Paris Agreement On Climate Change Boosts Clean Energy Innovation And Finance

On December 12, 2015, 195 countries came together in Paris to adopt a landmark climate change deal. The Paris Agreement creates, for the first time, a long-term global framework that commits nearly every country to reducing greenhouse gas emissions to address climate change. The Agreement sets a concrete goal of limiting temperature increases to "well below" 2 degrees Celsius above pre-industrial levels, and pursuing efforts to meet a more ambitious goal of 1.5 degrees Celsius. Under the Agreement, all countries must establish nationally determined climate targets and report on their progress using a rigorous, standardized process of review.

NATIONALLY DETERMINED CONTRIBUTIONS, INTERNATIONAL ACCOUNTABILITY

The cornerstone of the Agreement is the requirement that each country set a nonbinding (i.e., intended) target for itself to cut its carbon emissions. Although there is no penalty for failing to meet a target, the Agreement includes a robust transparency system that enables countries to hold each other accountable for meeting their targets. This transparency system requires countries to report on national inventories of emissions by source on a uniform basis and on progress made in implementing and achieving the targets put forward (with some flexibility for developing countries). As a further check, the Agreement establishes a comprehensive technical expert-review process that analyzes whether their reporting is in line with adopted standards.

FUTURE TARGETS AND CHECK-INS (A NAME AND SHAME MECHANISM)

To ensure that progress continues, every five years (starting in 2020) all countries are required to create new, more stringent reduction targets. (Certain countries initially sought a less frequent 10-year review cycle, but the more rigorous five-year cycle was ultimately chosen). These targets will be submitted nine to 12 months before they are finalized to provide time for other countries and the public to comment on the proposed targets, increasing pressure on countries to conform their actions to their national targets and the goals set forth in the Agreement. We expect this component of the Agreement, in particular, will result in greater demand for clean technologies as these new and more ambitious greenhouse gas targets come into play.

FINANCING (VARYING LEVELS OF COMMITMENT)

To hold all countries accountable to this Agreement, and to avoid the shortcoming of the Kyoto Protocol in 1997 (in which only developed nations were required...