Challenge Trump to an innovation race, and avoid a trade war

David Hart is Senior fellow at the Information Technology and Innovation Foundation, the leading US science and tech policy think-tank

Donald Trump’s surprise victory in the United States presidential election has put global climate negotiators on the back foot.

The President-elect’s promise to pull the United States out of last year’s Paris Agreement and his unabashed enthusiasm for coal slowed the momentum that negotiators had hoped to sustain at this year’s climate change talks in Marrakech, Morocco. Trump’s shocking win also provoked threats of tariffs – decision-makers in Canada, Mexico and Europe mooting the possibility of carbon duties on American products.

But there’s a better approach: challenge the incoming president to an innovation race.

That would do a lot more than a carbon tariff to fix the climate over the long term.

The carbon tariff proposal contravenes the fundamental premise of the Paris Agreement. Each nation offered its own commitments at Paris, with the negotiators then constructing a plausible path forward by putting them all together.

A key aspect of this process is periodic renegotiation to bring the sum of national commitments closer to the global goal of limiting the rise in average global temperature to two degrees Celsius or less. But the International Energy Agency says that even if they are fulfilled, the Paris commitments would lead the world to overshoot the target by 35%.

We need another approach to a carbon tariff, which would take us back to the bad old days of top-down climate negotiations.

While setting a global cap, divvying it up among nations, and punishing countries that exceed their quota might seem logical, this approach failed miserably in the 1990s and 2000s. It left the world playing catch-up in the fight against climate change. Wielding the stick causes a backlash. It threatens national identity and self-worth, even when succumbing to pressure may appear to be the economically rational response.

The United States under President Trump would undoubtedly react badly to the carbon tariff. As Harvard economist Robert N. Stavins put it: “Is he the sort of person who would back down or would he retaliate? He seems like the kind of person who would retaliate. And then you’d have a trade war.”

If the stick of tariff threats is a bad approach, will the carrot of competition work?

Challenging the United States to a low-carbon innovation race would tap into similar emotions of pride and superiority, but channel them in constructive directions. If the United States can come up with new and better ways to produce electricity, trap carbon and save energy, Americans would save the world and make a lot of money. If the Mexicans, Canadians, and Europeans do the same… well, at least the world still gets saved.

A global focus on innovation would lead to new options that will make the energy services that everyone needs more affordable and more accessible. Simply making dirty energy more expensive – the carbon tariff approach – will not do that. Europe’s very high tax on gasoline, for instance, has encouraged Europeans to drive smaller cars, but it has not led to the breakthroughs in electric vehicles that the world desperately needs to kick its petroleum habit. The small carbon tariffs being suggested will have small results in the best of circumstances. Yet even relatively small investments in innovation have the potential to be truly transformative.

Mission Innovation, a lesser-known agreement which was also signed last year in Paris, provides the framework for an innovation race. Many of the world’s largest nations, including the United States, pledged to double their investments in low-carbon energy research and development by 2020.

A deep-pocketed group of global entrepreneurs, led by Bill Gates, promised to provide billions of dollars in follow-on investment to reap the fruits of this R&D in the market. They announced a US$1bn initial fund on Monday. The cost of fulfilling the US’s Mission Innovation commitment would be $6.4bn per year when fully ramped-up. That’s a mere rounding error in the context of the giant tax cuts and spending extravaganza that are set to come in the next year.

So a message to the nations of the world as they await Trump: be afraid, even very afraid, but don’t let fear lead to a counterproductive spiral of threats and counter-threats.

Stay on the sunny side, keep doing the right thing, and hope that, as Winston Churchill was famously supposed to have said, “You can always count on Americans to do the right thing… after they have tried everything else.”