President Trump said yesterday that he felt compelled to withdraw the U.S. from the Paris climate accord because, “I cannot, in good conscience, support a deal that punishes the United States, which is what it does.”
Trump cited a study that said the Paris Agreement “could cost Americans as much as 2.7 million lost jobs by 2025.” The report was conducted by the consulting firm National Economics Research Associates, and commissioned by the American Council for Capital Formation and the U.S. Chamber of Commerce.
The problem other researchers have identified with the report is that it discounts any benefits the U.S. economy would see in responding to climate change. It discounts growth and innovation in the clean energy economy and the new business opportunities that will crop up around it. By ignoring these benefits, business leaders from within and outside the cleantech sector say the Trump administration will end up crippling a huge economic driver — which is exactly what the president said he didn’t want to do.
Tom Werner, the CEO of SunPower, called the decision to withdraw from the Paris Agreement an “unfortunate blunder, contrary to what America is all about, which is being an innovation leader.”
While analyst firms, including GTM Research, anticipate leaving the Paris Accord will have little effect on wind and solar companies operating in the U.S. in the near-term, there could be negative repercussions further down the line.
“Longer-term we’ll see what impact this has on markets,” said Werner. “I think markets are more driven by economics and the economics of solar are clear. However, I think this could deprive us from innovation coming to the private sector in renewables.”
The most notable impact will be on startups, he said. SunPower has purchased several companies that had partial support from the Department of Energy, and want on to create jobs and have a successful exit. There’s likely to be less startup activity absent the Paris goals driving investments and attracting talent, Werner said.
The CEO added that he will also be closely watching the international stage. If other countries also weaken their position on the Paris Accord, that could influence the market for renewables, even more so than in the U.S. where the clean energy transition is already well underway. The opposite could also be true, where international markets become even more attractive.
“No question you want to be close to your end market and we know solar project development is all local,” said Werner. “So if the markets are elsewhere you’re going to have more jobs elsewhere, so directionally you need to look at where the growth is.”
“They have this fear that they will lose out”
So for the renewables sector, and other businesses linked to climate change mitigation and adaptation, the impact of leaving the Paris agreement may, therefore, be less about markets stalling and more about navigating market shifts.
“From a market and economic perspective, what has changed is not necessarily the level of investment, but where future market opportunities are found and who will be making investments,” said Seth Cutler, senior energy and environment analyst at Frost & Sullivan.
Eliot Metzger, senior associate at the World Resources Institute (WRI), said that he spoke to a global leader in the transportation sector this week that said it is concerned the U.S. Paris decision puts them at a disadvantage. “They have this fear that they will lose out on global markets,” he said.
Leaving the Paris agreement could have real impacts on the ability for U.S. companies to win contracts with foreign governments, which is a major market driver, Metzger said. With the de-emphasis on climate research and clean energy technologies at the federal level, U.S.-based companies may also start to lack the expertise to offer compelling products and services in a low-carbon economy. Other countries, meanwhile, will be all too happy to step in.
“Countries like India are excited to reverse the global brain drain,” said Metzger. “This is their chance to keep that talent at home … The competition for talent is a really big [issue], probably bigger than we can appreciate. That’s the life blood for the future.”
“Businesses must step up to protect the planet”
Reactions from the corporate community this week were swift and strong.
Tesla CEO Elon Musk abruptly quit the president’s business advisory committee yesterday, tweeting that “climate change is real. Leaving Paris is not good for America or the world.” Musk was followed shortly after by Disney CEO Robert Iger.
The nearly 600 businesses that have made commitments to climate leadership in partnership with the We Mean Business coalition, reiterated their commitments to act in the wake of Trump’s announcement. An hour before the president made the official withdrawal announcement, some 300 companies got on phone with policy leaders at Ceres to ask what they could do in response, said Ceres President and CEO Mindy Lubber, speaking on a call with reporters.
Wal-mart, the world’s largest company by revenue, said in a statement that its commitments to renewable energy and emissions reductions have been embedded in the business for more than a decade, “and we believe they are good for our customers, good for our business, and good for our environment.”
In November, the Wal-mart expanded its climate commitments, and earlier this year the company launched Project Gigaton to help meet its science-based targets to reduce its supply chain emissions by one gigaton by 2030.
Salesforce, which has been a leader in developing regulations that make it easier for companies to buy renewable energy in the U.S., said in a company statement that it is “disappointed” with the administration’s decision to withdraw from the Paris Agreement as the threat of climate change looms. “As powerful platforms for change, businesses must step up to protect the planet for future generations,” Salesforce said in a company statement.
Outlook for the U.S. electric sector
For utilities, withdrawal from the Paris Accord, coupled with the recent termination of the Clean Power Plan, could ease the pressure these companies feel to transition to cleaner energy sources. U.S. utilities have already been decarbonizing at a rapid pace, but without an overarching framework, power companies in fossil fuel heavy states may be able to justify burning coal for longer and avoiding renewables.
But while that may be true in some cases, Andrew Steer, president and CEO of WRI, pointed out that an increasing number of utilities are offering green tariffs to accommodate the green appetite of corporations — even in traditionally conservative, fossil fuel heavy regions like North Carolina and Kentucky.
“The thing that we should all go to bed tonight giving thanks for is that [the Paris exit] didn’t happen three years ago,” said Steer. “It’s never the right time, but it’s happened when the momentum has grown so much that the damage … I believe is containable.”
Cory Honeyman, senior solar analyst at GTM Research underscored that the outlook for solar deployment in the U.S. remains driven by its growing cost competitiveness across both distributed and utility-scale PV.
“Rooftop solar is past grid parity in well over half of all states, and over two thirds of the utility solar pipeline comes from projects with economics on par with new-build natural gas,” he said. “So what continues to matter most is that growing economic case positioning U.S. solar to remain a double digit gigawatt annual market.”
Rate reform debates, state-level policy changes and a looming trade dispute remain the red flags that loom over the U.S. solar outlook, he said.
Regarding the solar trade case, which could end up being decided by the president, Werner said that siding with solar manufacturer Suniva is the wrong approach if Trump is interested in creating jobs. Just 10 percent of U.S. solar jobs are tied to making cells and modules, while 90 percent of solar employment is in R&D, installation and other areas of the business, he said.
“In our view open free trade is what makes America great and allows entrepreneurs and self-starting people to create new opportunities and new businesses,” said Werner. “If it’s all about jobs, then the [trade case] is bad policy.”