Download the paris agreement

THE PARIS
AGREEMENT
What It Means for Business
FROM AMBITION TO ACTION
T
he Paris Agreement on climate change is a historic turning point. Together, governments are
sending a decisive market signal that the transition to a thriving clean economy is inevitable,
irreversible and irresistible. Paris calls to businesses and investors to accelerate this transition,
and to seize the trillions in opportunities to bring clean energy and prosperity to all.
The Paris Agreement marks a watershed
moment for the global economy.
For the first time the international
community has committed to net
zero greenhouse gas emissions in the
second half of this century in order to
hold global warming well below 2°C
(with a stretch target of 1.5°C). This
commitment to decarbonize the global
economy sunsets the fossil fuel era.
For the first time, climate
ambition is now universal. All major
economies, including the United
States and China, are committing to
restructuring their energy systems:
changing transport patterns, and
transforming infrastructure, buildings
and land use.
ARON CRAMER,
President & CEO
PAUL SIMPSON,
CEO
The transition to a thriving clean
economy is already underway. China
has embedded many of its Paris
commitments into the 13th Five-Year
Plan, that will guide its economic and
social development through 2020.
Europe has been leading this transition
for over two decades. The US is
implementing its emissions reduction
target under the Clean Air Act and
other domestic laws.
Paris has immediate and long-term
implications for business operations,
supply chains, investor preferences
and consumer demand in the global
marketplace. As the global economy
undergoes a deep transformation,
businesses can:
MINDY LUBBER,
President
KEITH TUFFLEY,
Managing Partner & CEO
MARK KENBER,
CEO
Seize new and expanded lowcarbon market opportunities
Align investment decisions to longterm policy certainty
Benefit from policy coherence
across borders and into new
markets
Increase investor confidence and
protect operations by managing
climate risks
Be recognized as leaders among
their peers by taking climate action
through We Mean Business
With ambitious policies in place, the
time for business action has arrived.
SANDRINE DIXSON-DECLÈVE,
Director
PETER BAKKER,
President & CEO
SEIZE THE MARKET OPPORTUNITY
Under the Paris Agreement, 188 countries have submitted national climate
plans of unprecedented scale and ambition. These plans mark a structural
transformation decoupling economic growth from greenhouse gas emissions.
1
Taken together, these plans put us on a
path towards 2.7°C of warming by 2100
compared with previous projections of
up to 4.8°C 2, and create a new global
economy in their wake.
The agreement requires that countries
pursue measures to achieve the
objectives in their national climate
plans ,3 that include new targets
from both emerging economies and
developed economies.4
The US doubled the pace of its
decarbonization with a new target of
26-28% emissions reductions below
2005 levels by 2025.5
China committed to peaking carbon
dioxide emissions around 2030,
reducing the carbon intensity
of GDP by 60-65% below 2005
levels and reaching 20% nonfossil fuel energy in the process.6
Accomplishing this will require
the addition of renewable energy
capacity equivalent to all electricity
generation in the US today.
The European Union committed to
at least 40% emissions reductions
below 1990 levels by 2030.7
capturing 2.5 to 3 billion tonnes of
carbon dioxide through additional
forest cover, all by 2030.8
Brazil was the first emerging
economy to shift from targeting
the carbon intensity of GDP to an
absolute emissions reductions
target, of 37% below 2005 levels
by 2025 and 43% by 2030.9
The market opportunities unlocked by
the agreement are remarkable. Over
the next 15 years, US$90 trillion will
be invested globally in infrastructure
where emissions are currently
concentrated.10
Collectively, the national
climate plans under
the Paris Agreement
represent at least a
US$13.5 trillion market
for the energy sector
alone in energy
efficiency and low
carbon technologies
through 2030.
11
India committed to reaching 40%
non-fossil fuel electricity, reducing
the carbon intensity of GDP by
33-35% below 2005 levels and
US$5.2
Trillion
Largely to
decarbonize the
power sector
This will only continue to grow
as national climate plans
improve over time.
The global clean technology market
is growing significantly faster than
the global economy as a whole,12
and the new national climate plans
from developing countries will open
new market opportunities. These
include expanded markets in building
efficiency and demand-side energy
management; low-carbon and electric
vehicles; solar, wind, hydro and
geothermal energy; and water and
waste management.
Businesses that act boldly and swiftly
will reap the rewards of these market
opportunities.
