What problems do entrepreneurs target to work on? Put simply, if there were no bald men on the planet or if the bald men all had no $, would any drug company invest in R&D to cure baldness? No. In the case of the "green economy", low energy prices reduce the incentive to invest in green goods such as the next Prius. High energy prices raises operating costs for using a car to drive 15,000 miles a year. If your current car achieves 15 MPG and the price of gasoline is $10 a gallon, you would be paying $10,000 a year on gas and even Republicans would seek a greener alternative. This arithmetic highlights that the real point of carbon pricing is to induce innovation.
The key counter-factual here is the following; "Now that the U.S is out but California and other progressive states are still "in", how much will green innovation slow down?" If the answer is not much, then President Trump's decision is not costly in terms of our collective fight against severe climate change. We need to have a serious discussion about the pace of advance in innovation with and without a global carbon tax. Did Elon Musk build Tesla because he expected there would be a global carbon price? Will his company's stock price crash to zero if the price of carbon is zero? I don't think so. How the green economy evolves in a world without a co-ordinated anti-carbon policy is a crucial question. To answer this question will require that economists write down models of firm investment behavior under uncertainty. My bet is that different firms will make different bets and greener products will continue to appear.
The rhetoric in today's NY Times would lead a space alien to conclude that the green economy is now dead. I do not believe that the U.S is such a central point in world events. In our decentralized capitalist economy, individual decision makers are looking to the "Commander" for signals of what to do next. Individual experimentation plays a key role in creating our luck and discovering the next generation of technological improvements.