We'll Always Have Paris
The Road to Ratification
Last year the world waited to see if the hype surrounding COP21 in Paris would produce a global commitment between heads of state to help stem the tide of rising temperatures. Since that historic week in Paris, 87 of the 197 countries who are party to the newly produced Paris Agreement have achieved ratification.
Of special importance, in October the European Parliament voted to ratify the agreement and helped it cross the required 55 signatories representing 55% of global greenhouse gas (GHG) emissions to enter into force on November 4 (ahead of COP22, which starts on November 7). This puts environmental targets front and center in discussions within countries big, small, developed, and developing—and consequently within the business community.
As part of the Paris Agreement, each country came to the negotiating table with pledges (Intended Nationally Determined Contributions, or INDCs). Its subsequent ratification converts the INDCs into Nationally Determined Contributions (NDCs), with progress tracked by the agreement’s governing body, the CMA. Countries have the option of making their plans more ambitious, such as if they meet a goal ahead of schedule, but cannot backpedal on their efforts. To meet their respective NDCs, countries will design and tailor their initiatives to achieve the agreed-upon targets.
Implications for Companies’ Operations
As countries get serious about methods to move the meter on change, both city- and country-level efforts will affect companies. These changes are coming in the form of carbon taxes, such as the one announced by Canadian Prime Minister Justin Trudeau in October, a call to ban new internal combustion engines in Germany, and a move to fund solar investments over fossil fuels in Brazil.
Two German cities, Hamburg and Schleswig-Holstein, have created “NEW 4.0,” an initiative that combines the powers of business, science, and politics to work toward the goal of a sustainable energy supply. These city targets support overall country efforts; more and more can be expected to take shape.
The new Kigali deal has sweeping implications for business and environment. This amendment to the Montreal Protocol will phase out hydrofluorocarbons (HFCs), a chemical used in refrigerants. Since the deal is a treaty, it has binding implications and penalties for signing countries, and given its global participation, the interplay between country emissions reduction targets and business impact is inevitable. Companies will be forced to evaluate and deal with how country targets will impact their operations, investments, and regulatory practices.
Key countries’ INDCs for the Paris Agreement are as follows:
- Australia: Reduce GHG emissions 26-28% below 2005 levels by 2030
- Brazil: Shift from targeting the carbon intensity of GDP to an absolute GHG emissions reduction target of 37% below 2005 levels by 2025 and 43% by 2030 (ratified)
- China: Peak GHG emissions around 2030 and reduce intensity 60-65% below 2005 levels by 2030 (ratified)
- European Union: Reduce GHG emissions at least 40% below 1990 levels by 2030 (ratified)
- India: Reduce emissions intensity of GDP by 20-25% compared to 2005 levels by 2020 (ratified)
- Japan: Reduce GHG emissions 26% below 2013 levels by 2030
- Mexico: Reduce GHG emissions unconditionally 25% below the business-as-usual baseline by 2030 and up to 40% if certain conditions are met (ratified)
- Russia: Reduce GHG emissions by 25-30% below 1990 levels by 2030
The U.S. has formally committed to reducing GHG emissions 26-28% below 2005 levels by 2025, a target it describes as “fair and ambitious” as well as “consistent with a path to deep decarbonization.” Specifically, the target includes carbon dioxide, methane, nitrous oxide, perfluorocarbons, hydrofluorocarbons, sulfur hexafluoride, and nitrogen trifluoride. The target reflects the climate policy trajectory set by the current administration, beginning with its 2009 pledge to reduce country emissions by 17% below 2005 levels by 2020 and continued through The President’s Climate Action Plan in 2013.
The newest commitment specifically identifies the following mechanisms to reach the target:
- While the Clean Power Plan is currently hung up in the courts, if upheld it could reduce GHG emissions by 371 million to 383 million metric tons in 2020
- Improving fuel economy standards for heavy-duty vehicles for model year 2018 and beyond
- Reducing methane emissions from landfills and the oil and gas sector
- Providing alternatives to high-GWP HFCs through the Significant New Alternatives Policy (SNAP) program
- Reducing the buildings sector’s emissions, including by promulgating energy conservation standards for a broad range of appliances and equipment as well as a building code determination for residential buildings
- Reducing GHG emissions from federal government operations 40% below 2005 levels by 2025 as set forth in Executive Order 13693
Opportunities for Manufacturers
While the efforts to meet global environmental responsibilities will cause a shift in business and force companies to make changes, it also presents manufacturing with opportunities for advancement and innovation. For example, DOE’s Clean Energy Manufacturing Initiative aims to “increase U.S. competitiveness in manufacturing clean energy technologies and increase U.S. manufacturing competitiveness across the board by boosting energy productivity and leveraging low-cost domestic energy resources and feedstocks.” In the private sector, companies will play an integral role in the landscape of these changes, much like they did in the discussions surrounding Paris. They have proven to be powerful partners by forming coalitions to sponsor and spur change in their respective industries. They will continue to develop alternatives to ensure their businesses are sustainable and thrive through change.
The signing and ratification of the Paris Agreement are the start of a new chapter marked by multilateral cooperation to combat rising temperatures through a panoply of efforts; however, this is only the beginning. Politics, science, and business are now converging to seize upon the momentum created a year ago. These forces are combining to modernize the world’s economies through policies, tools, and targets to fuel the new global economy.