Study: Paris Climate Agreement Would Hurt US Economy

EU analysis says US GDP would drop 3.4% by 2030.

The economic impact of the Paris Climate Agreement is expected be a boon to Europe and China but would have a detrimental effect on the US economy and employment if it rejoins the pact, according to analysis by Eurofound, the EU’s agency for the improvement of living and working conditions.

The Eurofound analysis assessed the potential global economic and employment impact of a transition toward a low-carbon economy by 2030 and found that it would boost GDP in the EU by 1.1% and employment by 0.5%. But it also said that for the US, it would cause GDP to fall by 3.4%, and employment to decline by 1.6% due to reduced oil and gas production activities such as shale gas extraction.

“Climate change is expected to have very serious implications for living and working conditions on a global scale,” Eurofound Chief Researcher Donald Storrie said in a release. “It is the people who are socially, economically, or otherwise marginalised that are particularly vulnerable. This report shows the considerable economic and employment dividends for Europe in tackling climate change and fully implementing the Paris Agreement.”

The Paris Agreement’s central aim is to combat climate change by keeping a global temperature rise this century below 2 degrees Celsius. But in June 2017, US President Donald Trump announced the US would withdraw from the Paris Climate Accord, saying that it “disadvantages the United States to the exclusive benefit of other countries.”

The Eurofound report also found that China and India would see an increase in GDP, driven by increased investment into transforming their electricity supply sectors and by energy efficiency policies.

The forecasts are based on a global macro-economic model run by Cambridge Econometrics and Eurofound’s European Jobs Monitor. The projections are modeled on the assumption that there will be no significant labor market frictions from the transition, and that the labor force will adapt to the structural change with regards to skill requirements. This also assumes that funds are made available for the restructuring, and that countries maintain current levels of performance in key economic sectors.

The potential positive for GDP and employment growth in the EU is mainly attributed to the investment activity required to achieve the transition, combined with the impact of lower spending on the import of fossil fuels. It said the shift toward production of capital goods, such as equipment, machinery, and buildings, will result in a significant increase in demand for construction and for labor from related occupations.

The analysis projects that Latvia will experience the largest boost to GDP from the economic restructuring required to implement the Paris Agreement at close to 6%, followed by Malta, Belgium, and Bulgaria, which would see their GDP rise by more than 2% each.

Among EU countries, Belgium, Spain, and Germany would see the largest increase in employment by 2030, while Poland is the only EU country showing negative employment impact as its large coal extraction industry would experience large job losses.

The findings of the report will be discussed at the Future of Manufacturing in Europe event in Brussels in April.

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