Climate change is a global challenge and requires a global solution. Through analysis and dialogue, the Center for Climate and Energy Solutions is working with governments and stakeholders to identify practical and effective options for the post-2012 international climate framework. Read more
The following article appeared in the July 2016 issue of the American Bar Association International Environmental and Resources Law Committee Newsletter.
By Jennifer Huang, International Fellow, Center for Climate and Energy Solutions (C2ES)
Parties to the United Nations Framework Convention on Climate Change (UNFCCC, or Convention) reached a landmark agreement on December 12, 2015 in Paris, charting a fundamentally new course in the global climate effort. A central issue in the negotiations was strengthening transparency requirements to better hold countries accountable for their commitments. Moving beyond the strict differentiation between developed and developing countries that characterized earlier efforts under the Convention, the Paris Agreement establishes an enhanced transparency framework with “built-in flexibility” to accommodate varying national capacities. For the first time, all parties must report regularly on their emissions and implementation efforts, and undergo international review. These transparency mechanisms will provide information necessary to track parties’ progress in implementing their nationally determined contributions to the new treaty, and will help strengthen parties’ capacities to measure and understand their own efforts. By building mutual trust, they also can help strengthen the overall climate effort.
The Paris Agreement promises support to help developing countries meet the new requirements and allows them flexibility in the scope, frequency, and detail of their reporting, and in the extent of review of their communications. Deciding the nature of that flexibility will be a primary focus of continuing negotiations on the detailed rules for implementing the agreement.
Existing UNFCCC transparency framework
Existing transparency requirements under the UNFCCC differ for developed and developing countries. Parties to the Convention must submit national communications (NCs) on their mitigation and adaptation actions every four years, though the required content differs for developed and developing countries. United Nations Framework Convention on Climate Change [hereinafter UNFCCC] art. 12, May 9, 1992, S. Treaty Doc No. 102-38, 1771 U.N.T.S. 107 (entered into force Mar. 21, 1994). To enhance reporting on national greenhouse gas (GHG) inventories and efforts to implement the requirements of the Convention, agreements reached in 2010 at Cancun established two parallel processes: one for developed countries, and a less stringent one for developing countries. UNFCCC, Conference of the Parties, Seventeenth Session, Durban, S. Afr., Nov. 28 – Dec. 11, 2011, Decision 2/CP.17: Outcome of the Work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention, U.N. Doc. FCCC/CP/2011/9/Add.1 (Mar. 15, 2012).
Under International Assessment and Review (IAR), developed country parties enhance the reporting in their NCs through the submission of biennial reports (BRs), which outline their progress in achieving emission reductions and the provision of financial, technological, and capacity-building support to developing country parties. Developed countries undergo a technical review of their national reports, in which technical experts review the annual GHG inventories, examine the technical information on emissions and removals, and verify the methodologies used to provide those measurements. The technical review is followed by a “multilateral assessment,” which is essentially a Q&A between the party being assessed and other parties on the basis of all submitted national reports. To date, all developed countries have gone through one full round of IAR.
Under International Consultation and Analysis (ICA), developing country parties enhance the information in their NCs through the submission of biennial update reports (BURs), which include a national inventory report and information on their mitigation actions, needs, and support received. Unlike developed countries, developing countries are not required to report the progress made in implementing and achieving emission reductions. The BUR then undergoes a technical analysis by a team of technical experts under a less rigorous standard of review than for IAR, resulting in a summary report that includes the capacity-building needs to facilitate reporting in subsequent BURs. The technical analysis is followed by a “facilitative sharing of views,” which is another peer review forum where parties are free to ask questions of a party on its BUR.
Although the current ICA process for developing countries is only halfway through its first round, both the UNFCCC secretariat and parties have learned some important lessons. There has been significant improvement of the technical basis for reporting, such as greater consistency in the use of reporting methodologies and an increase in the requests for technical review of NCs. There is more coherency and coordination at the institutional level, domestically and internationally, although room for improvement remains. Finally, for developed and developing countries alike, simply going through the process and engaging with the secretariat improved the quality of reporting and increased familiarity with the process.
