Certainly nothing in President Trump’s Rose Garden announcement that the United States will withdraw from the Paris climate agreement resembled that bittersweet moment between Rick and Ilsa in Casablanca. Despite the momentous decision, however, it remains likely that the citizens of this country and around the world “will always have Paris.”
This is not some myopic conclusion or reflection on whether the Paris accord was a good or bad deal for this country. (By the way, the odds of 190 countries agreeing to renegotiate on Mr. Trump’s terms are about as good as those of the New York Jets again winning the Super Bowl in my lifetime.) Rather, this view takes into account that the marketplace has long ago embraced the issues associated with climate change and efforts to reduce carbon emissions.
Don’t take my word for it – just two days before the President’s announcement, 62 percent of ExxonMobil’s shareholders voted to require the company to report on the impacts of climate change to its business. In other words, investors want the company to assess the risk to its bottom line as countries around the world reduce fossil fuel use to live up to goals established in the Paris Agreement. Similar shareholder resolutions obtained near-majority support in other major industry sectors.
More proof: Renewable energy continues to become more economical, even as government-supported subsidies are phased out around the globe. A report from the World Economic Forum at the end of last year indicated that renewables, especially wind and solar, have achieved economic competitiveness and reached what it termed “grid parity.” According to one of the report’s co-authors, renewable energy “is not only a commercially viable option, but an outright compelling investment opportunity with long-term, stable, inflation-protected returns.” If those trends continue, Wall Street, not Pennsylvania Avenue, will likely dictate the future of the international energy mix. If he were alive today, John D. Rockefeller might not like that prognosis, but he might very well admire how the market continues to have the power to influence basic human behavior.
Market influence goes beyond the valuation of various companies’ financial risk or individual or institutional investment decisions. It also impacts consumer choice, ranging from electric/hybrid or zero-emission vehicles over traditional gas-combustion engines to housing preferences that tend to reduce reliance on automobile travel. Even the rapidly evolving autonomous vehicle industry has the potential side benefit of reduced greenhouse gas emissions. Drivers may not appreciate how greater use of currently available technology such as GPS guidance or sensors that detect available parking spots can dramatically reduce emissions. But there is no doubt that progress to more advanced vehicle automation is unstoppable. Once again, the market has spoken, and Fortune 100 companies in the technology and automobile sectors have listened.
Perhaps as influential as financial markets is the marketplace of ideas. These take years to shift, but in the context of concern over climate change, attitudes have rapidly changed. The movement in public opinion can be witnessed on a global scale. Australians express fear over the future health of their cherished Great Barrier Reef. Pacific islanders who exercised influence far out of proportion to their populations or economies spurred the international movement toward the Paris Agreement out of a genuine concern over losing their homeland. African nations, having long suffered from the political and social upheaval arising from drought on that continent, rightly worry over even greater conflicts as a result of potentially more severe droughts. The United States’ withdrawal will not and cannot change any of that. If anything, it might have the opposite effect of further bolstering other nations’ commitment to the goals established in the Paris Agreement.
When Rick urged Ilsa to hold on to the memory of their brief but enduring love affair, he knew that their relationship was not to be. For the 194 other signatory countries left to ponder the repercussions of President Trump’s decision, however, they may look to another famous line from Casablanca: “I think this is the beginning of a beautiful friendship.”