Why should you care? The outcome of COP21 is of great interest to anybody in the energy, industrial and environmental sectors of the economy as the international community has finally reached an agreement showing global intention on behalf of the leaders of this world to fight climate change. As of December 12, 2015, greater efforts to lower greenhouse gas ("GHG") emissions are to be expected and a switch towards a greener economy is now clearly on the radar.
This is the prelude to a series of bulletins which will cover the main elements of the Paris Agreement and potential impacts and business opportunities for our clients.
The Paris Agreement in a nutshell
What are the Parties committing to achieve?
The Parties to the Paris Agreement are committing to participate in the global fight against climate change. More precisely, they are committing to:
- Hold the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels.
- Foster adaptation to the adverse impacts of climate change, climate resilience and low GHG development without threatening food production.
- Switch towards a greener economy.
What are the Parties committing to do?
Reduce GHG emissions and enhance conservation of sinks and reservoirs of GHG
Ahead of COP21, 186 countries submitted plans to reduce GHG emissions before 2025 or 2030. The Paris Agreement requires each Party to communicate its nationally determined contribution by 2020 and every five years thereafter. Every updated target will thus indicate each Party's progression towards lowering GHG emissions.
The Paris Agreement leaves it up to the Parties to determine how they will tackle the fight against climate change at the national level. This implies that each Party may elect to implement economic instruments at the national level to ensure the achievement of its nationally determined contribution. One can certainly expect cap-and-trade and carbon tax mechanisms to attract more attention from our political leaders.
The Paris Agreement recognizes the key role forests play in the fight against climate change. A distinct article of the Paris Agreement focuses on actions to conserve and enhance sinks and reservoirs of GHG, therefore sending a strong signal to support REDD+ initiatives.
Leadership and Payment by Developed Countries
Developed countries express their intention to provide $100 billion annually to developing countries by 2020. However the Paris Agreement doesn't quantify this commitment but nevertheless states that developed countries shall provide financial resources to assist developing countries with respect to both mitigation and adaptation in continuation of their existing obligations under the United Nations Framework Convention on Climate Change. A similar commitment is made regarding capacity-building. The Paris Agreement states that developed countries should enhance support for capacity-building actions in developing countries.
When does the Paris Agreement come into force?
The Paris Agreement will come into force once at least 55 Parties to the United Nations Framework Convention on Climate Change accounting in total for at least an estimated 55% of the total global greenhouse gas emissions have ratified the Paris Agreement.
What to expect in Canada?
The newly elected federal government participated in COP21 with strong support from the provinces. One can expect that this collaborative approach paved the way for further elaboration of Canada's nationally determined contribution under the Paris Agreement. While nobody can predict what form Canada's nationally determined contribution under the Paris Agreement will take, the Paris Agreement certainly provides the necessary leeway for a collaborative approach between the federal government and the provinces. Provinces like Québec, Ontario, British Columbia, Alberta and Manitoba which have either already put a price on carbon or have recently expressed strong intentions to do so in a near future certainly have something to bring to the table to support Canada in fulfilling its commitments under the Paris Agreement.
Fasken Martineau will provide you with further analysis of the Paris Agreement and our comments on potential impacts and business opportunities for our clients.