, vacation, and buy their products elsewhere.
Leaving Paris would be part of a pattern by the Trump Administration of disowning US leadership on multilateral issues that are too big for any nation to solve on its own: Global health and disaster response. Trade. Even defense. Each of these abdications in turn diminish America’s stature in the world even as they harm old friends who have counted on us. But when future historians look back to pinpoint the exact moment when the US irrevocably ceded international leadership to others, leaving Paris would be it.
Most discussions of the linkage between forests and poverty—including one last week at the United Nations Forum on Forests (UNFF)—focus on how to increase income to poor households from the harvest and sale of forest products. But at least as much attention should be paid to forest destruction as a pathway to the further immiseration of poor people. As forests are destroyed, poor people often lose access to the forest goods and services they depend on. And because deforestation contributes to the emissions that cause climate change, forest destruction impacts the development prospects of poor countries as well.
Can forests provide pathways out of poverty?
On May 2, I participated on one of several panels at the UNFF12 meeting in New York on the relationship between forests and selected Sustainable Development Goals (SDGs). The UNFF is a subsidiary body of the United Nations, established in 2000 to promote “. . . the management, conservation, and sustainable development of all types of forests and to strengthen long-term political commitment to this end.”
It’s great that UNFF is focusing on the linkages between forests and the SDGs; as I wrote two years ago in a blog about SDG15 (the one that includes forests), the many contributions of forests to objectives such as food, water, and energy security (depicted in Figure 1) are inadequately reflected in the SDG targets overall.
The UNFF panel on the contributions of forests to SDG1 (“End poverty in all its forms everywhere”) was framed around the potential of forests to provide a pathway out of poverty. But examples of sustainable forest management actually providing such a pathway appear to be relatively rare. Panelists and delegates offered a few examples of rural communities gaining increased income from forest products, services, or employment, but they were weighted toward the management of planted forests rather than natural forests. Instead, the panel focused mostly on the many challenges of translating natural forest wealth into money in the pockets of poor people while keeping forests standing.
One useful approach to addressing the lack of clear evidence on how forests can provide pathways to prosperity for the poor is the PRIME framework developed by Priya Shyamsundar and colleagues, with support from the World Bank’s Program on Forests (PROFOR). PRIME stands for Productivity, Rights, Investments, Markets, and Ecosystems. Attempts to nurture community-based forest enterprises have often foundered owing to constraints on the first four factors (the “P,” ‘R,” “I,” and “M”)—low resource and labor productivity, unrecognized rights to forest resources, and limited access to capital and markets.
And while in theory it should be possible to monetize the values of forest-based ecosystem services (the “E”) to provide income to local forest stewards, in practice payments for ecosystem services schemes have found limited application as a poverty reduction strategy, not least because poor people often lack legal status as “sellers” of those services.
In short, mobilizing natural forests as a pathway to prosperity for poor people remains more of a proposition than a widely proven strategy.
The impact of deforestation on poverty
Deforestation, on the other hand, can lead to either prosperity or pauperization, depending on who gains the benefits and who bears the costs. The gains from one-time removal of valuable timber can be considerable, but are often enjoyed by elites in capital cities rather than by the rural poor.
The conversion of forests to other land uses generates winners and losers, both of which may be poor. While it’s true that clearing forests to plant oil palm enables smallholders in Indonesia to send their kids to college, indigenous communities lose access to their livelihoods when their customary forests are converted to industrial-scale plantations. At Loggerheads? Agricultural Expansion, Poverty Reduction, and Environment in the Tropical Forests by World Bank economist Ken Chomitz remains the best resource for understanding such variable deforestation-poverty linkages.
But the impact of deforestation on access to forest goods and services—particularly important to poor households and women—is unambiguously negative. In the first instance, deforestation means the loss of income from collecting wild forest products, which constitute, on average, 21 percent of household incomes in communities that live in and around forests, with the poorest households more forest-dependent.
In addition, forest loss removes the ecosystem services that nurture health and well-being, and buffer poor households from natural disasters. Figure 3 depicts how deforestation transforms forests that provide food and medicine, clean water, and resilience to natural disasters into landscapes prone to landslides, flooding, and the spread of disease.
While maintaining forests might sometimes be a pathway to prosperity for poor people, forest loss can certainly be a road to their further immiseration.
The neglected link between forests and poverty via climate change
Yet even a reframing of forest-poverty linkages to include the local implications of forest loss is incomplete without incorporating the connection between forests and global climate change. The extreme weather events that are becoming more frequent and severe on a warming planet threaten to unravel decades of development gains and impose catastrophic hardship on the poorest households.
According to a 2014 National Bureau of Economic Research Working Paper, exposure to a single severe storm—such as Hurricane Mitch, which hit Central America in 1998—can knock a country off its pre-storm economic growth trajectory for decades. With overall economic growth associated with commensurate income growth for poorer segments of society, climate change poses a roadblock on one of the most reliable pathways to prosperity.
As detailed in Why Forests? Why Now?, deforestation is a globally significant cause of the emissions that cause climate change. And because standing and re-growing forests are a safe, natural, and proven carbon capture and storage technology, maintaining forests is an even greater part of the solution to climate change—equivalent to up to 30 percent of global net emissions.
As depicted in Figure 3, deforestation and climate change reinforce each other in a vicious cycle leading to poverty, with emissions from deforestation contributing to climate change, and climate change compromising the ability of forests to offer a source of resilience to the natural disasters that are becoming more frequent and severe. Poor households and poor countries are suffering first and worst.
The bottom line
As long as discussions about forests and poverty focus only on mobilizing forests for profits, and fail to recognize deforestation as a pathway to pauperization, forums such as the one last week at UNFF risk barking up the wrong tree.
