The disengagement of the United States (US) from the Paris agreement marks a clear shift in US policy and leadership on climate change, a decision that will impact numerous industries, geographies, and businesses that Frost & Sullivan’s Environment team monitors on an ongoing basis. Today, the Trump Administration deemed the Paris agreement too costly to the economy and success of the US. From a market and economic perspective, what has changed is not necessarily the level of investment, but where future market opportunities are found and who will be making investments.
A federal lead to deliver on Paris agreement obligations would see a nationally-coordinated approach towards investments in technologies, solutions, and strategies that prevent and offset the drivers of climate change; this is the approach that the US is moving away from.
Instead, the US will see an environment with more fragmented investments, led by states, localities, and industries themselves that need to deliver productive continuity as climate change disrupts the status quo. On this new trajectory, regions within the US will see continued changes in water availability (drought, flood, and increases in groundwater salinity) and changes to air quality brought about by human activity.
Two key questions stemming from today’s decision to abandon the Paris agreement are: first, to what extent did federal decision-makers factor in that regulation is not solely a business killer, but also a driver, and an engine for innovation to achieve economic goals through new methods and processes; and second, what timeline was applied to deem the Paris agreement too costly? While abandoning the Paris agreement removes constraints and investment by the US to return activity to business as usual, this is a near-term strategy designed to maximize growth in the world today. In the long-run, the US may find itself without a costly, but fiscally optimized, national strategy to mitigate climate change, that results in a much higher aggregate cost to all those individual actors within the country as they make local and state investments to mitigate the impacts of climate change.
These two scenarios both drive investment and economic activity, but how they differ is in scale, coordination, and ownership. The net impact is yet to be known, but the US will continue to see investments in flood management, network upgrades, water reuse and recycling, energy efficient equipment, privatized services and other solutions that will enable the national economy and individual industries and municipal services to continue.
Frost & Sullivan monitors these markets on an ongoing basis and is well positioned to deliver key insights and strategic direction in navigating the ongoing challenges presented by a changing environment, economy, policy landscape, and customer need.
