International Environmental Law Case
There are many international agreement created by sovereign countries and international organizations. These agreements are aimed at dealing with specific problems affecting people in the world. One of the international agreements relate to Paris Agreement. The agreement was created with the aim of dealing with global warming, which is a serious threat to the wellbeing of people throughout the world. Every agreement has impact on various countries, organization or companies. This paper seeks to analyze the impacts of Paris agreement on the U.S and Exxon Mobile Corp, which is oil and gas company operating in the U.S.
In the year 2016, the United States adopted the Paris Agreement joining other countries like Germany, Poland, Netherlands, Portugal and Singapore (Hunter, Salzman & Zaelke, 2016). The president maintained that joining the agreement is an important step toward dealing with the challenges facing people globally. Obama stated that his office was committed to promoting initiatives that would help in protecting the planet. The effort of U.S and China joining Paris Agreement was seen by many leaders, including Mr. Ban Ki-moon, Secretary-General of the United Nations, as a step in positive directing in the fight against emission because these two nations alone account for about 40 percent of the total global emission (United Nations, 2015). However, the U.S support to Paris Agreement is threatened by the proposed amendment of Article 30 of the agreement.
To make Paris Agreement more effective in preventing global warming and help to avoid some of the worst concerns of climate change, the amendments of Article 30 was proposed. The amendment maintains that any country that fails to prepare, maintain and communicate the nationally determined contributions (NDC) will have breached the agreement. As a result of the breach, another member country to the Paris Agreement will be allowed to impose 50% tariff on the commodities that have been produced using fossil fuels, and are imported from a country that has breached the agreement. The amendment also maintains that a country that is not a party to Paris Agreement will be subjected to 50% of an import tariff. Also, the agreement maintains that no party can withdraw from Paris agreement before January 30, 2021.
From these facts relating to Paris Agreement, it is clear that parties to the agreement have the role to play in protecting the environment. The amendments of Article 30 have also added more responsibilities to the member countries. It is likely to impact on the growth and development of the U.S economy, which mainly relies on fossil fuel in producing its goods. It is also likely to affect Exxon Mobile Corp whose main income is from the extraction of fossil fuel. As a new attorney at Exxon Mobile Corp, my focus is providing an analysis and recommendations to senior management on the following issue. The importance of this analyzes and recommendations relate to the fact that the company is based in the United States, and the government of the U.S is opposed to the amendments (United Nations, 2015). Thus, the report includes issues of treaty law, potential implications of international trade law and the concerns of the amendment to interests of Exxon Mobile interests.
Issues relating to Amendments of the Agreement
The agreement is created under international law where international organizations and the sovereign states enter and pledge to comply with all provisions of the agreement. This means that being the party to the agreement, the United States assumes the obligations that it is entitled to protect. Failure to protect those obligations, the U.S can be held responsible about international law. This is because failure to abide by the agreement sends a negative message to other member parties. If the U.S fails to abide by the provisions of the agreement it will be viewed as the traitor that is only focused on promoting its personal interests.
The member countries can impose trade regulations with the aim of limiting their trading activities with the U.S if it breaches the agreement. This is because; all parties to Paris agreement are committed to ensuring that all provisions of the agreement are obeyed. This relates to the fact that the parties to the agreement understand the problem of global warming and its effect on the people. As a result, any party that would defect from the agreement is likely to get unfair treatments from other parties. As a result, some countries or trading block like the European Union would introduce trading tariffs with the aim of punishing the party that has breached the agreement. The punishment by imposing trade restrictions will not only affect the U.S but also the companies operating within the country, particularly those that uses fossil fuel, like Exxon Mobile Corp, to produce commodities.
No single country in the world, including the United States, has adequate resources to fully satisfy its needs. Thus, the U.S must depend on others for commodities and services that are not available locally, which can be imported through participation in international trade. In addition, companies in the US are bound to engage in numerous trade activities with foreign enterprises. International trade also allows countries to export surplus products to other countries with the aim of earning foreign exchange. The United States import oil and gasses from countries like Canada, Venezuela, and Mexico, which are parties to Paris Agreement (United Nations, 2015). In the case of the U.S breach the agreement, these countries can impose import tariff, which would make oil and gas extremely expensive to the United States. This would negatively affect the local companies in the U.S, for example, Exxon Mobile that trade in oil and gas or those companies that depend on oil and gas to undertake its daily operations. Thus, there is a need for the president of United States to consider respecting Paris Agreement. This is a need for the U.S government to understand that even in a situation where it is dissatisfied with the agreement, it cannot withdraw from the agreement until the year 2021 (Hunter, Salzman & Zaelke, 2016).
Potential Implications of Paris Agreement
One of the potential implications of a breach of Paris Agreement by U.S, particularly in international trade law, relates to a domino effect. This refers to the effect that failure by the U.S to abide by the provisions of the agreement would have to other parties. The agreement was realized after extensive negotiations, where countries realized the need to deal with the issue of global warming. Thus, all parties to the agreement must show their commitment and willingness to protect this agreement. Thus, if the U.S fails to abide by the agreement, other nations would be influenced to disrespect their climate commitments. As a result, some countries like China, which account for the largest proportion of total global emission, would continue engaging in economic activities that do not conserve the environment, particularly by engaging on production of commodities using fossil fuel while still not being punished. This will increase the competition of goods produced in the U.S using fossil fuel.
