The Paris Agreement on Climate Change, C’est Bon

How should one evaluate the agreement reached in Paris December 12 by the 21st Conference of Parties to the UN Framework Convention on Climate Change (UNFCCC)?   Some avid environmentalists may have been disappointed in the outcome.  The reason is that the negotiators did not commit to limiting global warming to 1 ½ degrees centigrade by 2050, nor will the new agreement directly achieve the 2 degree limit.

But such commitments would not have been credible.  What came out of Paris was in fact better, because the negotiators were able to agree on meaningful practical near-term steps. Virtually all countries agreed concretely to limit their emissions in the near term, with provisions for future monitoring and periodic checkup and renewal. This is a more important achievement than setting lofty goals for the distant future while giving little reason to think that they would be met.  The important thing is to get started.

In four key respects, the agreement is a good one, for those who see global climate change as an important problem and who want down-to-earth steps to address it.

First, and most salient, is comprehensive participation.  More than 186 countries offered individual commitments, called Intended Nationally Determined Contributions (INDCs), to go into effect in 2020. These countries account for 96% of global emissions, compared with the current coverage of the Kyoto Protocol which is only 14% of global emissions.  In the past, only advanced countries were expected to agree to commitments to reduce emissions of greenhouse gases.  Developing countries were explicitly spared that within the UNFCCC.  One reason it is so important for them to make explicit commitments is that the growth in emissions is now taking place exclusively in developing countries, not among the advanced countries.  Furthermore, countries like the United States would not agree to limit their emissions if they feared that the effect might simply be a migration of carbon-emitting industry to developing countries.

Second is the agreed process of future assessment and revision of targets.  The decision was to take stock and renew the commitments every five years. (Some negotiators had been arguing for ten-year intervals.)  Future steps can adjust targets to be either more aggressive or less, in light of future developments.  Probably more aggressive, if the scientists’ predictions are borne out.  The second set of INDCs is to be decided in 2018.

Third is transparency in monitoring, reporting and verifying each country’s progress.  Countries are to report every five years, starting in 2023, how well they have done compared to what they had said they would do.  The United States and Europe had to push hard on China and India to get agreement on this.  But without it, the INDCs would not have been credible.

Fourth are mechanisms to facilitate international linkage, including scope for firms operating in rich countries to finance emission reductions in poor countries.  This is important in order to achieve the environmental goals in an economically efficient way:  it is cheaper to pay a poor country to refrain from building new coal-fired power plants than to shut down plants that are already operating in rich countries.  Achieving the first period’s INDCs at low cost will in turn be important for willingness to take further steps in future periods.

Some may be disappointed that the Paris Agreement did not explicitly commit to more aggressive environmental goals, particularly limiting warming to 1 ½  degrees centigrade (above pre-industrial levels) or zero greenhouse gas emissions in the second half of the century, leaving these as aspirations.  And in truth the INDCs are nowhere near enough in themselves even to limit warming to 2 degrees Celsius (3.6 degrees Fahrenheit), the long-term global goal that was agreed at an earlier Conference of the Parties in Cancun in 2010.

Actually achieving such environmental goals would of course be desirable, in order to minimize risk of disaster scenarios.  But proclaiming ambitious collective numbers is very different from achieving them.  It is almost beside the point that, by now, a goal of 1 ½ degrees would be very high-cost economically. The plan needs to be credible if it is to determine myriad business decisions made today.   But collective goals are not credible without assignment of individual responsibility; and leaders in any case can’t make credible commitments 35 years into the future.

Others, from developing countries, are disappointed for another reason:  the figure of $100 billion in finance from rich countries does not appear in the legally binding body of the agreement.  They did get an admission of moral responsibility to help small island states, for example, cope with “loss and damages” from sea level rise.  But the rich countries rejected demands for concession of legal liability.  I judge this a reasonable outcome in a difficult situation.

Rich countries can’t deny that their past emissions have inflicted harm on the world.  The entity whose land was flooded would have a claim to compensation from the entity that had caused the damage, if they were operating within a domestic legal system.  But sovereign countries are not operating in such a legal system.  The $100 billion in finance has always seemed to me problematic.  The developing countries fear that the rich countries won’t in the end deliver it, not in cash; and they are right.  The rich countries fear that if they did send “reparations,” much of it would disappear into the pockets of local elites; and they are right.  Better, then, not to make promises in the first place.

The poor countries do have a strong case.  The average American still emits ten times as much greenhouse gases as a citizen of India.  India cannot be deprived of the right to develop economically.  But the best place to take account of these fairness concerns is in the agreed emissions targets.  The efforts that the richer countries promise in these agreements should be – and generally are — greater than the efforts of poor countries.  The richer a country is, the earlier the date at which its emission targets should peak.  The richer it is, the more sharply its target should cut relative to emissions baseline.  With targets that take into account countries’ stage of development, i.e., that continue to grow in the short term, the poor countries can get paid for additional emissions cuts under the international linkage mechanisms.  This fulfills the important principle of “common but differentiated responsibilities and respective capabilities” that was and is a key feature of the UNFCCC under which the Paris Agreement has been reached.

The Paris Agreement incorporates both fairness and efficiency.  In light of the very big obstacles and long odds that they faced, the negotiators were surprisingly successful in converging on a plan that offers hope of practical progress.

A shorter version was published by Project Syndicate.

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