Several news organizations are reporting this morning that President Trump has decided to pull the US out of the Paris climate agreement. Trump tweeted today that he will be announcing the decision in the next few days. We think the announcement will come Friday.
While the administration will trumpet the withdrawal has a major accomplishment, it is largely symbolic. First, the agreement is non-binding. But moreover, the President had already signed an executive order directing EPA to reverse the Obama administration’s carbon policy and Clean Power Plan regulation. This work is already underway, and we will likely see a draft proposed rulemaking in the next few weeks.
Many are calling the move surprising and provocative but in our view Trump had decided long ago, even before the election, to withdraw from the climate pact and thus undo another Obama administration legacy achievement.
In our post-election note to clients on November 9, 2016, we listed five energy policies that will be impacted by the Trump Presidency including: “US will abandon Paris climate agreement.” In our view, the announcement should not be seen as a surprise by markets or the general public.
Since the inauguration, Paris supporters have launched an aggressive lobbying campaign of the administration enlisting large corporate supporters to engage with the White House. In addition, organizers focused on administration insiders who reportedly were advocating to stay in the Paris accord, such as NEC Director Gary Cohn and Presidential advisers Ivanka Trump and Jared Kushner.
We believe the leading proponents for withdrawing are EPA Administrator Scott Pruitt and the President himself. In addition, the National Mining Association issued a statement urging the President to withdraw, and in our view, made it hard for the White House to do anything but withdraw.
The President is quickly realizing that getting things done in Washington is extremely hard if you need Congress to take action. Withdrawing from the Paris agreement is accomplished by executive action alone, and therefore the President can claim another campaign promise fulfilled with the stroke of a pen.
As we have explained in our notes since the election, many energy policy changes by Trump will be accomplished via executive orders or regulations because these policies were adopted by the Obama administration through executive action and regulation. If President Obama had submitted the Paris agreement for Senate ratification as a treaty, it would have been extremely difficult to withdraw. The same can be said for the Clean Power Plan and other Obama energy initiatives. (It should be noted that the Senate during the Obama administration as well as now would likely reject the Paris accord.)
The White House had postponed the timeline for a decision until after the G7 summit in Italy last week to give the President a chance to consult with our allies on the Paris agreement. The recent election of French President Macron gave added hope to the theory that Trump could be successfully lobbied by other world leaders to stay in the accord.
But after the G7 meeting, German Chancellor Merkel, now engaged in her own reelection campaign, told a rally that the time Europe can depend on others “were over to a certain extent.” The Merkel comment was followed by a Trump tweet on unfair German trade policies. We suspect now that Trump is eager to make the announcement that the US is pulling out of the Paris accord but the idea that the administration would have made the decision to stay in the pact was very unlikely from the start.
