Assessing the Paris Climate Agreement
Much no doubt will be written about how 195 nations came together in Paris to make a global commitment to tackle climate change and what changes in regulation and the investment landscape might result. From my vantage point in Paris during the negotiations, a few key impressions stand out.
First, the agreement overcomes those past flaws that prevented a more universal endorsement, including fully by the United States. Rather than being a top down allocation of an emissions budget, it relies on each country to identify those measures it will take to address greenhouse gas emissions. This eliminates the past distinction between developed and developing countries and seems to contain a more equitable burden sharing, epitomized by the extensive green energy commitments China has made.
Second, the degree of business participation in the discussions and the commitments many businesses brought forth were quite extraordinary. Large companies in the United States signed on to the Business Acts for Climate Pledge, the We Mean Business coalition brought other business commitments, and the U.N. Global Compact registered actions by many more. Large electricity generators and oil and gas producers called for a price on carbon, and renewable energy generators highlighted the scale of their recent deployments.
Government and United Nations negotiators heard a clear message that many capable companies and investors believe in clean energy solutions and are rethinking their business models to develop more nimble, technologically-oriented models. Some of this optimism flowed from the new connectedness that technology enables and the ever accelerating pace of that technological change. Many in Paris envisioned a sense of new possibilities for economic growth from the need to decarbonize economies, rather than a pervading sense of limits and sacrifice.
Third, the numerous regulatory and diplomatic steps that the United States has pursued these past several years provided it with significant negotiating credibility. By coming equipped with extensive emissions reductions from EPA’s power plant regulations and the doubling of motor vehicle efficiency standards, and having worked closely with China and India through bi-lateral efforts, the U.S. was able to achieve its key negotiating objectives. Thus, the final agreement includes enhanced transparency and review provisions to help to ensure that country emissions reduction commitments prove to be meaningful. U.S. negotiators also carefully avoided new legal obligations and thereby arguably minimized the need for Senate confirmation before a deeply polarized Congress, much as occurred with the Minamata Convention on mercury emissions.
Fourth, the agreement follows the pattern of existing domestic environmental laws in recognizing that it may not be a perfect solution, in and of itself, and that the science will continue to evolve. Similar to the Clean Air Act’s five year review provision for fundamental health-based pollutants, the Paris climate agreement acknowledges the need to calibrate future emissions reductions based on new science and will regularly assess the success of country measures in meeting the emissions targets.
While the agreement and on-going support for it in the United States surely will spawn much on-going debate and many challenging implementation issues, what happened in Paris represents a tectonic shift in the global approach to climate change and energy.