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A layman’s look at the Paris Climate Accord
President Trump surprised few but enraged many when he withdrew the U.S. from the Paris Climate Accord. Love him or hate him, you have to give him credit for following through on his campaign promises with unprecedented consistency, his lack of diplomacy notwithstanding.
Let’s review the backstory, including the benefits of our growing energy use and the debate over whether that energy use impacts the climate. Then, from one simple layman’s perspective, let’s take a look at the major provisions of the Accord and evaluate the impact of our withdrawal.
Energy Makes America Great
The industrial revolution has dramatically improved the plight of mankind over the last century. Chart #1 shows that, on the back of increased energy use, our life expectancy in the US has increased 60 percent from 50 years in 1990 to almost 80 years currently, and our standard of living and productivity (GDP per capita) has increased more than five-fold.
Nobody who wants to reduce their carbon footprint really wants to reduce their energy footprint. There are places in the world where people survive without energy. None of them are very nice, and many are environmental disasters. Therefore, whatever steps we take to reduce emissions need to acknowledge the fact that we want and need energy, and during the transition to the theoretical all renewable world, oil, gas, and coal will continue to be significant and necessary sources of fuel.
Arguments AGAINST man induced global warming
Believing in man induced global warming is kind of like believing in God… one cannot prove or disprove it beyond any doubt. Each of us must examine the evidence and come to our own conclusion and then, apparently, like our religion, bitterly defend it to the death. The evidence against man-made climate change includes but is not limited to the following:
1. The climate is ALWAYS changing, and atmospheric CO2 concentrations (and sea levels) have been significantly higher in the past
2. Man’s CO2 emissions are less than 4% of natural emissions, and CO2 only represents 20% of the greenhouse gases in the atmosphere (the greatest being water vapor). Thus, man’s effect is insignificant.
3. Due to less CO2 dissolved in the oceans at higher temps, increases in CO2 concentrations have lagged, not preceded, historic temperature changes.
4. Historic temperature fluctuations have been correlated with changes in solar flare activity.
5. Predictions of human caused global warming are based on climate models that are inherently inaccurate. (Renowned climate philosopher, Yogi Berra, said it best… “Predictions are difficult, especially about the future.”)
Evidence FOR man induced global warming
The primary evidence for man’s impact on global warming is shown in Chart #2, and summarized below. As Yogi also said, “You can observe a lot just by watching.”
1. CO2 IS a greenhouse gas.
2. Although man’s contribution is proportionally small, it has tipped the equilibrium, resulting in CO2 concentrations increasing from a baseline of +-270 ppm for tens of thousands of years to over 400 ppm currently. The abrupt increase in the CO2 level is much faster than at any time in history and could only have been caused by man.
3. Computer models predict this incremental increase in CO2 will increase global temperatures. While these models may not accurately predict how MUCH the earth will warm, they all predict that indeed it WILL warm.
4. The recently ended 14 year “pause” notwithstanding (stable temps from 1998 to 2012), the earth’s temperature has been on a steady climb for the last century.
These conflicting arguments present quite the conundrum. If man is causing global warming, then ignoring the issue and doing nothing about it could be devastating in the long run. If man is not the cause, then we are going to great expense for no reason, potentially destroying our economies in the process. Despite my prior absolute statements, I’m probably more like 60-40 that man is having a significant impact. But even if I was 40-60 or even 10-90 the other way, I would still be hesitant to do absolutely nothing about human emissions.
Conversely, even if I was 100 percent positive man was the cause, I wouldn’t take a radical course of action that could take down the economy, because that would create its own set of disasters, none of them good for mankind or the environment.
The Paris Climate Accord
Which brings us to the Paris Accord. Each ratifying country has “committed” (no penalty if unsuccessful) to moderating their future CO2 emissions. The U.S. pledged by 2025 to reduce emissions by 26 to 28 percent from 2005 levels. The U.S. further agreed to donate $3 billion to help developing nations comply. So, besides giving the world one more reason to bash Trump, what are the effects of the U.S. withdrawal? Not much, it turns out.
Chart #3 shows that by 2013, the U.S. already reduced emissions by 7.4 percent and is forecast to be 15 to 20 percent lower by 2025, even without the Accord. China, on the other hand, which has almost tripled their emissions since 2000, is allowed by the Accord to continue to increase emissions through 2030, as they have a 1.4 billion citizens to bring up to first world standards.
The reality is, an incremental 10 percent reduction in U.S. emissions in the short term is irrelevant in the long term, and we will get there eventually anyway, given the momentum of “the renewable movement.”
A balanced approach
The bottom line is we need to continue to increase our renewable portfolio while acknowledging the continued need for other energy sources to support a strong economy. That is happening already without the Accord.
As Yogi said, “The future ain’t what it used to be.” But given a balanced approach, we can preserve the environment and still have an energy future that is bright enough to keep the lights on.
George Sharpe is an Investment Manager at Merrion Oil & Gas.