The Paris Agreement

Much has been said recently about the US pulling out of the Paris Agreement and the vast majority of it has been highly politicized by people who have never even read the agreement. Opinions are quite polarized, ranging from “It was a perfect agreement and, now that we have pulled out, the sky is falling,” to “It was a bad deal that would have cost hundreds of trillions of dollars and killed our industries.” I have read the agreement (It’s only 27 pages!) and both of those hyperbolic reactions are inaccurate. I would encourage everyone to familiarize yourself at least with the summary (even fewer pages!) but below are my key takeaways:

GOALS

  • Curtail the rapidly increasing global temperatures (mitigation)
  • Do so by reducing global green house gas (GHG) emissions
  • Recognize that climate change is happening so become better at dealing with it (adaptation)

ACTIONS

  • This is a “bottom up” rather than “top down” agreement. There are no specific actions defined or required by the agreement; rather, each country voluntarily commits to its own contributions toward achieving the agreement’s goals. There is no enforcement or penalty mechanism in case a country fails to meet its commitments.
  • Each country specifies targets for its own GHG reductions. For example, the US is targeting 26-28% reduction (relative to 2005 levels) by 2025 while Switzerland is targeting 50% GHG reductions (I’m not sure relative to which baseline.) by 2030.
  • Specific actions taken are meant to be compatible with economic growth, not a hindrance to it. For example, some actions might reduce the number of coal jobs but increase the number of solar jobs by many more.
  • Especially for developing and least developed nations, actions are focused on those with “co-benefits,” actions that not only mitigate and/or adapt, but that also alleviate poverty, improve health, improve energy access and security, etc. A fantastic example is GIVEWATTS, which reduces GHGs but also breaks the poverty cycle, reduces respiratory illness, and improves education by distributing solar-powered lighting (replacing kerosene lamps) in off-grid schools and clinics in East Africa.
  • Countries primarily focus on reducing their own GHGs but the most developed countries have also committed to sharing resources (know-how, technology, and financial capital) with developing (especially small island developing) and least developed countries as they are hardest hit by climate change and have the least capacity to address it through mitigation and/or adaptation.
  • The developed countries have committed to making available $100B/year from 2020 to 2025 to help developing and least developed countries meet their goals. The $100B is spread across all developed countries but it is likely that the greatest GHG emitters, the US and China, will together account for at least half of it. The $100B is not an outright public grant (transfer of funds from one government to another) but rather a mix of public grants, loans, loan guarantees, and equity investments. The $100B comes from both public and private sources.
  • To date the US has committed $3B – of which only $1B has been paid – for a fund that focuses on adaptation for developing and least developed nations. The total size of the fund is currently ~$9B.
  • Beginning in 2018, every five years there will be a “global stocktake,” basically an assessment of how GHG emissions are going and how much temperatures are changing around the globe. This is essentially a “management dashboard” to assess how effective the actions are in meeting the goals. It is also a chance to adjust course based on new data.

Looking past the polarizing politics and evaluating the Paris Agreement simply on its merits, I conclude that it is a good deal. It managed to bring nearly every country in the world together (No small feat that!) in common pursuit of addressing a goal that benefits everyone. No country is compelled to do anything by any other country and each country can contribute what it believes is fair and practical. It focuses on actions that align with economic growth and it recognizes the importance of adaptation, not just mitigation.

Regardless of what each individual country commits, having [almost] all countries working together to contribute something is truly laudable. The US, which [unknowingly and with no ill intent] played a significant role in generating the GHGs that have contributed to the rapid rise in temperatures, sends a really bad signal by pulling out of the agreement. It says either that we don’t value the goal of addressing climate change or that we do but we want to do it by ourselves. Climate change is a global issue and it will necessarily require global solutions.

With the US pulling out, I worry about two reactions:

  1. Other countries pulling out due to, “If the US won’t commit, why should we?” This could lead to a tragedy of the commons of epic scale.
  2. Other countries staying in with renewed commitment. This would be a huge blow to the US’s increasingly tenuous role as a world leader. It used to be that, when the world faced devastating challenges (Nazis, natural disasters, etc.) the US led the way to the solution. Will we really just give up and relinquish that role to, say, China?
I have also heard arguments that our current president is just using this as an opportunity to “renegotiate” the deal. As you can see above, though, there is nothing to renegotiate; everything is voluntary and this is simply a framework for cooperation. I also find it highly unlikely that the president who is all but dismantling the US Environmental Protection Agency has any sincere intent to enter any agreement about climate change.
What do you think? Does this description of the Paris Agreement surprise you? Do you agree with my interpretation/conclusions? Have I made an error on any facts/figures? Let me know in the comments.

ADDENDUM

I have received many questions about China’s and India’s contributions to the Paris agreements so here is some more information about them:

China’s targets:

  • Peaking of carbon dioxide emissions around 2030 and making best efforts to peak early
  • Lowering carbon dioxide intensity (carbon dioxide emissions per unit of GDP) by 60 to 65 percent from the 2005 level (~14% overall)
  • Increasing the share of non-fossil fuels in primary energy consumption to around 20 percent;
  • Increasing the forest stock volume by around 4.5 billion cubic meters from the 2005 level.

  • To reduce the emissions intensity of its GDP by 33 to 35 percent by 2030 from 2005 level.
  • To achieve about 40 percent cumulative electric power installed capacity from nonfossilfuel based energy resources by 2030 with the help of transfer of technology and low cost international finance including from Green Climate Fund (GCF).
  • To create an additional carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent through additional forest and tree cover by 2030.
They estimate the total cost to achieve those targets to be $2.5T over 15 years ($167B/year on average). They will of course fund some of that domestically but they will seek financial help from the developed world as well.

Published by Bryan Guido Hassin

These are the musings of a global cleantech entrepreneur. This blog began as a way to document my experience during the IMD MBA in Switzerland and now is the place where I publish eclectic thoughts on business, politics, fitness, entertainment, travel, wine, sports, and . . . whatever else is top of mind.

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