Negotiating the Paris Agreement – moving beyond bifurcation
The Paris Agreement, adopted at the Conference of the Parties (COP) 21, calls for an enhanced transparency framework requiring all countries to work toward the same standards of transparency and accountability. UNFCCC, Conference of the Parties, Twenty-first Session, Paris, France, Nov. 30-Dec. 13, 2015, Decision 1/CP.21: Adoption of the Paris Agreement, U.N. Doc. FCCC/ CP/2015/10/Add.1 (Jan. 29, 2016). The new framework will build on parties’ experiences with the existing system but without its strict bifurcation between developed and developing countries. All countries will be required to report on their GHG emissions and implementation efforts at least every two years and undergo both expert review, or technical analysis of the information in their reports, and peer review, in which parties can engage reviewed parties on their reports. Id. at ¶¶ 90-91; Annex, art. 13(3, 4, 11).
To achieve this outcome, negotiators had to overcome a number of concerns by developing countries. Some were worried that the in-country expert reviews currently required of developed countries would impinge on their sovereignty if imposed. Many already lack the funding, expertise, and data to comply with existing requirements; fulfilling enhanced requirements would require further capacity building. Finally, most voiced some fear of the unknown. With only 16 developing countries having submitted biennial reports by December 2015, few even had experience with ICA.
The agreement assuages some of these worries by increasing the flexibility and capacity building measures under the Convention. To enable developing countries to comply with the new requirements, the transparency framework “shall provide flexibility in the implementation of the provisions of this Article to those developing country Parties that need it in the light of their capacities.” Id. at Annex, art. 13(2). Moreover, it establishes an enhanced framework for capacity building to support developing countries. The Paris outcome launched the Capacity Building Initiative for Transparency, to be funded through contributions by developed countries, to help developing countries create or enhance the domestic tools and institutions they need to meet these obligations. Id. at ¶¶ 84-86. The Paris Committee on Capacity Building was also set up to oversee a four-year work program to boost the capacity building activities needed to implement the Paris Agreement. Id. at ¶¶ 71-73. The work program will, for instance, identify and provide recommendations on addressing capacity gaps and needs, promote the dissemination of tools and methodologies for capacity building, and explore how developing countries can take ownership of building and maintaining capacity over time. Id. at ¶74(b),(c),(f).
The transparency processes will feed into a global stocktake, which will assess collective progress towards meeting the Paris Agreement’s long-term goals. Id. at art. 14. They will also link to a new committee of experts to “facilitate implementation” and “promote compliance.” Id. at art. 15(1). In contrast to the Kyoto Protocol, which included an enforcement-based compliance system, this committee will be facilitative in nature and operate in a “non-adversarial and non-punitive” manner. Id. at art. 15(2).
Further work is needed over the next few years to establish the nuts and bolts of the new transparency regime. Parties must overcome some key challenges. The agreement promises to accord flexibility to developing countries, but the exact nature of that flexibility and how it will be operationalized is an important consideration as parties begin to negotiate the implementing rules. Parties will need to determine how flexibility can be built into the modalities, procedures and guidelines for transparency of action and whether existing communication channels can be streamlined to avoid overburdening developing countries.
Flexibility can be embedded in the transparency process in many ways. For instance, some countries might initially submit their reports less frequently. Parties currently report on their GHG inventories via guidelines that offer several approaches, or “tiers.” Each tier represents a level of methodological complexity in categorizing emissions and activity data. Tier 1 is the most basic method while Tiers 2 and 3 are each more demanding in terms of complexity, certainty, and data requirements. Thus, another option would be for some developing countries to start at the lowest, least stringent, reporting tier, and comply with higher tiers as they build institutional capacity over time.
Because the transparency process links to the global stocktake and will be buttressed by an implementation and compliance mechanism, parties will need to clearly outline their relationship to one another and coordinate the complementary work on these elements. The Global Environment Facility, which serves as a financial mechanism for the UNFCCC, will also need to make the financial arrangements necessary for the operationalization of the Capacity Building Initiative for Transparency. Id. at ¶ 86. This is a crucial step for developing countries to make the switch to the new transparency framework, and continue to do so over time.
The new working group for the Paris Agreement will begin to develop the modalities, procedures, and guidelines for transparency of action and support as well as for the implementation and compliance mechanism. Id. at ¶¶ 91, 103. It will report each year to the COP before concluding its work in 2018, at which time there will also be a facilitative dialogue to assess collective efforts. Id. at ¶¶ 20, 96. The recommendations on transparency of action and support will be forwarded to the first Conference of the Meeting of the Parties to the Paris Agreement (CMA 1), which will take place after the Paris Agreement has entered into force. Id. at ¶¶ 91, 99.
