The Paris Agreement is a Universal Call to Action and a Market Signal to Heed

December 17, 2015

Historic Global Climate Agreement is Reached 

COP 21 in Paris was historic. On December 12, 2015, after long days of negotiations and hours pouring over draft text, 195 nations who are Parties to the United Nations Framework Convention on Climate Change (UNFCCC) adopted the Paris Agreement to decarbonize the economy, work collectively to reduce global greenhouse gas (GHG) emissions and limit global temperature increases. The Paris Agreement sets out ambitious and aspirational collective goals to:

  • hold the increase in global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit temperature increase to 1.5°C above pre-industrial levels[1]
  • increase adaptive capacity and foster resilience
  • increase financing of low carbon and climate resilient development

Parties agreed to aim to peak global GHGs as soon as possible and achieve carbon neutrality or net-zero emissions by the second half of this century. This is a significant statement, and if implemented adequately, could save millions of lives and prevent serious damage to small island states and coastal areas, among others. The Agreement’s aims won’t be easy to achieve, but these goals are valuable drivers and establish a clear call to action.

The Paris Agreement is the first universal agreement that requires both developed and developing countries to pledge commitments, take action and submit to periodic global stocktakes (reviews by the international community of how commitments and actions are achieving goals, or not). The Agreement requires nations to submit nationally determined contributions (NDCs). It also acknowledges the gaps between countries’ current commitments and their plans to achieve them,[2] and requires Parties to ratchet up NDCs to meet the goals of the Agreement every 5 years. Despite a lack of precise targets and outcomes, the Agreement marks a turning point in international climate negotiations and sets the stage for bold action going forward.

The Paris Agreement is a new breed of international accord, one that takes a bottom-up approach to action with public registration and scrutiny, rather than establishing top-down governance. It is possible that international and public scrutiny can drive action, while allowing for nations to self-determine their commitments to reach common goals. There is debate about whether this approach can be effective, but it appears it was the best compromise that could be reached and may even drive a new competitive and collective spirit of action. One can hope.

The adoption of the Paris Agreement is a first step towards a binding international agreement. It will enter into force once ratified by 55 countries, accounting for at least 55% of global GHGs. This is expected to happen within the next year or so (but note that the Kyoto Protocol took 7 years to come into force). The decision that accompanies the Paris Agreement commits UNFCCC Parties to interim measures and processes that will keep us moving forward in the meantime.

There was much discussion of finance for technology deployment, adaptation and compensation for loss during the negotiations, with various mechanisms being supported or established in the decision. The concepts of loss and damage (referring to significant climate impacts creating loss and damage to vulnerable nations, which could be compensated by others) were discussed and included in the Paris Agreement but the Parties did not agree to ensure financial compensation for loss and damage. Instead, they punted further discussions of these important and contentious issues down the road. The Paris Agreement also creates a voluntary mechanism that will allow emissions reductions in a host Party to be used by another Party to fulfill its nationally determined contributions (a type of emissions reduction trading scheme).

The Paris Agreement sends a clear signal to the world that there is collective will to urgently address climate change. We now have strong, shared goals and a mechanism to monitor and police individual state action enshrined in international law. Although this is much needed progress, the mechanism to require assessment of national plans will not be operational until 2023. Therefore, the COP decision that accompanied the Paris Agreement also includes actions to occur prior to 2020, including: requesting a report from the Intergovernmental Panel on Climate Change (IPCC) to better understand what action is required to hold temperatures to 1.5°C above pre-industrial levels; holding ongoing dialogues facilitated by “high-level champions” about the adequacy of targets; and a technical examination process on adaptation before 2020.

Actions Surrounding Paris Agreement Illuminate the Future

Along with the collective sense of urgency and action that came out of the international negotiation session, the COP 21 side events demonstrated that private sector and civil society understand the need to transition the global economy and are fully on-board to address this massive challenge. An example of one such private sector effort is the Task Force on Climate-related Financial Disclosuresannounced by Bank of England Governor, Mark Carney. The task force will be led by former New York City Mayor, Michael Bloomberg, and will asses the accuracy with which the G-20’s financial markets reveal their vulnerability to climate risk. The World Bank continues to promote global carbon pricing initiatives, to which more and more entities are signing on. Additionally, climate leadership at regional and local levels is stronger than ever and global efforts to share best practices are multiplying.

Of course, there will still be laggards who claim climate action is too difficult, or inconsistent with economic stability and growth; however, they are becoming pariahs. As Arnold Schwarzenegger notably posted on Facebook last week:

A clean energy future is a wise investment, and anyone who tells you otherwise is either wrong, or lying. Either way, I wouldn’t take their investment advice.

The sessions held around Paris outside of the formal negotiations shared Schwarzenegger’s sentiment and many tackled the thorny issues of how to move forward creatively and equitably; they were some of the most hopeful and inspiring events I’ve ever attended.

One event I attended captured the mood that permeated. It was an event to launch a new organization called Energy Unlocked, which aims to support transformations and innovations of our energy systems. The event was held in the Raoul Dufy room at the Musee d’Art Moderne on December 4th. The room’s mural depicted innovators of the history of energy and was painted in 1937. One of the most recent historical innovators depicted in the mural was Edison, who would likely still recognize our electricity systems, as not a whole lot has changed since his time. But the future of energy can look very different. The event featured a number of current energy innovators, mostly women, and some from developing countries. Anil Raj from OMC Power, based in India, told us how he is bringing small-scale renewable power plants to places without a reliable electricity grid. His company uses solar technology, not because it is greener but because it’s cheaper, showing the possibility to leapfrog over fossil fuels entirely. Similarly, Sara Bell from Tempus Energy, which uses demand flexibility to lower electricity bills in the UK, talked about competition and customer preferences driving efficiency and innovation— demonstrating that low-carbon choices, far from being a sacrifice, can often be the preferred choice.

The future will be altered by climate change. It’s too late to reverse this trend. What we can – and must – do is slow it down, minimize the impacts and adapt smartly.

The Paris Agreement has provided a global legal mandate, driving a business imperative to innovate, build low-carbon futures, transition economies, construct new concepts of growth and de-risk assets and operations from climate impacts. On December 12, 2015, the nations of the world spoke with one voice about the need to create a low carbon and climate resilient future. It’s time to heed their call.

Laura attended the COP 21 Negotiations in Paris, December 2015

[1] Canada played an important role in supporting the 1.5°C goal mid-way through the negotiations and also strongly supported the inclusion of other important concepts like indigenous rights and traditional knowledge.

[2] Carbon Action Tracker has a great Paris Agreement Briefing that goes into more detail about the pledges and gaps: