The EU Can Make the US Greener Through Trade

After the decision by President Trump to withdraw the United States from the Paris Climate Accord, there is significant worry about the future of US energy exports to the EU. The EU’s Renewable Energy Directive currently being debated, would add barriers to the import of wood pellets from nations that are not party to the Paris Accord after 2020. This would be a mistake for the EU as this would lower the incentive for global reduction of emissions, adding to the difficulty in combating Climate Change

The US exports a significant amount of wood pellets to the EU, 4.9 million tonnes last year, which used for the production of biomass. Biomass is a carbon-neutral source of energy that can be used in the production of heat and electricity. Biomass is essential in the transition away from fossil fuels, as it produces up to 80 percent less emissions than coal and is an affordable source.

In order to reach its 20-20-20 goals for sustainable energy production, the EU has encouraged coal plants to transition their energy source to biomass. Examples of this switch include Drax Power Station in the UK and more recently DONG Energy in Denmark.

The directive as currently formulated would require that biomass imports into the EU either come from nations party to Paris, or from forests that are able to monitor and report on maintained carbon stock and sink levels. As most of the forests in the US that export wood pellets are small and privately owned, many do not have the funds to implement these monitoring systems, which are specific to biomass export. As biomass is produced off residue from other wood products, the main business of these small forests is not in the wood pellet industry, and as a result this requirement would pose a costly burden.

The EU currently receives around 30% of all its imported wood pellets from the United States, and if the Renewable Energy Directive passes as is, then there would be a significant gap in the amount of wood pellets supplied for the energy Europe needs. This would make it more difficult for European Nations to transition away from fossil fuels after 2020.

The more pressing concern, however, is that if global emissions are not reduced, it is irrelevant how much the EU reduces domestically. Tackling Climate Change requires the aggregate emissions across the globe to be lowered, and a sustainable transition away from fossil fuels would need to occur everywhere.

By distracting themselves with President Trump’s politics, EU commissioners are missing the point: Europe still needs to make pragmatic inroads on climate policy with or without the Paris Accord. Part of that solution means ensuring biomass trade with the US.

The US forests that produce wood pellets for export are privately owned, which means that even if not legally obligated to follow the procedures of the Paris Accord under the current administration, they still would if properly incentivised.

By reducing the EU’s energy trade with the US, this would take away the incentive for private forest managers to follow through with more sustainable practices. Through trade, and holding these exports accountable to the EU’s sustainable energy criteria, American forests would profit from being more environmentally friendly.

When the EU raised its standards on the import of cocoa, in order to improve the quality of imports, and in the hopes that it would modernise the African cocoa industry, the project caused devastation. Cameroon, where the main export is cocoa, suffered a huge economic loss, and was stuck with products that were not deemed fit for European consumption. If the barriers were lower and modernisation procedures given financial incentive through continued trade, things might have gone differently.

If the US was allowed to continue its wood pellet trade with the EU, it would give small forests the incentive to invest in sustainability. Assurances were given by states with the highest wood pellet exports that they would continue with sustainable forestry techniques, and this is believable given that it would be in their economic interests.

Encouraging these forestry practices has already done lots of good for the environment in the US. The wood pellet export market has resulted in more forest area, more forest investment, and a large reduction in greenhouse gasses throughout the Southeast United States. This all being a result of trade, which has increased the value of investing in sustainable forestry techniques.

Cutting off trade now would go back on the progress made in the fight against Climate Change.

The global effort required to ensure sustainable energy production is one that is more effectively handled through trade than through UN agreements. In the US it is private firms that export wood pellets, and private firms that produce energy. To punish them for decisions they did not make would be a damaging policy in the long-run.

As long as the incentives to maintain sustainable forestry techniques remain, US forests will follow them. The EU has a moral obligation if it is serious about combatting Climate Change to keep these incentives in place, and adjust the Renewable Energy Directive accordingly.

Ryan Khurana is a Research Fellow at the Consumer Choice Center. Born in Toronto, Canada, he currently lives in London.