Weak Agreement Reached in Paris

The final draft outcome has been presented by the COP President this afternoon. The deal still needs to be approved by the plenary that is due to meet later today, but it is unlikely that there will be any further changes made to the agreement at this stage.

In summary, the deal reached in Paris is weak, containing no concrete increase in the level of ambition to address climate change, and simply urging countries to do more over time. The most notable outcome is the five-year review cycle for country targets and the establishment of transparency requirements on all countries, but even these elements are accompanied by language that could allow countries to maintain the status quo for years to come.

So, what's the deal?

• Differentiation remains front and centre — the biggest issue at COP21 has been the demarcation between developed and developing countries under a new deal. Developing countries, in particular India, have been adamant that the definition of rich and poor established in 1992 remains unchanged, whereas the US and other developed countries want to do away with the 'bifurcated' approach that groups large developing economies such as China and India together with the world's poorest states. For now, developing countries have won the debate, with crystal clear language on differentiation embedded throughout the final text. The most notable clause is Article 4, Paragraph 4, which reads "Developed country Parties shall continue taking the lead by undertaking economy-wide absolute emission reduction targets. Developing country Parties should continue enhancing their mitigation efforts, and are encouraged to move over time towards economy-wide emission reduction or limitation targets in the light of different national circumstances." What this means in plain English is that Non-Annex 1 countries have no obligation to commit to firm emission limits… indefinitely.

• 1.5°C is recognised, but 2°C remains the overall goal — the Paris Agreement reiterates the overarching goal of limiting global warming to 2°C above pre-industrial levels, but also makes reference to 1.5°C. The tighter temperature goal has been under consideration for several years, but this is the first time that it has been officially acknowledged as an aspirational goal "recognizing that this [staying below 1.5°C] would significantly reduce the risks and impacts of climate change" . The relevance of the 1.5°C target is questionable, however, with no direct link made between a tighter temperature goal and the necessary country-level ambition needed to achieve it. The IPCC has been instructed to produce a study of potential emission pathways consistent with a 1.5°C goal, but it remains to be seen if this will have any influence on how individual countries will set out their INDCs in future.

• New collective target to achieve 'balance' in global emissions — there has been much debate at COP21 about a more defined long-term goal to complement the temperature target. Proposals for a 2050 emission reduction goal, for a peak year for global emissions, or for language on 'decarbonisation' or 'emissions neutrality' have all failed to make it into the final agreement. What countries have settled for is an ambiguous aim to "achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century" . It is unclear what 'a balance' would imply in terms of actual emission reductions. Expect lengthy debate over the coming months on the meaning of this target.

• Unclear compromise on transparency — a new 'transparency framework' will be set up that places requirements on all countries to "regularly" disclose their emissions and progress towards their INDCs. However, the framework will "provide flexibility in the implementation...to those developing country Parties that need it in the light of their capacities". What this means in practice is that developing countries can provide as much or as little information as they wish, using their own interpretation of 'limited capacity' as justification for a lack of transparency. The guidelines for the transparency framework will be worked out in 2016, so the debate on exactly what each country will need to disclose will continue.

• No reference to the $100bn in the agreement — it is mentioned twice in the decision text accompanying the agreement, but there is no reference made in the agreement itself to the promise of $100bn per year in climate finance from developed to developing countries by 2020. The $100bn pledge has been a bone of contention in the UN talks since it was made in 2009, with developing countries demanding that more of the promised cash be delivered before progress can be made on mitigation targets. The OECD calculated that over $60bn was delivered in 2014, but this figure has been roundly disputed by the G77. The absence of a mention of the $100bn in the Paris Agreement is likely to reflect a trade-off made by developing countries in return for stronger language on differentiation. It is a win for the US, which does not want to be tied to a figure for future financial commitments.

• Another round of INDCs and a 'stocktake' every five-years — the cycle of review of country-level targets (INDCs) is the most notable outcome from Paris. All countries will need to revisit their INDCs in 2020 and then again every five years. In parallel, a 'global stocktake' will be conducted every five years, starting in 2023, assessing progress towards the collective goals. The language on differentiation, and ambiguous requirements, weaken the impact of the review process, however, with the stocktake to be done in a "facilitative manner", and countries requested to "communicate or update" their INDCs every five years. The text does state that each successive target submitted by a country should be more ambitious than its last, but it is unclear how such an increase in ambition will be judged.

• Markets make it in, but it will take time to flesh out the detail — markets have proven to be a controversial issue, with the establishment of a new market-based mechanism remaining in brackets right up until the last minute. The use of markets, or "internationally transferred mitigation outcomes" has made it into the final deal (see Article 6), but the text is light on detail and it remains to be seen how the new market mechanism will operate in practice. The agreement requests that more of the details on markets be worked out by COP22 next year.

A long road ahead

The Paris Agreement will disappoint many observers that were hoping for a step change in global ambition to emerge from COP21. It is no surprise, however, that the reality falls far short of such expectations. What Paris set out to achieve was the formalisation of a pledge-and-review type process, which will serve to place continuing pressure on the world's biggest polluters to take greater action to curb their emissions. The climate debate will continue for years to come, and although COP21 has failed to come up with a solution to the climate problem, it has arguably set up the means through which a solution, if at all possible, may eventually be reached - ie, through a process of continual assessment and cooperation between countries. For now at least, a breakthrough on global action to address climate change remains elusive.

This article was first released on Bloomberg New Energy Finance on 12 December 2015.

By Bloomberg New Energy Finance