In my previous blog about the 2015 United Nations Climate Change Conference (COP21), I said there was cautious optimism that a multilateral deal could be reached. Well, there was in fact good news coming from Paris on December 11. At the conference, 187 countries committed in a legally binding agreement to reduce their greenhouse gas (GHG) emissions.
The commitments in Paris will not immediately deliver the 2°C or 1.5°C temperature limits suggested by the United Nations’ panel of experts as the maximum allowed to avoid the worst effects of climate change. Instead, the agreement commits to a process of increasing emissions cuts every 5 years to eventually curtail emissions to a level that limits temperature increases within the 2°C-1.5°C range. More importantly, it commits countries to a “balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of the century.” In short, this means that the world will need to be net zero emissions early after 2050.
The Paris agreement did push forward the financial agreements to developing nations that were introduced in Copenhagen. There is room to improve in this area, but it’s becoming less relevant as renewable generation becomes competitive with new conventional capacity.
In parallel to the conference, there were a large number of commitments from investors and businesses to move investments to clean energy and even to divest from fossil fuels. For the first time, major businesses and investor groups lobbied for strong long-term goals and stringent rules to increase ambition (and reduce investment risk).
One interesting commitment came from the automotive industry. Led by Renault, a group of 13 CEOs from the industry committed themselves to decarbonizing transportation over the next 2 to 3 decades. They anticipate 2 billion vehicles on the road by 2050, but are clear in saying that, “We cannot continue to rely on fossil fuels to power those vehicles.” If they deliver on this promise, they will break what was perhaps the most successful partnership between two industries in the 20th century. It would hit the transport fuel market, the most important market of the oil industry and one that has been less affected by renewable penetration to date.
Point, Set, Match?
COP21 was successful thanks to the technological advances in renewables in the last decade and a combination of societal changes (i.e., improved economic performance in the United States, the Chinese population facing dreadful air quality issues, and extreme weather patterns in parts of the world) that make political inaction less tolerable.
However, minimizing GHG emissions in the global economy is not going to be easy, especially as some countries might need to shift funding toward adaptation and increased resilience. Until recently, renewables grew on the shadow of conventional sources, barely affecting their business models or hitting their core markets. This has changed in the last few years, and the Paris agreement sets a ticking clock in the face of oil companies and utilities with large generation capacity reliant on fossil fuels that says that these technologies are on their way out (or at least that they will play a minor role in the second part of the century). The problem that arises is how to keep the standards used in the old system while laying the base for the success of the new system. Smart thinking and lots of innovation will be needed to go through this transition without rocking the boat (too much).
Tags: Climate Change, Energy Technologies, Greenhouse Gas Emissions, Policy & Regulation
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