Energy has fueled economic and social development worldwide. From the US to China to South Africa, energy has enabled countries to increase incomes and standards of living. In turn, expanding middle classes have increased their energy consumption. How can developing countries, especially middle-income countries, dramatically scale up energy use, and provide access to modern energy services to the billions who lack them, while keeping GHG emissions within the global goal of limiting dangerous temperature rise to 2 degrees Celsius, or even better 1.5 degrees?
The international forest and climate communities have placed high hopes on the potential for compliance carbon markets to generate funding to reduce tropical deforestation through international forest offsets. At a meeting last week in San Francisco on “Navigating the American Carbon World” (NACW) it seemed as if these hopes are likely to be dashed. Or at least not realized in time to save the vast tropical forests in time for them to play a significant role in combatting dangerous climate change.
Reducing deforestation and conserving forests is a critical part of a solution to global climate change. Compelling evidence for this is at the heart of a recent CGD publication Generating results-based funding to pay tropical forest countries for their performance in reducing deforestation has been envisioned as a promising approach to mitigating dangerous greenhouse gas (GHG) emissions, and was enshrined in Article 5 of the Paris Agreement.
One way to generate funding to reward forest countries for reducing deforestation is to include forest offsets in compliance carbon markets. Carbon offsets allow GHG emitters to pay others for actions to reduce GHG emissions cheaply, outside the capped enterprise or sector, such as from uncapped sectors like forests. Offsets can provide an important tool for keeping the cost of emissions reduction low. As our CGD Working Group report, Look to the Forests, noted, there is not yet enough results-based funding, so hopes have been pinned on the potential of carbon markets to generate funding to pay for results.
In recent years over 50 jurisdictions have implemented policies to put a price on carbon. Some of these programs, including China and Korea, allow for the use of domestic forest offsets. But so far, only California has an active compliance carbon market (cap and trade program) that includes the potential to use international forest offsets in its enabling legislation.
The International Civil Aviation Organization (ICAO) has set itself voluntary goals to offset emissions from air travel and is also considering buying high quality international forest offsets in its market based program CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation). If cap and trade programs are allowed to purchase international forest offsets, this could be a boon to global efforts to reduce and halt deforestation, with enormous benefits both for local communities and the globe.
Where is California’s market today?
California has developed robust procedures that that would allow capped entities (polluters) to pay tropical forest countries to reduce their deforestation as a way to offset their own emissions. But until now, the procedures have not been cleared for use by the California legislature.
The launch of California’s international forest offset program has been slow and subject to continuous delays. There are several reasons for this. First, international forest offsets will compete with domestic (within California) offsets, which are already up and running. In California, the cap & trade program has generated an entire industry engaged in producing domestic offsets within the state. They have gained lots of experience with developing and implementing the domestic forest offset protocol. Companies that are required to reduce GHG emissions are keen to see more offsets because it drives the price of compliance down. But companies that generate offsets within the state are not interested in encouraging international offsets because they may be cheaper and compete with the domestic offsets.
Second, in California there is an active and outspoken community of people from disadvantaged communities located either near heavily polluting industries or major transport corridors. These communities, referred to as the Environmental Justice (EJ) community, and others, are opposed to the use of offsets, and in fact oppose trading emission permits altogether. They believe that there is a correlation between emission of GHGs and local pollutants that are harmful to health, and they hope to tackle the latter by forcing polluters to reduce more emissions in situ rather than through trading or offsets. The pressure from the EJ community is strong and finding a more sympathetic audience in the California legislature. The legislature is currently reviewing the impact of cap & trade, and especially offsets, on reducing local toxic and criteria air pollutants. There is pressure to stop cap & trade after 2020 and to replace it with direct command and control regulations, or even a carbon tax.
In the current California political climate, REDD+ and the use of international forest offsets are considered toxic. Some legal experts are even questioning whether carbon trading across borders is constitutional. Only sovereign governments are allowed to enter into international treaties. Do the agreements between sub-national governments like California and Ontario, or a future agreement between California and the state of Acre in Brazil, constitute an international treaty?
Perhaps the most significant obstacle is regulatory uncertainty in California. California’s cap & trade program is due to expire in 2020. The legislature is considering legislation that would extend it to 2030. There is solid support for the program in Governor Brown’s administration and by the majority democratic assembly and senate. But extending the program is likely to require a two-thirds supermajority vote and this would be more difficult to ensure. The administration already expended considerable political capital in passing the recent $52 billion transportation bill, which required a two-thirds majority, so there are questions about the level of political energy that remains to pass the cap & trade extension by a two-thirds majority. When California first put in place its cap & trade program (AB32), which goes till 2020, only a simple majority was needed. In the meantime, law suits were filed against AB32 claiming that revenues from the program are actually a tax, which requires passage by a two-thirds majority of the legislature. While the courts ruled that cap & trade revenues are not in fact taxes, but are regulatory fees, in 2010 voters approved Proposition 26 which stipulated that a two-thirds supermajority vote in the legislature is required to pass any fees, levies, charges or taxes that previously could have been enacted by a simple majority.
All this means that the potential for compliance cap & trade markets to generate funding to encourage tropical forest countries to halt deforestation is uncertain. At the NACW, experts suggested that California’s international forest protocols would be unlikely to be approved before 2020, and possibly as late as 2025. This is bad news for tropical forests. At current rates of deforestation, by 2025 a huge swath of tropical forests could be gone. Given that reducing deforestation, and reforesting degraded areas, can account for as much as 30 percent of current global emissions, maintaining forests is critical to halting dangerous global warming, and is one of the most cost-effective options to do so. With funding from compliance carbon markets in question, new ideas to generate funding for a financial incentive to halt deforestation are badly needed.