Environment & Energy Report

Taxpayer Groups Warm to Coolant Deal, Splitting Conservatives (Corrected)

June 20, 2018, 12:03 PMUpdated: June 20, 2018, 1:12 PM

A global deal to limit climate-warming coolants has its newest backers: a team of conservative taxpayer advocacy groups.

Support from the groups—Americans for Tax Reform, FreedomWorks, and American Council for Capital Formation—signals a potential political shift for the 2016 global agreement to phase down hydrofluorocarbons, or HFCs, refrigerant chemicals that are highly potent greenhouse gases. The deal, known as the Kigali amendment, has been hanging in limbo—despite increasing lobbying from the U.S. refrigeration and chemical industries to persuade the Trump administration to publicly back it and send the pact to the Senate for ratification.

The Kigali deal, which amends the 1987 Montreal Protocol, a global deal to protect the ozone layer, to include a phasedown of HFCs, is projected to limit 0.5 degrees Celsius (0.9 degrees Fahrenheit) of warming by the end of the century. Environmental groups have said the pact is one of the most significant steps the world can take in the short term to reduce greenhouse gases.

But the taxpayer groups—all known for promoting lower taxes, free markets, and free trade—laud the Kigali agreement for a different reason: its economic potential.

“Senate ratification of the Kigali amendment will build on the success of deregulation and tax reform and help ensure the economy continues to grow at strong levels,” write Alex Hendrie, director of tax policy for Americans for Tax Reform; George David Banks, executive vice president at American Council for Capital Formation; and Patrick Hedger, director of policy for FreedomWorks, in a June 20 letter to President Donald Trump. “This agreement has our support because it will ensure that U.S. manufacturers are able to thrive in the global economy and create more wealth and jobs in America.”

Political Game-Changer

The groups’ backing could be a game-changer politically, and their letter comes on the heels of a push by 13 Republican senators, offering strong support for the deal and urging the administration to send it to the chamber for a vote.

That splits the conservative community, as some free market groups such as the Competitive Enterprise Institute and the Heritage Foundation have opposed the Kigali pact.

“While some may view this as a climate issue, it’s clear that there’s a very strong positive economic case to be made for how this will strengthen American competitiveness,” Hendrie, with Americans for Tax Reform, told Bloomberg Environment.

He said the group, which coordinated the letter, doesn’t take a position on climate, but looks at all policies through an economic lens.

The group has had problems with other environmental regulations or global agreements because it sees them as problematic for the economy. For example, Americans for Tax Reform, like many other conservative groups, opposed U.S. participation in the Paris climate deal, praising Trump’s June 2017 decision to withdraw from that agreement.

‘America First’ Trade Policy

With the Kigali deal, potential economic gains are clear cut, Hendrie said.

In the letter, the taxpayer groups point to a recent report showing U.S. ratification of the Kigali deal could grow the country’s product share by 25 percent. The May 3 report, produced by Inforum and JMS Consulting for refrigeration and chemical industry groups, also estimated ratifying the agreement would add 33,000 manufacturing jobs to the industry by 2027 and increase manufacturing output in the sector by $12.5 billion per year.

Backing the deal would be an easy decision for Trump when he sees the persuasiveness of that economic argument, Banks, with the American Council for Capital Formation in Washington, told Bloomberg Environment. Banks served as Trump’s top international energy adviser until February.

“I would argue that this is clearly an ‘America first’ trade policy that has economic development and environmental co-benefits,” Banks said. “And if we don’t ratify, we run the risk of the Chinese just dumping HFCs into the U.S. market and wrecking our U.S. subsector for refrigerants.”

Bipartisan Support

Industry has long urged the Trump administration to back the Kigali agreement, but officials, including top appointees at the Environmental Protection Agency, have resisted taking a public stance.

The letter from the taxpayer groups shows “whatever you think about climate change, this is really a trade measure that helps protect and expand a market for U.S.-leading industries,” Durwood Zaelke, president of the environmental group Institute for Governance & Sustainable Development, told Bloomberg Environment.

The Kigali deal isn’t just an Obama administration legacy, either, Zaelke added. He noted the Montreal Protocol has enjoyed broad bipartisan support.

The roots of efforts to limit HFCs were in the Bush administration, which first green-lighted work on the amendment and set up an international workshop on the issue, said Banks, who also worked in the Bush White House as a climate adviser.

Trade Penalties

The Trump team will look at the HFC deal through the same lens as the Bush administration, filtered through the impact to U.S. businesses, manufacturing and jobs, Banks said.

A failure to ratify the Kigali deal could also shut U.S. companies out of global markets, the taxpayer groups wrote in their letter. The Montreal Protocol imposes trade penalties on countries that don’t ratify and don’t meet the targets of the treaty.

More than 20 countries have ratified the deal so far, and it will take effect Jan. 1, 2019.

“It would be a shame to hesitate and miss out on the next market expansion,” Zaelke said. “If you only look at the jobs and economic benefits, it would be a slam dunk. There is an incidental benefit for the environment, but that should be something to cheer, not to veto something that is so good for industry.”

(Corrects name of American Council for Capital Formation in second paragraph)

To contact the reporter on this story: Abby Smith in Washington at asmith@bloombergenvironment.com

To contact the editor responsible for this story: Rachael Daigle at rdaigle@bloombergenvironment.com

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