The United States Climate Alliance gained its 21st member on February 12, 2019—now officially representing more than half of the United States by population. With the growing acceptance and collaboration among individual state entities comes hope for a more unified strategy towards mitigating climate change from US stakeholders. For shippers, it will be important to understand the Alliance’s long-term goals, how they may try to impose these sanctions on stakeholders, and ultimately how these changes will affect individual freight networks.
What is the United States Climate Alliance?
The United States Climate Alliance was formed shortly after the federal government pulled out of the Paris Agreement—a global initiative incepted on December 12, 2015 by the United Nations Framework Convention on Climate Change (UNFCCC). With a goal of strengthening global response to the threat of climate change, the Paris Agreement rallied participating countries to join as a collective, unified force, identifying specific carbon and emissions reduction goals with the objective of limiting global temperature rise.
The Agreement proposes actions to limit global temperature rise to under 1.5 degrees Celsius. To hold member countries accountable, each participant needs to identify the degree to which they will invest in the initiative through Nationally Determined Contributions (NDCs). To date, 185 of 197 Parties to the Convention have ratified the agreement. Of the parties that withdrew, the United States was the only member who initially joined, and then seceded from the initiative in response to the NDCs imposed upon them.
After the US seceded from the global initiative on June 1, 2017, governors Andrew Cuomo (NY), Jay Inslee (WA), and Jerry Brown (CA) launched the United States Climate Alliance. According to their website, the United States Climate Alliance “is a bipartisan coalition of governors committed to reducing greenhouse gas emissions consistent with the goals of the Paris Agreement.”
Since its meager beginnings with only three state participants, the Alliance has gained traction, adding 18 states to their roster of participating state governments.
Limiting Climate Change: The Financials
When considering total global emission levels, the majority are both produced and ultimately abated by the investment and technology produced in developed countries. Urban city centers tend to be more affluent in terms of economic investment per capita (and per square mile), however on the flip side this also leads to jeopardized air and water quality, noise pollution, and high carbon intensities.
Consider this conceptual relationship between per capita income and environmental degradation with the environmental Kuznets Curve. As economic development progresses, environmental air quality, sustainability, and emissions initially degrade, however, an equilibrium point is eventually reached where technology, infrastructure, and legislation become advanced enough that efforts can be made to improve conditions.
Because of this inherent relationship among climate change, emissions, and the developed world, the Paris Agreement—along with many global agreements requiring government investment—required greater financial NDCs from larger, more developed economies.
In the US, however, President Trump felt strongly that the Paris Climate Agreement put unfair financial burdens on the American people through taxes and increased costs to produce goods for the benefit other countries.
According to President Trump’s official statement on June 1, 2017, terms of the agreement were believed to result in 440,000 fewer manufacturing jobs by 2025. The same statement claimed the terms would affect numerous sectors such as, “paper down 12 percent; cement down 23 percent; iron and steel down 38 percent,” and also included coal “down 86 percent; natural gas down 31 percent.” Trump stated that this would cost the United States close to $3 trillion in lost GDP.
To many observers, Trumps apprehension was controversial, due to the bold nature of a major economy taking such a starkly contrary stance to a topic such as climate change. Other world leaders reaffirmed their commitment to the Agreement, and ultimately the UN chose not to renegotiate terms with the US because the organization wholeheartedly believed the Agreement must move forward as written.
As a result, Trump formally withdrew from the nonbinding agreement.
In response, governors from New York, Washington, and California formed the US Climate Alliance. Operating on behalf of the US, participating states agree to adhere to a specific set of goals, all of which support the overarching efforts of the global Paris Climate Agreement. Their goals are outlined as follows:
- Implement policies that advance the goals of the Paris Agreement, aiming to reduce greenhouse gas emissions by at least 26-28 percent below 2005 levels by 2025
- Track and report progress to the global community in appropriate settings, including when the world convenes to take stock of the Paris Agreement
- Accelerate new and existing policies to reduce carbon emissions and promote clean energy
With these goals central to the collaboration among participating states, it should be expected that not only will legislation in participating governments be advanced, but additional states will join the ranks of these 21 participants as time goes on.
The Effects of Populous Majority Representation
While the alliance itself is approaching its two-year anniversary in June, the long-term implications of its increased membership are worth noting when considering forward-looking strategies in the supply chain and transportation industries.
In the nearer term, it can be expected that more significant legislation and incentives will begin to pop up among the states involved in the Alliance, adding new complexities to domestic transportation networks. From state-to-state, the taxes, regulations, and costs acting on a single freight movement will increase in variability, making agile supply chain strategies ever-more crucial.
In practice, the initiatives enacted by the US Climate Alliance can take various forms. Advanced taxation and pricing strategies—like a flat carbon tax, cap and trade programs, or the low carbon fuel standard—have already been instituted in both California and Oregon, and they have been proposed in multiple other states. These policies promote investment in low carbon technologies, while also creating an on-cost for fossil fuels that grows over time as more stringent emissions targets take effect. These techniques are also leveraged across transportation and power generation in Canada, the European Union, and other advanced economies. Ultimately, the goal is to provide benefits for more invested parties, and extra costs-related incentives for organizations who choose not to comply.
Among Breakthrough clients, 34 percent of gallons of diesel fuel consumed occur within the jurisdiction of the United States Climate Alliance. That is a significant amount of shipments operating under more specific environmental criteria. By utilizing a market-based fuel management approach, shippers can ensure that they are capturing the intricacies of individualized state policies and legislature and are ultimately paying the most accurate price for the fuel that moves their goods to market.
Contact us for more information about the implications the United States Climate Alliance will have on transportation, or any of Breakthrough’s solutions.