US$8.3
Trillion
Improvements in
energy efficiency
in the transport,
buildings and
industry sectors
LOW-CARBON ENERGY INVESTMENT
THROUGH 2030 WITH THE NATIONAL
CLIMATE PLANS 13
US$1.0 T
US$1.3 T
US$1.2 T
Hydro Power
Wind Power
Solar Power
TAKE ADVANTAGE OF
LONG-TERM CERTAINTY
The Paris Agreement sets our direction towards a thriving clean economy with clear goals:
NET ZERO GOAL
To reach net zero greenhouse gas emissions in
the second half of this century,14 in order to hold
global warming well below 2°C with a stretch
target of 1.5°C 15
RESILIENCE GOAL
To become resilient to the climate impacts we will
inevitably face, by reducing our vulnerability to
them and increasing our capacity to adapt 16
FINANCIAL GOAL
To guide global finance towards low greenhouse
gas emission and climate-resilient investments 17
Governments have made our
economic destination clear —­a world
with warming well below 2°C and net
zero greenhouse gas emissions in the
second half of the century.
To move us towards this destination, the Paris Agreement
requires governments to formulate new national climate plans
every five years.18 Each new plan must progress beyond the
previous one and represent the country’s best efforts.19 After
taking stock of their collective progress in 2018, governments
will submit new or updated plans in 2020.20
The Paris outcome also asks countries to provide, by 2020,
long-term strategies to reduce emissions through midcentury, that will provide additional long-term policy certainty
for the private sector.21
This long-term arrangement outlasts any one administration
or set of political circumstances, enabling businesses and
investors to make low-carbon investments, build low-carbon
operations and switch to low-carbon procurement. National
climate plans will be strengthened as low-carbon technologies
mature, continuously pushing the global emissions trajectory
downward.
Businesses that align investment decisions to long-term policy
certainty won’t be caught short as policy evolves.
LEAD ON A LEVEL PLAYING FIELD
The Paris Agreement is universal;
all countries agreed to reduce
greenhouse gas emissions and build
climate resilience. It was adopted by
consensus and now includes national
climate plans from countries covering
virtually all global greenhouse gas
emissions. Governments committed
to simultaneously improving climate
targets at five-year intervals, which
will draw down emissions across all
regulatory jurisdictions.
For the first time global
business operations,
supply chains and
investment portfolios
are all subject to the
same international policy
framework.
96%
of countries globally have
now submitted national
climate plans
collectively representing
98.7%
of global greenhouse
gas emissions
This will promote comparable effort
by all countries, minimize competitive
imbalances between economies and help
to harmonize global standards for
low-carbon technologies.
Businesses that lead will benefit from
policy coherence across borders and into
new markets.
MANAGE YOUR CLIMATE RISKS
Recognizing the risks we face even if we
keep warming well below 2°C, the Paris
Agreement establishes a global goal
of strengthening resilience to climate
change.24 It encourages countries
to assess climate vulnerabilities and
impacts and to formulate
Three quarters of suppliers recently national adaptation plans
to build resilience. Nearly
stated that climate risks could
90% of the national
climate plans submitted
significantly impact their business
operations, revenue or expenditure. so far include policies to25
build climate resilience.
Failure to mitigate or adapt to climate
change is the highest impact risk
to business for the years to come,
according to the World Economic
Forum’s 2016 Global Risk Assessment
Report. 22
Yet only half of these are currently
managing this risk.23 By managing
climate risks and building resilience to
climate impacts, businesses protect
both their operations and their license
to operate.
By establishing a global policy
framework and focusing stakeholder
attention on whether businesses and
investors are matching a 2°C emissions
trajectory, the Paris Agreement also
increases the risks of high-carbon
investments. A record number of
shareholder proposals in the US after
Paris now address climate change.26
Businesses are also increasingly
disclosing how they manage climate
risks, either voluntarily or as
increasingly required by regulation.
Businesses with robust climate risk
management and resilience strategies
will increase investor confidence and
protect their operations from climate
impacts.
STAND UP AND BE COUNTED
The cost of not taking climate action
is growing while the cost of action is
falling. Leading businesses taking bold
climate action benefit from a 27%
average internal rate of return on their
low-carbon investments,27 alignment
with incoming climate and energy
regulation, first mover advantages in
low-carbon markets, more resilient
operations and supply chains and a
stronger reputation among employees,
consumers and other stakeholders.
Climate action drives
innovation, creates
new and better job
opportunities, helps
to grow the economy
and increases
competitiveness in the
global marketplace.
In Paris, the “Action Agenda”
showcased leading initiatives in every
sector, from energy to finance and
buildings to transport.28 Each annual
UN climate conference through 2020
will similarly showcase the latest in
private sector climate action, offering
a natural platform for business
leadership and best practices.29
The We Mean Business commitments
are the gold standard for taking
bold climate action.31 Some of the key
commitments include Science-Based
Targets to reduce emissions in line with
a 2°C trajectory, procuring 100% of
electricity from renewable sources and
putting a price on carbon.
