Less than a year after the landmark Paris Agreement was adopted at COP21, the Paris Agreement entered into force. The world has already seen a significant shift towards stronger climate action.
The adoption of the Paris Agreement delivered a signal to governments, businesses and the global public: All parties, from national governments to small businesses, must do their part to minimize the risks and impacts of climate change.
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This signal has mobilized actions by public and private sector institutions to move away from fossil fuels, which contribute to climate change, and towards an economy powered by renewable energy.
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Coal-burning power plants are the top source of carbon emissions in the U.S., and a leading driver of human-made climate change around the world. Since the adoption of the Paris Agreement, there has been significant progress in the phase out of coal as an energy source.
A month after the Paris climate talks, the Obama administration announced that it would halt new coal mining leases on public lands. Governments around the world from the European Union to oil giant Saudi Arabia announced also moves away from fossil fuels.
In fact, even before the treaty entered into force, countries reached milestones in generating power from cleaner sources. A study found China, that the world’s largest emitter, already peaked its coal use — a turning point for fossil fuel consumption. In May, coal-generated energy in the UK fell to zero for the first time in a century while in September, Costa Rica celebrated two months of burning no fossil fuels.
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The Paris Effect on the fossil fuel industry has extended to the private sector as well: In March, financial giant JPMorgan stopped financing coal mines around the world due to the threat from climate change, and in October, French bank Societe Generale announced it would do the same.
The shift away from the use of fossil fuels is only one part of the fight against global warming. The Paris Agreement goes further, urging the world to transition quickly to a low-carbon, sustainable future. In order to fully power this future, clean energy technologies such as wind and solar need faster investment, development and deployment.
Since December, actors on every level – countries, states, businesses and individuals – have displayed a massive appetite for clean energy, which attracted a record $329 billion investment in 2015. The private sector and financial markets have helped drive the growth of the clean energy industry, as solar reached a record low price in December and major companies like Apple and General Motors pledging go 100% renewable.
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International climate action has accelerated since the Agreement’s adoption. Most notably, leaders from the U.S., Canada and Mexico reached a landmark agreement in June to generate half their electricity from clean energy sources by 2025.
The Paris Agreement sent a price signal to markets, companies and investors across the world, accelerating a shift in funding and investment patterns that preceded Paris but has intensified since.
The private sector and and state-owned enterprises have begun widespread assessments of their exposure to climate risk, which was reflected by the Financial Stability Board’s creation of a climate financial disclosure task force. The Paris Effect continues in the financial world as major players like Moody’s and BlackRock warn of climate risk. Investors, too, have demonstrated a shift towards climate-friendly energy sources, heading toward what analysts are calling an “investor death spiral” for fossil fuel companies.
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Businesses and governments have also shown an increased willingness to put a price on carbon, as evidenced by China’s announcement that it will expand its carbon trading market to eight major industries and the Canadian prime minister’s direction to provinces to enact a carbon tax or cap-and-trade scheme by 2018.
Over the past year, prominent figures across the world, from California’s insurance commissioner to the World Medical Organization, have joined the call for divestment to protect themselves from the financial risks from climate change. A growing number of cities, countries and private institutions have already divested their funds from fossil fuel holdings this year, including cities like Copenhagen, Berlin and Sydney, Norway’s sovereign wealth fund–the largest in the world–and the Rockefeller Family Fund.
The Paris Agreement has acted as a signal to the world that it’s time for strong climate action and a rapid shift to a clean energy economy. Governments, businesses and individuals have already heeded this call and an ever-increasing number are joining the movement as the Paris Effect continues to spread around the world.Still unsure about how the Paris Agreement affects businesses? This article breaks down the main ways the private sector is influenced by this international sustainability agreement.
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It is an agreement within the framework of the United Nations Framework Convention on Climate Change that establishes measures for the reduction of Greenhouse Gas (GHG) emissions through mitigation, adaptation and resilience. It establishes as main objectives:
Together with the 2030 Agenda, it projects an integrated vision towards a sustainable world, focused on the well-being of people, the preservation of the planet and peace.
Its entry into force implies a profound structural transformation in our society. However, climate action does not depend only on governments but is the duty of citizens, financial institutions and the private sector.
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According to the We Mean Business Coalition report, the commitment of companies around the world would amount to 60% of the GHG reduction of the total established in the Paris Agreement. This represents a reduction by 2030 of 3.7 billion metric tons of C02 per year.
To achieve the goal of reducing emissions, a GHG emission rights trading scheme is established by which polluting companies have the obligation to offset the emissions derived from their activity by purchasing carbon credits from developers of projects to reduce carbon emissions. Rules about the trading of credits to offset GHG emissions such as recycling plants, renewable energy projects, forestry projects, energy efficiency, etc, were partially clarified at COP26 in Article 6 of the Paris Agreement.
In Spain, on December 7, 2018, the Ecological Public Procurement Plan of the General State Administration, its autonomous bodies and the managing entities of Social Security (2018-2025) was approved.
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This plan establishes that all companies contracted to carry out public works must have approved quality systems that can contribute to achieving better environmental sustainability. Governments committed themselves through the Paris Agreement to reduce their emissions to zero by 2050, and this implies that measures such as the previous one will be implemented in the different sectors to push private sector companies to adopt environmental policies related to climate change, the use of resources and sustainable production and consumption.
In September 2021, the UK also added environmental criteria to its public tender selection process for contracts of more than 5 million pounds, among which the delivery of a carbon reduction plan.
Along with the Paris Agreement, the Sustainable Development Goals (SDGs) are another set of rules meant to help the world become more sustainable and equitable. This too needs to be integrated into businesses.
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At , we support companies in the implementation of their sustainability and decarbonization strategies. Get in touch with our team to discover our solutions.
Eight years after the adoption of the Paris Agreement, the race to net zero is well underway, and some countries are clearly standing out.
The latest IPCC assessment report reminds us that we need to do much more this decade if we are to limit global warming to 2ºC, and presents the most efficient avenues to meet our climate goals: phasing out fossil fuels and using carbon removal methods in hard-to-abate sectors.
Paris Climate Agreement
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