Kari KankaanpääPosted by: Kari Kankaanpää
17.12.2015

 
Having digested the outcome of the Paris climate conference for a while and the highest hype over the result being evaporated, the result can be judged on its merit. What did the world actually accomplish? Is this a real turning point in efforts to combat climate change?

Success factorsCOP21JPG_web

Definitely the outcome of COP21 was much better than anyone dared to expect. The biggest surprises finally were the ambitious 1.5 degrees target and the extensive role of markets in the text.

Actually there are a couple of success factors behind. The Agreement is a result of years’ progressive efforts. The world has changed in many ways and now the time was ripe. The bottom-up approach in preparing the agreement was flexible enabling countries to match their efforts to their circumstances. The French skilled diplomacy showed its power and numerous bilateral consultations around the world before the conference were most productive. There was a polite, but firm handling of “troublemakers”: everyone was heard during the process, everything was transparent and responsibilities were shared. Cooperation between the world giants US and China and US and India was active. Last but not least: the solidarity to France due to the unfortunate attacks in Paris a couple of weeks ago certainly played a role as well.

Progressive efforts

What makes a difference is that now we all are in the same boat, actions have to be undertaken by all. The earlier famous firewall between the developed and developing countries has been broken. All countries are obliged to present their national commitments (NDCs, nationally determined contributions) on mitigation, adaptation and financing, and report on the progress. Each subsequent pledge must be more ambitious, there is no backsliding possibility. Someone may question the conclusiveness of the deal: yes, there are no sanctions for non-compliance. But the collective target, transparent reporting and existing commitments by almost 190 countries are there. The coverage of the agreement is amazing: the current NDCs represent 98% of global emissions. Just to compare, the Kyoto Protocol covered less than 70% of emissions and less than 40 parties were involved.

Accelerated energy transition

The Agreement sends a clear signal for climate action by all. The direction is evident – phase out greenhouse gas emissions in the second half of the century. The deal will increase long-awaited predictability and stability to enable investments to be redirected to low-carbon and climate resilient development. As such, it is expected to accelerate low-carbon transition and give new business opportunities. It will boost all low-carbon and carbon free solutions, including nuclear energy.

The EU’s “solo-run” on climate ambition seems to be fading out, as the key competitors are onboard. Concern on carbon and investment leakage will gradually diminish. Naturally this depends on e.g. how the carbon price level in the Chinese emissions trading system starting in 2017 will evolve.

Business engaged

Business was broadly engaged in pre-Paris action and during the COP21. In the run-up to Paris and during the conference, business was consistent and constant with the expectations and contributions on business action and carbon pricing. Also the investor community made a raft of pledges, such as to decarbonise portfolios or increase the share of investment in low-carbon and climate related areas. The push for carbon markets to be part of the deal was strong.

Markets matter

Paris Agreement enables market-driven mitigation action both through cooperative efforts and a new mechanism to support sustainable development. The decisions text also specifically mentions the role of carbon pricing in cutting emissions. The new trading provisions are open to developed and developing countries alike. It could provide impetus for the development of carbon markets globally. Joint markets and market mechanisms enable global cost efficiency.

As market approach now is recognized, it is important that the energy and climate policies of the EU and the member states support this intent. Market-driven development must be trusted and the regulations reduced. The EU should open its carbon market for internationally traded emission reductions and consider raising its 2030 climate ambition.

In short term, the Agreement will not impact the EU carbon price and is unlikely to raise ambition in the EU.

COP21_webA piece of history

Most of the Paris Agreement is pretty boring legal text in UN jargon. Perhaps it is not entirely revolutionary, but evolutionary. It will not change the world overnight, in fact, it is a start of a long journey. A huge amount of work needs to be done in the next years to put “flesh to the bones” of the agreement. Most likely we have to wait for the next 10-15 years until we can judge whether Paris was a game changer or not.

This was my fourth COP attendace and definitely the best one. Although this sounds already a cliché, it was a once a lifetime experience to be witnessing this historic event!

 

Kari Kankaanpää
Senior Manager, Climate Affairs

Read more about Fortum and Paris climate negotiations

 

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