U.S. exits Paris Agreement. What happens now?

While it was widely expected, President Trump has now formally stated that the United States will exit the Paris Agreement.

The Paris Agreement by the United Nations Framework Convention on Climate Change (UNFCC) requires each of the 197 participating countries to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. It also aims to strengthen the ability of countries to deal with the impacts of climate change. To reach these ambitious goals, appropriate financial flows, a new technology framework and an enhanced capacity building framework will be put in place, thus supporting action by developing countries and the most vulnerable countries, in line with their own national objectives. The nonbinding agreement also provides for enhanced transparency of action and support through a more robust transparency framework.

To say this is the hot topic of the day would be a vast understatement. But we already knew that. Another thing that is quickly known and observed is that this move has raised a tremendous amount of tension and ire in an already highly-polarizing political environment.

Politics aside, a key topic we should be asking is: what are the long-term effects and ramifications of the U.S. pulling out of the agreement on freight transportation, logistics, and the supply chain?

Given that it has been less than a day since the decision was made official, it may be premature.

But one thing that was made very clear prior to yesterday was that a lot of very large shippers were fully in support of remaining in the agreement.

In a letter sent to President Trump on April 26, 16 companies, including Apple, DuPont, General Mills, Google, Intel, and Walmart, among others, pleaded their case for why the U.S. should remain in the agreement.

“Climate change presents U.S. companies with both business risks and business opportunities,” the letter stated. “U.S. business interests are best served by a stable and practical framework facilitating an effective and balanced response. We believe the Paris Network provides such a framework.”

The companies added that companies based or operating in the U.S. benefit from U.S. participation in the agreement in several ways, including: strengthening competitiveness and reducing the risk of competitive imbalance for U.S. companies; supporting sound investment with the Paris Agreement providing greater clarity on policy direction and enabling better long-term planning and investment; creating jobs, markets and growth; minimizing costs through encouraging market-based implementation that helps companies innovate to achieve environmental objectives at the lowest possible cost; and reducing business risks in regards to future climate damages like physical harm to business facilities and operations, declining agricultural productivity and water supplies, and disruption of global supply chains.

And a May 10 letter to the President from 30 U.S.-based CEOs, including large shippers like Cargill, Johnson & Johnson, Unilver, and Tesla, expressed their support for the U.S. remaining in the agreement.

“As CEOs of large American companies, or with significant operations in the United States, we are concerned about keeping the doors open for the global flow of American manufactured goods and products at this critical time when our Manufacturing sector is starting to grow from our competitive energy advantage,” the letter stated. “Based on our experience doing business all over the world, we believe there is strong potential for negative trade implications if the United States exits from the Paris Agreement. Our business interests are best served by a stable and practical framework facilitating an effective and balanced response to reducing global GHG emissions. The Paris Agreement gives us that flexible framework to manage climate change while providing a smooth transition for business.”

Those two letters represent feedback from some of the world’s largest shippers making their collective case for the U.S. to remain in the agreement, but it appears to have fallen on deaf ears on 1600 Pennsylvania Ave.

In his comments yesterday, Trump said that the U.S will begin negotiations to reenter either the Paris Accord or a really entirely new transaction on terms that are fair to the United States, its businesses, its workers, its people, its taxpayers.  

“The United States will cease all implementation of the non-binding Paris Accord and the draconian financial and economic burdens the agreement imposes on our country,” he said. “This includes ending the implementation of the nationally determined contribution and, very importantly, the Green Climate Fund which is costing the United States a vast fortune. Compliance with the terms of the Paris Accord and the onerous energy restrictions it has placed on the United States could cost America as much as 2.7 million lost jobs by 2025 according to the National Economic Research Associates.  This includes 440,000 fewer manufacturing jobs …and the further decimation of vital American industries on which countless communities rely.  They rely for so much, and we would be giving them so little.”

But various reports dismissed Trump’s comments, with the leaders of France, Germany and Italy issuing a joint statement saying that the Paris climate accord was “irreversible” and could not be renegotiated.

“We deem the momentum generated in Paris in December 2015 irreversible and we firmly believe that the Paris Agreement cannot be renegotiated, since it is a vital instrument for our planet, societies and economies,” said chancellor Angela Merkel, president Emmanuel Macron and prime minister Paolo Gentiloni, with the reports adding that the three leaders called on their allies to speed up efforts to combat climate change and a promise to do more to help developing countries adapt.

With so much going on at such a rapid pace, there is a lot to stay on top of, given how quickly things can, and likely will, change. While President Trump made his case for exiting the agreement, his decision is being met with a tremendous amount of backlash. Meanwhile, the global supply chain will have to wait and see, while also continuing to be proactive on the sustainability front, too.