Why Donald Trump got his economic facts wrong in trying to justify withdrawal from Paris climate deal

US President appears to have based withdrawal from climate agreement on his misinterpretation of job and economy statistics

Donald Trump giving his reasons for withdrawing from the Paris climate change agreement (AP)

Donald Trump seems to have based his argument for withdrawing from the Paris climate change agreement on a misinterpretation of job and economy statistics.

In claiming that the agreement would lose America 2.7 million jobs by 2025 and reduce GDP by nearly $3 trillion by 2040, the US President appears to have cherry picked statistics and failed to take any account of the potential economic benefits of reduced emissions.

In explaining why he withdrew from the agreement, Mr Trump said: “Compliance with the terms of the Paris Accord … could cost America as much as 2.7 million lost jobs by 2025 according to the National Economic Research Associates (NERA).

“This includes 440,000 fewer manufacturing jobs … By 2040, compliance with the commitments put into place by the previous administration would cut production for the following sectors: paper down 12 per cent; cement down 23 per cent; iron and steel down 38 per cent; coal - and I happen to love the coal miners - down 86 per cent; natural gas down 31 per cent.

“The cost to the economy at this time would be close to $3 trillion in lost GDP and 6.5 million industrial jobs, while households would have $7,000 less income and, in many cases, much worse than that.”

All these statistics come from a “Key Findings” table in NERA’s March 2017 report Impacts of Greenhouse Gas Regulations on the Industrial Sector.

And they all come with a series of massive caveats, contained within a footnote to the Key Findings table that stated the NERA report: “Does not take into account potential benefits from avoided emissions.

“The study results are not a benefit-cost analysis of climate change.

“The long run, year 2040, impacts which are representative of the Obama Administration’s long term emissions goal of an 80 per cent reduction by 2050 are subject to a great deal of uncertainties about the future.

“The model does not take into consideration yet to be developed technologies that might influence the long term cost.”

These caveats, and Mr Trump's apparent failure to address them, seem to make his use of the NERA’s statistics at best highly debatable in at least three respects.

On Job losses:

Given that the study did not take into account potential benefits from avoided emissions, a benefit-cost analysis of climate change, or the influence of yet to be developed technologies, it seems that Mr Trump has failed to consider jobs being created in the emerging renewable energy sector.

This apparent failure to balance talk about 2.7 million job losses against the scope for job creation in renewable energy appears to be a very significant omission.

The potential for the development of jobs in emerging solar and wind technologies is indicated by the US Department of Energy’s January assessment that the solar workforce increased by 25 per cent in 2016, while the numbers employed in wind energy went up by 32 per cent.

Economists have now warned that leaving the Paris agreement may have a knock-on effect on US clean energy investment, which may result in jobs in the manufacture of solar panels or wind turbines being lost to other countries, including China - perhaps ironically given Mr Trump's past claim that climate change was a "hoax" perpetrated by China to gain an economic advantage over the US.

The Department of Energy also reported that the solar industry now employs many more Americans than coal: 373,807 to 160,119. A further 101,738 Americans are employed in wind energy.

The solar sector also already accounts for the largest share of workers in American electric power generation, accounting for 43 per cent of the workforce, compared to 22 per cent for fossil fuel electricity generation.

When electricity generation was combined with the fuels sector, 1.1 million Americans were employed in traditional coal, oil and gas, but almost 800,000 people are already working in low carbon emission generation.

On the economic benefits of stopping global warming

The NERA’s caveats explicitly acknowledged that its study was “not a benefit-cost analysis of climate change”.

And Mr Trump does not appear to have set his his claims of massive GDP loss against any assessment of how preventing climate change might help the economy.

This may seem strange, given his fondness for property investment and in particular his “Winter White House” Mar-a-Lago resort in Florida.

In June 2014 a group of analysts led by former New York mayor Michael Bloomberg produced Risky Business, a report into the economic costs of climate change in the US.

This stated: “In Florida, because of the porous limestone on which the major southern cities are built, even modest sea level rise comes at a significant economic cost.

“Under current projections, between $15 billion and $23 billion of existing property will likely be underwater by 2050, a number that grows to between $53 billion and $208 billion by the end of the century.”

Looking at the impact of global warming on the agriculture and food sectors that account for more than $750 billion of American GDP, the US Environmental Protection Agency (EPA) stated last year: “Overall, climate change could make it more difficult to grow crops, raise animals and catch fish in the same ways and same places as we have done in the past.”

“For example,” the EPA added, “High night-time temperatures affected corn yields across the US Corn Belt, and premature budding due to a warm winter caused $220 million in losses of Michigan cherries in 2012.”

The EPA assessment added that weeds, crop pests and livestock parasites tended to thrive in warmer temperatures, while drought threatened pasture and feed supplies.

“Heat waves,” the EPA said, “Which are projected to increase under climate change, could directly threaten livestock. In 2011, exposure to high temperature events caused over $1 billion in heat-related losses to agricultural producers.”

Such potential losses do not appear to have been accounted for in Mr Trump’s explanation of why he has withdrawn from the Paris agreement.

On how businesses might adapt to a low carbon economy

The NERA report accepted that its model “does not take into consideration yet to be developed technologies that might influence the long term cost.”

It also admitted that its long term predictions were “subject to a great deal of uncertainties about the future”.

Economists have now argued that the NERA report – and therefore Mr Trump – made insufficient allowance for how businesses might innovate to deal with climate regulations.

Criticising the NERA model as unrealistically rigid, Gary Yohe, professor of economics and environmental studies at Wesleyan University, told the Verge website: “None of the outfits that are modelled in this model would stay in business in the real economy for more than 10 or 15 years.”

An example of how businesses are innovating in the real world was provided by Darren Woods, who became chief executive of oil producer Exxon after Rex Tillerson vacated the post to become Mr Trump’s Secretary of State.

In his first blog since taking over from Mr Tillerson, Mr Woods wrote that Exxon has spent $7 billion on low-emission energy research and projects in the last 15 years.

Exxon and fellow oil giant ConocoPhillips have both reiterated their support for the Paris agreement.

They weren’t the only major business players to disagree with Mr Trump’s abandonment of the climate agreement.