On June 1, after returning from his first international trip, President Trump officially announced his intention to pull the United States from the Paris climate agreement. It's a decision that has rocked the political world, especially in terms of international relations.
This will be the second international climate agreement that the United States will leave—the first was the Kyoto Protocol—and the mistrust it will generate with regard to American reliability is obvious. After the G7 summit last week in which President Trump refused to commit to the agreement among other things, German Chancellor Angela Merkel publicly stated Europe can't rely on the United States. And in the wake of the decision, world leaders from China's President Xi Jinping to France's newly elected President Emmanuel Macron have criticized the U.S. decision to leave the agreement it helped establish.
As global politics go, it is an unpopular move. For the electrical construction industry, the effects are less certain.
What is the Paris climate agreement?
In 2015, the world's two most significant polluters—China and the United States—spearheaded an unprecedented agreement between almost every country in a concerted effort to address climate change. Each participating country was free to make its own commitments. Each country would have to periodically renew their commitments and steadily step up those commitments.
The United States committed to reduce emissions by 17 percent below 2005 levels by 2020 and at least 26 percent by 2025. While making strides toward that mark, according to the Rhodium Group, the United States will fall "considerably short" of its goal.
Other notable polluters, such as China and India, have been criticized for a lack of commitment by comparison. For instance, China's goal is to stop increasing carbon emissions by 2030, which some critics suggest means China has committed to do nothing until then. However, the country plans to decommission hundreds of coal plants by that time and, in 2016, led the world in solar-power investment.
According to the United Nations, the agreement calls for countries to limit average global temperatures to a maximum of 3.6 degrees Fahrenheit from pre-Industrial Revolution levels. The ideal that the agreement seeks is 2.7F. Without the agreement, and if the world continues on its trajectory, the United Nations states global temperatures could rise between 4.7 and 8.6°F, which would have disastrous ecological and economic consequences.
Notably, in the political landscape and in the media, there is popular denial that these projections are accurate; however, the scientific community of climate scientists have reached a consensus.
There is controversy surrounding the Paris agreement in that opponents argue current commitments won't accomplish any appreciable difference in the forecasted effects of climate change, an argument President Trump made in his announcement. However, the agreement is designed so that every participating country would have to steadily increase commitments each year, and proponents argue increased efforts would have stronger beneficial effects. It's also for that reason that, without the United States in the agreement, analysts believe the goals are not attainable.
Furthermore, no country can lower commitments, and in the announcement, President Trump said his intention is to remove the United States from the agreement to renegotiate. However, that plan poses complications.
Pulling out of the Paris agreement will take four years. Formal notice can't be filed until November 2019, and then it will take a year for the United States to officially pull out.
There is another scenario, which would be a more radical procedure. President Trump could remove the United States from the United Nations Convention on Climate Change (UNCCC) altogether, the underlying agreement for these pacts. However, since that agreement was ratified by Congress under President George H.W. Bush, leaving the UNCCC would require a two-thirds majority vote by the senate.
What does it mean for electrical contractors specifically?
By pulling out of the agreement, analysts believe the Trump administration will have greater clout to finally kill the Clean Power Plan, which would remove government incentive for the power generation and transmission sectors to invest in renewable energies, energy efficiency, electric vehicle infrastructure, LED lighting, and other energy technologies that support the endeavor.
In short, it potentially means a changing market. In addition to reducing their competitive viability, these industries may face greater skepticism and resistance from electrical contractors than they already do.
Of course, these industries have seen recent increases in cities, states and even private corporations making their own commitments toward reducing energy consumption and emissions. In fact, before the announcement, New York City Mayor Bill de Blasio stated the city was ready to continue to do its part to fulfill U.S. commitments toward the Paris agreement, even if the country pulled out of it.
And, as of this writing, 82 mayors across the United States had pledged to remain in the Paris agreement. In addition, 30 states and a coalition of some of the biggest American companies said Thursday that they would continue with their climate policies.
It's become apparent that coal, the greatest contributor of carbon emissions in power generation, is vanishing, in large part due to a surge in generation from natural gas. Natural market forces are pushing the United States toward technologies that aid in the reduction of climate change effects, and those forces are expected to continue.
So, it is unlikely that the fate of these industries rests on global political action, such as the Paris climate agreement. In the United States, these industries will continue to be viable markets and job creators. What's uncertain is the degree to which they will continue to grow, and uncertainty means risk for investors.
“We are examining the net effect on the Paris withdrawal on the electrical construction industry," said Marco Giamberardino, NECA's executive director, Government Affairs. "The more immediate impact we are seeing are the moves by Trump to unravel Obama’s climate change rules through the EPA. Overall, there has been a great amount of uncertainty about the impact of the Obama-era climate change agenda. Some thought it could create opportunities, and some thought it would limit opportunities.”
From a business standpoint, President Trump's decision to pull the United States from the agreement may not affect electrical contractors in the near term. ECs that are monitoring industry trends and remaining nimble and open to new markets will likely prosper as they always have.