Businesses and investors who commit
to action through We Mean Business
are, and will continue to be, recognized
as leaders among their peers.
As of April 5, 2016, 374 companies
with US$7.8 trillion in revenue and 183
investors with US$20.7 trillion in assets
under management, have now made
almost 1,000 commitments to climate
action through We Mean Business.32
RE100
Carbon Pricing
(100% Renewable Power)
75 Commitments
57 Commitments
THE GOLD STANDARD
SBTs
(Science-Based Targets)
122 Commitments
The NAZCA portal registers climate
commitments by companies, investors
and subnational governments, and it
counts over 2,000 commitments from
companies and 425 from investors.30
WMB
(We Mean Business)
686 Company Commitments
226 Investor Commitments
NAZCA
(Non-State Actor Zone
for Climate Action)
2,000 Company Commitments
425 Investor Commitments
374
US$7.8 T
183
US$20.7 T
912
Companies
Total Revenue
Investors
AUM
Commitments
ENDNOTES
1 International Energy Agency (IEA), Decoupling of global emissions and
economic growth, 2016, http://www.iea.org/newsroomandevents/
pressreleases/2016/march/decoupling-of-global-emissions-andeconomic-growth-confirmed.html
12 World Bank, Building Competitive Green Industries: The Climate and Clean Technology Opportunity for Developing Countries, 2014, p. 18.
2
MERGED TOGETHER: International Energy Agency (IEA), Special Briefing for COP21, 2015 p. 4. IPCC, 2014: Summary for policymakers. In: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report
of the Intergovernmental Panel on Climate Change [Field, C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. Es
trada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R.
Mastrandrea, and L.L.White (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, pp. 1-32.
14 Paris Agreement, Articles 2.1 (b) and 4.1.
3
UNFCCC secretariat, Paris Agreement: Article 4.2, 2015.
The official agreement can be found at: http://unfccc.int/files/essential
_background/convention/application/pdf/english_paris_agreement.pdf
20 Paris agreement, Decision 1/CP21, paras. 20, 23 and 24.
4
Paris Agreement, Article 2.
22 World Economic Forum, The Global Risks Report, 2016.
http://www3.weforum.org/docs/Media/TheGlobalRisksReport2016.pdf
5 United States INDC submission to UNFCCC, 2015.
http://www4.unfccc.int/submissions/INDC/Published%20Documents/
United%20States%20of%20America/1/U.S.%20Cover%20Note%20INDC%20
and%20Accompanying%20Information.pdf
13 International Energy Agency (IEA), Special Briefing for COP21, 2015.
15 Paris Agreement, Article 2.1(a).
16 Paris Agreement. Article 7.1.
17 Paris Agreement, Article 2.1(c).
18 Paris Agreement, Article 4.9.
19 Paris Agreement, Article 4.3.
21 Paris Agreement, Article 4.19.
23 CDP and BSR, Climate Supply Chain Report, 2016.
http://www.bsr.org/en/our-insights/report-view/bsr-cdp-climate-change-supply-
chain-report-2015-2016
6
China INDC submission to UNFCCC, 2015.
http://www4.unfccc.int/submissions/INDC/Published%20Documents/China/1/
China’s%20INDC%20-%20on%2030%20June%202015.pdf
24 Paris Agreement, Article 7.1.
7
European Union INDC submission to UNFCCC, 2015.
http://www4.unfccc.int/submissions/INDC/Published%20Documents/Latvia/1/
LV-03-06-EU%20INDC.pdf
26 Proxy Preview, Record Number of Climate and Corporate Political Spending Resolutions Dominate 2016 Shareholder Votes, 2016.
8
India INDC submission to UNFCCC, 2015.
http://www4.unfccc.int/submissions/INDC/Published%20Documents/India/1/
INDIA%20INDC%20TO%20UNFCCC.pdf
25 World Resource Institute, Climate Data Explorer (CAIT), 2016.
http://cait.wri.org/indc/
27 We Mean Business, The Climate has Changed, 2014.
28 For more information on Action Agenda, please see the official website:
http://newsroom.unfccc.int/
9 Brazil INDC submission to UNFCCC, 2015. http://www4.unfccc.int/submissions/
INDC/Published%20Documents/Brazil/1/BRAZIL%20iNDC%20english%
20FINAL.pdf
29 Paris agreement, Decision 1/CP21, paras. 120.
10 New Climate Economy, Better Growth, Better Climate: Executive Summary, 2014, pp. 8-10.
31 Take action with We Mean Business at:
http://www.wemeanbusinesscoalition.org/take-action
11 International Energy Agency (IEA), Special Briefing for COP21, 2015.
32 http://www.wemeanbusinesscoalition.org/
30 More information on NAZCA can be found here: http://climateaction.unfccc.int/
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