Clean Tech & Energy

The Paris Agreement: What Withdrawal Could Mean for Sustainable Energy Investors

President Trump has decided to withdraw the United States from the Paris Agreement, which aims to reduce dependence on carbon, protect the environment, and mitigate climate change. While clean tech companies are getting negative signals from the administration, support is on the whole growing. In fact, withdrawal has spurred many American states and cities to commit to clean energy. Investors, too, have an opportunity to affirm their support by maintaining or increasing investments in the clean energy sector.

What the Agreement Stipulates

The agreement was first signed in December 2015 and went into effect in November 2016, according to the United Nations Framework Convention on Climate Change. Participating countries pledge to set their own goals for reducing carbon emissions, to provide aid for clean energy in developing nations, to attend regular meetings with the other signatories, and to report on progress toward their goals.

Clean Energy Is Here to Stay

As the agreement is nonbinding, there are no penalties for withdrawing. Nor do current members face penalties if they fail to meet outlined goals. Withdrawal from the agreement, however, is symbolic of the larger rebuff of clean energy and climate change preparation by the Trump administration.

But clean tech investors are staying focused on the future. As sustainable technologies are becoming less expensive to implement relative to fossil fuels, market forces mean that they could be adopted more widely in the future, regardless of the Trump administration’s position.

Meanwhile, other governing bodies are implementing even more aggressive pro-sustainability policies, which may bring increased cash flow into related sectors. Some states have joined the United States Climate Alliance. Alliance members have pledged to work toward the goals outlined by the Paris Agreement.

Cities, too, are making the jump to clean energy. As part of his withdrawal announcement, Trump rationalized his decision by saying, “I was elected to represent the citizens of Pittsburgh, not Paris.” Ironically, the City of Pittsburgh’s official position, as the New York Times reported, is a long-term committment to clean energy. And it’s not alone. Pittsburgh is just one of the more than 300 cities that have made formal clean energy commitments. This means that a significant portion of the US population will live in a place where the Paris Agreement is still honored, regardless of the actions of the federal government.

On the international level, support for pro-sustainability policies remains strong. China plans to spend more than $360 billion on renewable energy by 2020, according to the New York Times. The European Union has committed to spending 20% of its budget on climate protection until the end of the decade.

So, although the United States federal government has pulled back from climate action, it cannot stop the momentum of clean energy. The case for it is not going away, and commitments from the public and private sectors aren’t either. For investors, opportunities are still plentiful and more likely to grow than shrink.

What Sustainable Energy Investors Can Do

Rather than pull back, investors may want to diversify their clean energy holdings to take advantage of growing opportunity abroad. With massive public investments already in the works, internationally positioned clean tech firms may see growth in revenue and share price. Firms that develop innovative technologies in the solar, wind, and hydropower sectors may be of interest. Similarly, companies that produce more efficient products with fewer emissions may also be in a prime position.

And investors who want to show support for sustainable energy can do so by continuing to invest in US clean tech producers. With sufficient funding, US companies could still be in a position to compete with their counterparts around the world. Companies could continue to innovate and create energy solutions with resources from the private sector, whether or not politicians see the value of clean tech.

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