Paris Agreement: Are Countries Playing Fair?

One of President Obama’s legacies is the Paris Agreement where nearly 200 nations committed to national plans that are expected to reduce greenhouse gas emissions. Its goal is to limit temperature to below two degrees Celsius above pre-industrial levels. The Paris Agreement was ratified on November 4, 2016, after 55 countries, consuming more than 55 percent of the world’s energy signed on to its conditions. Each country set its own targets to cut greenhouse gas emissions.

President-elect Trump has called climate change a hoax invented by the Chinese, and has promised to “cancel” the Paris agreement and repeal the Obama administration’s Clean Power Plan, which is at the center of the U.S. agreement. Some in the United States are pushing for President-elect Trump to stick with the agreement. For Example, Bill O’Reilly stated “President-elect Trump should accept the Paris Treaty on climate to buy some goodwill overseas. It doesn’t really amount to much anyway. Let it go.”[i]

But is that really the case?

The plan the Obama administration submitted to the U.N. stated the United States would reduce greenhouse gas emissions by 26 percent to 28 percent from what they were in 2005 by 2025. The Clean Power Plan is one of the regulations that plan cites as a source of greenhouse gas emissions reductions. Several studies have analyzed President Obama’s Clean Power Plan, and found that the plan will escalate electricity prices once electric utilities comply with the regulation. The plan, however, has been stayed by the Supreme Court as suits against it are moving through the lower courts. But, the Obama Administration has other mandates designed to reduce greenhouse gas emissions, such as onerous regulations on the efficiency of automobiles and trucks that would increase the cost of a vehicle by at least $3,800, shutting out almost seven million people from the new car market.[ii] Further, studies have shown that even with all of the President Obama’s regulations combined, the United States would reach just four-fifths of the commitment.[iii]

But will other countries follow their plans?

President Obama pushed China to join the Paris Agreement and China pledged to continue to increase its greenhouse gas emissions through 2030, after which it would try to decrease them. China will clearly increase its greenhouse gas emissions as a recent New York Times article indicates, as its coal production and use looks to be on the increase.[iv]

China’s Coal Production and Consumption

A lack of coal stockpiles and worries about electricity blackouts are making Chinese officials reverse policies that had helped reduce coal production. China’s coal mines are reopening and its miners are being hired back with paychecks that are almost 50 percent higher. Coal still produces almost three-quarters of China’s electricity, despite its hydroelectric dam projects and the world’s largest program to install solar panels and build wind turbines. Coal use in China also produces more carbon dioxide emissions than all the fossil fuels consumed in the United States.

Two years ago, China thought it would be easy to cut greenhouse gas emissions. China’s electricity consumption growth rate was falling, and many coal-fired power plants began operating only half the time. That made the International Energy Agency believe that China’s coal use peaked in 2013 and would decline thereafter. Further, last year, China’s coal production dropped 3 percent due to slowing economic growth and a gradual shift in its economy toward consumer spending and away from exports and heavy manufacturing.

At the same time, however, state-owned coal mining companies, having received loans from state-owned banks, kept building more mines, leading to losses and a decline in coal prices. China then began closing smaller, privately owned mines, reducing coal production. Last summer, mines were told that they could only operate 276 days a year.

But, the lower coal prices made Chinese investors purchase coal in commodity markets, betting prices would rise. As more speculators joined in, coal prices increased more. Also, the government decided to withdraw many trains from service this year due to a new safety improvement program, and as coal supply deliveries were held up, coal prices increased further, almost doubling from the start of this year until early November.

Also this year, China’s banking regulators let banks release a flood of mortgages to home buyers to help bolster economic growth, which produced increased demand for electricity from the steel and cement industries. To stop the coal price increases, China stopped most coal trading on commodity markets and encouraged state-owned mines to sign long-term contracts at low prices with power stations. But to satisfy demand and to avoid blackouts, the National Development and Reform Commission raised the number of days that mines could operate to 330 days per year.

According to Brock Silvers, a Shanghai banker who previously served on two Chinese coal company boards, “I get a kick out of people in the West who think China is decarbonizing, because I see no sign of it whatsoever.” IHS Energy agrees, expecting Chinese coal demand to peak in 2026.

Conclusion

While President Obama is instituting onerous regulations in the United States, the Chinese are continuing to mine and burn coal to avoid blackouts and to keep their economy churning, despite its commitment to the Paris Accord. After a slight hiatus, China’s coal mines are reopening and its miners are being hired back with paychecks that are almost 50 percent higher. Hopefully, President-elect Trump will undo the onerous regulations put in place by President Obama and bring U.S. coal miners back to work too.


[i] Huffington Post, Bill O’Reilly: Trump Should Accept Paris Climate Agreement, November 17, 2016, http://www.huffingtonpost.com/entry/oreilly-trump-paris-agreement_us_582e0043e4b058ce7aa9c938

[ii] Heritage, Fuel Economy Standards are a Costly Mistake, March 4, 2016, http://www.heritage.org/research/reports/2016/03/fuel-economy-standards-are-a-costly-mistake

[iii]Institute for Energy Research, http://instituteforenergyresearch.org/analysis/closer-look-obamas-crowning-achievement-paris-agreement/

[iv] New York Times, Despite Climate Change Vow, China Pushes to Dig More Coal, November 29, 2016, http://www.nytimes.com/2016/11/29/business/energy-environment/china-coal-climate-change.html?_r=1

 

The post Paris Agreement: Are Countries Playing Fair? appeared first on IER.

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