How well do we understand the indirect effects of U.S. policies on the climate?

Tariffs and a possible solar boom in Africa raise questions about whether President Trump's policies might unintentionally have more favorable long-term effects on the climate than we think.

Image created by Chat GPT, using the prompt: “Can you draw a cartoon of President Trump installing solar panels in Africa?”.

The Trump administration has made no secret of its desire to boost domestic fossil-fuel production, curtail some types of domestic wind and solar production, defund some types of climate science, and put pressure on international agencies to have more fossil-fuel friendly and less climate-hawkish postures.

So, U.S. and global greenhouse gas (GHG) emissions should rise, right? I’m not so sure, actually. The law of unintended consequences may be at play.

Tariffs as a carbon tax?

Back in March, my colleague (and world-renowned environmental economist) Jason Shogren wrote an op-ed titled “Thank you, GOP, for fighting climate change with tariffs”. (Journalist Robinson Meyer made a similar argument for HeatMap News.) Shogren’s opening two paragraphs summarize his argument:

“For years, economists and environmentalists alike have argued that reducing global trade could help curb the carbon footprint of our modern economy. Yet, despite clear evidence that the transportation of goods across oceans and continents generates massive greenhouse gas emissions, policymakers have largely not addressed this powerful climate lever. That is, until now.

So let me take a moment to express my gratitude to the Republican Party for its enthusiastic embrace of tariffs — an effective, if unintended, tool to mitigate climate change. By slowing global trade, these tariffs are doing what countless climate policies have struggled to achieve by reducing emissions generated by the production and transportation of goods worldwide.”

Beyond trade and shipping—if you squint at it—a carbon tax is a type of consumption tax, and—again if you squint at it—a tariff is also a type of consumption tax. Both are paid for by U.S. consumers and reduce U.S. consumption, and therefore reduce U.S. GHG emissions from consumption.

That’s not to say that tariffs are good economic policy. Increasing Americans’ tax burdens and inflation, and reducing Americans’ consumption are outcomes that most Americans oppose, it turns out. Squeezing small businesses and manufacturing firms with low profit margins and dependence on foreign inputs isn’t necessarily good either.

If the goal was to raise government revenue, consumption taxes (or their close cousin, value-added taxes, VATs) are more efficient. A tax’s revenue generated roughly equals its tax rate multiplied by its tax base (i.e. what is taxed). The market distortion from a tax is roughly determined by its rate. So, if you want to raise the most revenue with the smallest distortion possible, you would want a small tax on everything, which is approximately what a VAT is. Consumption also has the benefit of being hard to offshore to avoid taxation, unlike corporate income, for example. But I digress.

If the goal was to reduce GHG emissions in an economically efficient way, carbon taxes are better. They act like consumption taxes or VATs, except that they specifically incentivize GHG emissions reductions.

The merits of tariffs aside, we can do a simple back-of-the-envelope calculation to imagine what their (partial) effects on U.S. GHG emissions might be. The Yale Budget Lab projects that the tariffs and foreign retaliation could cost the U.S. 0.41% of its gross domestic product (GDP) annually. The U.S. emits roughly 6 Gt CO2 equivalent of GHGs each year. Assuming the U.S. GHG intensity of GDP stays roughly constant, which it has since the pandemic (see below), the tariffs would eliminate roughly 24.5 Mt of U.S. GHGs per year, similar to the combined emissions of all power plants in Wyoming (one of the biggest coal states in the country).

Will the Trump administration’s policies really add more emissions than that in four years, no matter how much they want to “drill, baby, drill”? As I’ve written about before, I doubt it.

Are U.S. tariffs and energy policies contributing to a solar boom in Africa?

Last week, Dave Jones from Ember Energy published the graph below, showing what appears to be a solar power boom in Africa, fueled by imports from China. In some African countries, solar imports have steadily increased over the past five years. In others—such as Algeria and Botswana, for example—solar imports from China seem to have suddenly and dramatically increased since President Trump’s inauguration.

Posted on X by Ember co-founder Dave Jones.

Could this be a coincidence? Maybe. But it could also be a predictable market response to the U.S. increasing trade barriers with China, decreasing domestic demand for Chinese solar panels, and decreasing foreign aid to Africa.

Africa is poised to be a major source of new energy demand this century, as its population grows larger and richer. If U.S. policy accidentally makes African development less carbon-intensive, that could put substantial downward pressure on global GHG emissions, all else equal. The same goes if the U.S. (intentionally this time) increases its natural gas exports (as the Trump administration wants to do), and that comes at the expense of coal, or other dirtier fossil fuels, from other countries.

How much influence do U.S. Presidents really have on domestic and global greenhouse gas emissions?

As the graph from my above-linked post shows, U.S. GHG emissions have declined more-or-less linearly (at a 1.1%/y rate) since the George W. Bush administration. During the Obama administration and President Trump’s first administration, solar and wind and oil and gas boomed, and coal declined. The main drivers of these trends were market forces (including global market forces) and to a lesser extent state policies, not federal policies.

Turning to the global scale, we see a similar linear decline in the carbon-intensity of the world economy since the 1960s. Effects of U.S. policies—let alone the major international agreements such as the United Nations Framework Convention on Climate Change (UNFCCC, 1992), the Kyoto Protocol (1997), and the Paris Agreement (2016)—are not clearly detectible in the trend. (My colleague Roger Pielke Jr. has noted this several times before.)

From: Our World in Data.

It’s not that climate and energy policies don’t matter. Climate and energy policies—including major international agreements—send market signals and thereby affect market incentives and technology development. The durability and integrity of climate science matters, too, and the Trump administration should be safeguarding these things, not undermining them, as I’ve written about before.

But these trends do illustrate that U.S. government policy is just one small cog in a large, interconnected global economic and technological system that determines GHG emissions. That system has a lot of inertia in it, and policy interventions to the system have a lot of indirect effects.

The COVID-19 pandemic powerfully illustrates how slow-changing the pathway of global GHG emissions really is. Large sectors of the economy in many of the largest countries in the world were shut down for the better part of a year, millions died, and GHG emissions (and GDP) only fell by about 3.5%.

When put in that perspective, do we really think that the fate of the global climate will pivot on the decisions of one country’s federal government over the next 3.5 years, even if that country is the United States? I’m not so sure.