The US economy thrives by ditching clean energy targets
Reducing green energy targets and intensifying reliance on fossil fuels, the policies advocated by President Donald Trump, could ultimately serve the US economy well while adversely affecting nations that continue to invest in the green transition. Economists examining the impact of climate change and the costs associated with reducing emissions on national economies through 2050, discovered that by increasing fossil fuel sales and sidestepping the costs of adhering to green regulations, the US could experience a GDP growth of approximately 1 percent more than if it had persisted with the clean energy transition. However, if other nations continue to advance in renewable energy, the global economy would contract by 0.2 percent relative to the baseline scenario, as indicated by the modeling. According to the researchers, while these economic effects may appear modest over the next 25 years, the majority of the physical damage from global warming is anticipated to occur after 2050, leading to heightened economic costs associated with extreme weather and other repercussions of climate inaction for all. They stated that there is also the added risk that climate change could accelerate in irreversible ways. “If Trump alone backs out on the transition, the US wins,” write Economics’ Eleonora Mavroeidi and Maeva Cousin. “If other countries do the same, the US loses, and so does almost everyone else.”
This exemplifies a fundamental economic principle referred to as the tragedy of the commons, where various participants acting in their own self-interest may result in poorer overall consequences, according to Mavroeidi and Cousin. The United States’ shift in climate policies will be apparent at the forthcoming COP30 climate conference in Belém, Brazil. Top US officials are absent, leaving the global community to navigate complex challenges like 2035 emissions targets and increasing climate finance for developing countries and small island nations. The Economics analysis posits that the US will completely forsake its renewable energy objectives, while the rest of the world continues to pursue these goals over the next 25 years. Reality is probably more complex. Last month, for instance, US pressure compelled countries to delay voting on a landmark regulation aimed at requiring the shipping industry to begin paying for its emissions. The US, recognized as the world’s second-largest polluter, also stands out as a significant oil and gas producer, supplying energy both within its borders and to other nations. During the summer, the Trump administration finalized a trade agreement with the European Union, which encompassed pledges from member nations to purchase $750 billion in US oil, natural gas, and nuclear energy.
Expanding these kinds of policies would enable the US to enhance its competitiveness in the fossil fuel market, allowing the industry to capture greater market share while avoiding certain costs associated with the green transition. However, the researchers suggest that another consequence of the US withdrawing from green policies might be that it encourages other countries to follow suit. If that occurs, the model indicates that the US would also experience negative consequences. The economy, in tandem with the global economy, would each experience a contraction of approximately 1 per cent, relative to a scenario where all nations persist in their pursuit of renewable energy sources. Global CO2 emissions would also rise by approximately 75 percent. Countries that are hotter and have lower incomes are anticipated to experience some of the most significant consequences of climate change, irrespective of the global commitment to a green transition. The analysis revealed that India, Vietnam, and Indonesia emerge as the most significantly impacted, while sub-Saharan Africa, along with the Middle East and North Africa, also faces considerable challenges. Wealthier nations, such as the US and Canada, are more insulated and are therefore anticipated to experience smaller losses.
Modeling relied on projections of energy demand and supply, which take into account, among other factors, the increased energy demand resulting from the rise of AI data centers. The economists employed a comprehensive model of the global economy to assess the potential impacts of a US policy shift on economic performance, emissions, and climate-related damages. “Doing nothing is a costly strategy, especially for countries already facing intense heat with a limited capacity to adapt,” write the authors. “Richer countries are initially affected less severely but would also see their costs climb over time.”
