Client Alert

President Trump Announces U.S. Government Pull Back on Paris Agreement While States, Cities, Businesses, and Investors Continue Push Forward

08 Jun 2017

Last week, President Trump made a public decision to take action on the Paris Agreement on climate change. His remarks have no legal effect on their own and do not explain when or what legal action will be taken. As a result, no federal, regional, or state laws, rules, or other requirements or policies have changed. On the contrary, many states, cities, businesses, and investors have been invigorated to continue moving forward in pursuit of their self-determined climate and clean energy targets, building on the existing market momentum around clean energy.

Specifically, on June 1, 2017, President Trump announced the U.S. Government’s new posture on the Paris Agreement: The federal government “will withdraw” from the Agreement and “begin negotiations” aimed at either developing a new multilateral climate initiative or “re-enter[ing]” the Agreement, albeit on new terms. [1] However, the Paris Agreement, which “entered into force” in November 2016, [2] limits withdrawal—namely, Article 28 stipulates that states party cannot begin the one-year process to leave until three years after the Agreement enters into force. [3] The Administration has yet to clarify how and on what timeframe it intends to implement withdrawal, renegotiation, or potential re-entry.

On June 5, 2017, a large number of states, cities, businesses, and investors made clear that the President’s announcement would not change their posture toward the Paris Agreement. The message from the group of “125 cities, 9 states, 902 businesses and investors, and 183 colleges and universities” is simple: “We are still in.” [4] This broader group built on earlier announcements by state- [5] and city- [6] level coalitions as well as individual businesses. Some are already pursuing strong policy changes designed to fill any gap created by waning federal government’s leadership. For example, on the day after the President’s announcement, the State of New York issued a new plan to invest $1.5 billion “in major renewable energy projects,” a step that “represent[s] the largest clean energy procurement by a state in U.S. history.” [7]

These developments came amid other signs that the momentum for greater climate action—in terms of business practices, investor preferences, and regulatory focus—is increasing. For example, on May 31, 2017, ExxonMobil shareholders prevailed with more than 62 percent of shares voting in favor of greater climate risk reporting. [8] The same measure had failed in previous years; its success this year, paired with the anticipated culmination of the industry- and investor-led global effort of the Carney-Bloomberg Task Force on Climate-Related Financial Disclosures, [9] likely marks a shift in governing norms.

All this comes as sovereigns continue acting on climate. On the same day as the Trump announcement, China, India, and the European Union, among others, reaffirmed their commitments to the Paris Agreement. The climate and clean energy policies, laws, and norms impacting U.S businesses—whether federal, subnational, or international—remain dynamic. However, the last week's activity showcases how market forces are increasingly driving the growth of clean energy (including utilization of natural gas rather than coal), energy efficiency, and distributed resources like storage and microgrids. The economic realities now underpinning the emerging clean energy economy give it a staying power and resilience against policy disruption, even after the announced U.S. withdrawal from the Paris Agreement.  Nonetheless, we expect to see efforts to bolster the momentum around clean energy through intensified subnational government policy initiatives in the U.S., actions by other states party to the Paris Agreement, and advocacy and actions from the private sector, including business and civil society organizations both at home and abroad.












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