Be­yond the Paris cli­mate agree­ment

Financial Mirror (Cyprus) - - FRONT PAGE -

Now that it has been rat­i­fied by In­dia and the Euro­pean Union, the Paris cli­mate agree­ment is set to en­ter into force. But the hard part is yet to come: turn­ing the agree­ment’s vague po­lit­i­cal com­mit­ments into con­crete ac­tion to mit­i­gate global warm­ing.

The Paris agree­ment, con­cluded last De­cem­ber, was a ma­jor ac­com­plish­ment and an un­prece­dented dis­play of po­lit­i­cal unity in the ef­fort to tackle one of the most dan­ger­ous and com­pli­cated threats to our fu­ture wel­fare and pros­per­ity. By in­clud­ing the en­tire in­ter­na­tional com­mu­nity in its partly bind­ing frame­work, the deal es­tab­lishes a new par­a­digm in global gover­nance.

But, in prac­ti­cal terms, the agree­ment is hardly a guar­an­tee of suc­cess. It pro­vides no tools to en­sure i mple­men­ta­tion of the poli­cies and mea­sures needed to keep global warm­ing “well be­low” two de­grees Cel­sius above pre-in­dus­trial lev­els, the thresh­old that forms the cen­tre­piece of the deal.

The agree­ment pro­vides merely a frame­work for re­port­ing and re­view­ing on the im­ple­men­ta­tion of dis­parate na­tional agen­das, as well as pro­vi­sions aimed at nudg­ing coun­tries to achieve deeper cuts. Rather than es­tab­lish­ing an en­force­ment mech­a­nism to keep coun­tries on track to meet­ing their tar­gets, the agree­ment re­lies on a “fa­cil­i­ta­tive di­a­logue” on col­lec­tive progress to sus­tain mo­men­tum. But even this pro­vi­sion will not be tested un­til 2018.

Given the dif­fi­culty of such large-scale in­ter­gov­ern­men­tal co­op­er­a­tion, a more am­bi­tious and bind­ing global agree­ment could not rea­son­ably be ex­pected, at least not any­time soon.

But cli­mate change is not go­ing to wait. Its ef­fects are al­ready be­ing felt world­wide, with ex­treme weather con­di­tions be­com­ing in­creas­ingly fre­quent.

In fact, ev­i­dence sug­gests that the ef­fects of cur­rent con­cen­tra­tions of green­house-gas emis­sions are al­ready at the up­per end of the mod­eled sce­nar­ios. Cli­mate sci­en­tists now warn that the two-de­gree win­dow is clos­ing very rapidly, if it is not al­ready shut.

If we are to have any chance of meet­ing our cli­mate tar­gets, we need to take strong ac­tion now to re­duce emis­sions dras­ti­cally – ac­tion that goes be­yond the Paris agree­ment. We must fun­da­men­tally trans­form the way we do busi­ness, with in­vestors and com­pa­nies aban­don­ing their cau­tious ap­proach to the low-car­bon tran­si­tion.

There are signs that such a shift in mind­set is un­der­way. Ef­forts and ini­tia­tives to cat­alyze a more rapid move to­ward greener prac­tices by com­pa­nies, in­vestors, and cap­i­tal mar­kets are mul­ti­ply­ing, spear­headed partly by busi­ness lead­ers ea­ger to profit from the trans­for­ma­tion. But the mo­men­tum re­mains far from strong enough, and, in gen­eral, cap­i­tal mar­kets still do not in­cor­po­rate cli­mate and car­bon fac­tors when pric­ing as­sets and eval­u­at­ing risk.

With the right ap­proach, busi­nesses could not only help to achieve the emis­sions tar­gets set out in the Paris agree­ment; they could also con­trib­ute to reignit­ing growth and de­liv­er­ing on the Sus­tain­able De­vel­op­ment Goals, ap­proved by the United Na­tions last year. As a re­cent re­port re­leased by the Global Com­mis­sion on the Econ­omy and Cli­mate em­pha­sizes, that ap­proach should cen­ter on in­vest­ment in sus­tain­able in­fra­struc­ture.

There is no ques­tion that the in­vest­ments made to­day in in­fra­struc­ture, as well as in ex­trac­tion and util­i­ties – will have im­por­tant im­pli­ca­tions for long-term emis­sions. The wrong ap­proach could eas­ily lock the world into a car­bon-based econ­omy for an­other decade or more, push­ing us far be­yond the two-de­gree thresh­old. Green in­fra­struc­ture, how­ever, can form the foun­da­tion for a sus­tain­able econ­omy.

The Global Com­mis­sion re­port sets out to iden­tify the main ob­sta­cles to fi­nanc­ing such in­fra­struc­ture and to cre­ate an agenda to over­come them. In do­ing so, it rep­re­sents a new ap­proach to bring­ing about sys­temic change, dif­fer­ent in two fun­da­men­tal ways.

First, the pro­posed agenda adopts a more holis­tic per­spec­tive on the green trans­for­ma­tion. The re­port in­cludes spe­cific rec­om­men­da­tions on mat­ters such as how to shift to low-car­bon sys­tems; but it presents them against the back­drop of broader pri­or­i­ties, such as the SDGs. In other words, it seeks not just to put the tran­si­tion to a green econ­omy at the top of the po­lit­i­cal agenda; it makes it a key com­po­nent of the re­sponse to a broad range of po­lit­i­cal, so­cial, and eco­nomic chal­lenges.

Sec­ond, the rec­om­men­da­tions em­pha­sise the busi­ness op­por­tu­nity pre­sented by the on­go­ing dis­rup­tion of the world econ­omy. If in­vestors recog­nise the ben­e­fits of get­ting in on the ground floor of the new econ­omy, they will be more likely to em­brace the nec­es­sary changes, thereby help­ing to drive for­ward a crit­i­cal cli­mate tran­si­tion.

The new ap­proach may make all the dif­fer­ence – and not only to busi­ness. What is at stake is noth­ing less than the world’s abil­ity to take back con­trol of our fu­ture.

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