The commitment to conserve the environment, particularly by reducing emissions, requires different countries to change the mode of producing different products. The parties to Paris agreement are required to adopt renewable energy because it is friendly to the environment (United Nations, 2015). Thus, the decision by some countries to ignore climate commitments, due to failure of the U.S to abide by Paris agreement, would create a situation whereby nonrenewable energy is used in the production of different commodities. However, due to possible enmity, which is likely to emerge between parties to Paris Agreements and those that are not a party to the agreement can affect international trade. U.S trading partners that abide by Paris agreement are likely to end these partnerships, forcing the U.S to get isolated in international market. This would affect international trade, which involves different countries exchanging various product and services. This means that in the event the U.S withdraw from Paris agreement, companies like Exxon Mobile would have challenges importing various products from the foreign market.
International agreements are respected by member countries because they consider the interests. As a result, a country that breaches those agreements is punished through international trade. Therefore, if the government of the U.S decides to breach Paris Agreement, other countries of the world, particularly the parties to the agreement will complicate the trading activities of the U.S in the global market (Hunter, Salzman & Zaelke, 2016). In this case, the U.S would not be able to import all required product from other countries. This would cause a shortage of different commodities like oil and gas, which would raise their prices. Additionally, due to the transfer of cost burden to the consumers, companies that use oil and gas as a source of energy to produce products would charge high prices to those products.
Additionally, the U.S would face the challenges of exporting its surplus products, for example, computers, electronics and automotive. As a result, the country would not earn foreign exchange, which in turn would negatively affect the value of U.S dollar. Failure to export product to foreign market would limit the market to products produced in the U.S. This would make many countries to incur losses. It is important to understand that international trade helps in improving international relations between countries. Thus, the international relation with other countries of the world is weakened when the U.S does not participate fully in international trade.
Concerns of the Amendment to Interests of Exxon Mobile
The main concerns of Exxon Mobile relate to the impact of the breach of the agreement by the U.S government on international trade. Exxon Mobile exports its products to different parts of the world. As a result, international trade is important to Exxon Mobile because it relies on other countries for the raw materials and market for its products. The amendments of Article 30 of Paris agreement put more emphasis on the fossil fuel, particularly in the country that breaches the agreement. The concerns of Exxon Mobile relate to the fact that failure by the U.S to prepare, maintain, and communicate the NDC, would affect the market for the product of Exxon Mobile, which is made from or using Fossil fuel. If the U.S breaches the agreement, other parties will have powers to impose 50% tariff on products produced using fossil fuel or those imported from the country that has breached the agreement. Increasing the tariffs by 50% will make the import of those products very expensive.
Most of the products produced by Exxon Mobile are produced using fossil fuel. Thus, Exxon Mobile will be faced with the challenge of accessing the foreign market because of excessively high tariffs charged on its products. In this case, Exxon Mobile will have a limited market because the importer will be forced to look for an alternative supplier who would charge relatively lower price. Exxon Mobile would suffer from reduced sales, revenue and declining amount of profit earned from the trade of its products. The problem of the limited foreign market will force Exxon Mobile to concentrate on the local market so as to increase its sales. The company is likely to suffer from forces of demand and supply where there would be more supply of its products to the local market, in the short-term, compared to the level of demand. This would cause reduction of prices of those products, which would make the company incur huge losses.
Recommendations and Conclusion
It is clear that the government of the U.S consider Paris agreement as the threat to the economic development of the country. As a result, it would be extremely hard for the U.S to continue being party to the agreement. As a result, it is important for the U.S president and Rex Tillerson, Secretary of State and former chief executive of Exxon to discuss and agree on the way forward.
It is recommended that the U.S government continue complying with the agreement, including meeting its emission reduction pledge set out in its NDC. This will help in ensuring that companies like Exxon Mobile, which produces their product using fossil fuel do not suffer from high tariffs imposed on their products by other countries. The country needs to make an assessment on the impact of the agreement on the economy of the country so as to decide on whether to remain or withdraw from the agreement in the year 2021.
It is recommended for Exxon Mobile to explore the different market for their products so as to increase its foreign market so as it is not affected greatly by the action of the U.S about Paris agreement. The company can focus on countries that are not a party to Paris Agreement and initiate trade partnership with them. Additionally, it is recommended for Exxon Mobile to focus on producing other products that do not use fossil fuel. There is need to focus on other sources of energy so as to ensure that the company does not collapse as a result of the decision taken by the U.S about Paris agreement.
It is also recommended that the management of Exxon Mobile to international relations to countries that are trading partners with the U.S in order for them to can open branches in those countries. This would help in creating new market for its product. As a result, the company would reduce the amount of loss that it is likely to incur due to the impacts of amendments of article 30 of Paris agreement.
There is also the need for Exxon Mobile to invest in research and development so as to identify new market for their products. They can carry research on medical field and identify any opportunities that would offer a larger market for their products. Identifying the need in the market can prompt the company to produce new products, which would help in boosting the revenue and profits earned by the company. This in turns would help the company to continue growing despite the threats created by amendments of article 30 of Paris agreement.
To conclude, there is a need for the government to consult various stakeholders before making the final decision. This will ensure that there is no party that is negatively affected by the decision taken. In addition, parties to these agreement must be a live to the fact that trade dynamics are bound to change from time-to-time, therefore, they must create agreements that ensure business in their jurisdictions will remain competitive. Otherwise, these agreements may be punitive to business, which may make them migrate to less restrictive countries.
Hunter, D., Salzman, J., & Zaelke, D. (2016). International environmental law and policy. St. Paul, Minn: Foundation Press.
United Nations. (2015). Paris Agreement. Article 1-29. pp. 1-25.