The 21st Conference of Parties opened on Monday in Paris. In a compound to the north of Paris, the biggest gathering of world leaders ever took place. Prince Charles, Obama, Xi Jinping, Christopher Loeak, President of the Marshall Islands, Putin and Idriss Déby Itno, President of Chad, to name just a few, took to the stage and shared a joint message; to protect future generations an agreement must be reached and greenhouse gases (GHG) reduced. Monday was an exercise in political cheerleading to avoid the disappointment of Copenhagen in 2009 and the empty carcass agreement signed in Doha. From an outside perspective, the world leaders appear to be united.
The difficult task is now down to the negotiators, who will be engaged in intensive sessions refining every word of the draft text, which at present stands at 51 pages, for the next 10 days. We can expect some key developments to come out of this agreement that will have a profound effect globally, on businesses across every industry. The conclusion of this conference is likely to radicalise the global response to climate change. However, the intricacies of this challenge are not to be underestimated.
Any agreement that comes out of Paris is going to require a bigger share of reductions from Parties such as China and India. It is likely that every Party will be required to make a contribution to reducing GHG emissions, unlike the Kyoto Protocol. China have committed to plateau their emissions by 2030. President Modi’s statement yesterday, declaring that industrialised nations must pay for the historical damage and provide significant amounts of funding for low carbon tech in developing countries is likely going to cause a stir with the US. The draft agreement at present includes funding options of up to $100billion per year for low carbon technology, a commitment that will be filled by developed industrial nations.
Within the draft text of the agreement, there is a nod towards an international regime for emissions trading, similar to that in operation in the EU. This integrated approach allows emissions to be tracked, recorded and reported while establishing a carbon market. On the assumption that this proposal makes it into the final text, this would establish the largest carbon market and set an international precedent for big emitters to pay.
Businesses are now backing the climate movement. Ten companies wrote an open letter to David Cameron highlighting that the cuts to renewable and solar subsidies have reduced investor confidence. Speaking the PM’s language Vodafone, Tesco and M&S among others set a compelling case. Uniliever has vowed to strip coal from their energy sources by 2025; Nestle has made a similar commitment. UN Climate Secretary, Christiana Figueres, made clear that the momentum behind the political will at COP21 is the economic interest of states, not in the interest of the planet nor humanity. In her opinion, capital markets and technology are signalling a significant shift towards a low carbon economy. In the coming years, companies will have to demonstrate how they are contributing to the climate efforts or risk volatility from their shareholders.
The emphasis in all of the rhetoric, is that the time for the transition to a low carbon economy is now. In a year when we have had the VW emissions scandal, Exxon Mobil and fossil fuel divestment teetering on the brink of $4tn, the momentum must continue.
By the 11th December, we will have a better idea of the final text agreed in the compound to the North of Paris.