The Paris Agreement rests heavily on transparency as a means of holding countries accountable. Over the next few years, parties will undertake the technical work necessary to build on lessons learned and transition to a new transparency system. Creating a flexible system that increases parties’ capacities over time is paramount in this endeavor and will send a positive political signal to developing countries. Because countries will work towards the same standards over time, learning by doing ought to be a guiding principle, enabling countries to build on existing experience, develop trust, and identify gaps and incentivizing them to see the value of actively participating and learning from the transparency process. The establishment of a transparency framework that applies to all while providing flexibility for developing countries with less capacity is one of the greatest achievements of the Paris outcome.
Achieving the United States' Intended Nationally Determined Contribution
More than 180 nations representing more than 95 percent of global greenhouse gas emissions offered “intended nationally determined contributions” (INDCs) to the Paris Agreement reached in December 2015. The United States’ INDC is an economy-wide target to reduce net greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025. Available analyses suggest that the United States could reduce emissions by more than 22 percent with policies either already in place or soon anticipated. Options for achieving further reductions to meet the 2025 target may include additional policies, technological advances, and stronger action by cities and companies. Concerted efforts across multiple fronts could reasonably produce the reductions needed to meet the goal. Specifically, this paper looks at the progress that has been achieved since 2005, the effect existing and proposed policies will have by 2025 as well plausible steps to fill the gap.
The latest round of negotiations under the Montreal Protocol concluded late Saturday night in Vienna with key elements of an amendment to phase down hydrofluorocarbons (HFCs) beginning to take shape. The progress in Vienna sets the stage for a final agreement at the Meeting of the Parties scheduled for October in Kigali, Rwanda.
Countries are now closer than ever to a historic breakthrough that can dramatically reduce the risks of global climate change.
Because they are potent greenhouse gases rapidly expanding in their use in refrigeration and air conditioning, HFCs are a critical target in international efforts to achieve the goal established under the landmark Paris Agreement of keeping temperature increases well below 2 degrees Celsius. An ambitious HFC amendment could reduce global temperatures by an estimated 0.5 degrees by 2100 compared to business as usual growth.
The highlight of the meeting was a call to action delivered by U.S. Secretary of State John Kerry. His appearance, along with several days of morning to late-night engagement by Environmental Protection Agency Administrator Gina McCarthy, underscored the critical importance the United States places on using the HFC amendment to build on the momentum achieved in Paris.
Two key issues were the focus of the negotiations in Vienna: the baseline (the level of HFCs from which controls are based) and timetable for limiting HFC emissions, and the guidelines for providing financial support for developing countries in meeting these obligations. While more work remains to be done before the October meeting, real progress was made on both fronts.
The proposal for developed countries centered around setting a baseline of 2011-2013 with a 10 percent reduction from there by 2019. Most of these countries have already begun limiting HFCs though domestic regulations.
For developing countries, where HFC use is only now ramping up, a wide range of proposals was put forward. A large number of countries (African Group, Pacific Island countries, a number of Latin America countries, the United States, Japan, Canada, Australia, New Zealand, and the European Union) supported a baseline of 2017-2019 with a freeze at 2021. India, China and Gulf Cooperation Countries offered less ambitious proposals. India’s proposal would allow the longest unrestricted use with a baseline of 2028-2030 and a freeze at 2031.
On funding issues, there was broad agreement on using the Protocol’s Multilateral Fund as the institution for administering financial support to developing countries. Secretary Kerry emphasized that over 75 percent of the fund’s donor base of developed countries has already publicly stated their intention to provide additional funding to implement an HFC amendment. The key points of contention relate to important details concerning what aspects of costs will be paid and over what period of years.
Despite the progress made last week, closing the deal on an HFC amendment in October will not be easy and is by no means assured. With continued U.S. leadership and a willingness among all nations to cooperate in confronting the clear and present danger of climate change, an HFC amendment in 2016 should be achievable.
Rooftop solar panels in central India.
Photo courtesy Coshipi via Flickr
A bold initiative to vastly expand solar energy in developing countries recently reached two major milestones toward its ultimate goal of mobilizing $1 trillion in solar investments by 2030.
In late June, the World Bank Group signed an agreement establishing it as a financial partner of the International Solar Alliance, providing more than $1 billion in support. The Bank Group will develop a roadmap and work with other multilateral development banks and financial institutions to mobilize financing for development and deployment of affordable solar energy.
The news follows the June 7 joint announcement between India and the United States to launch an initiative through the Alliance focusing on off-grid solar energy.
The International Solar Alliance was announced at the Paris climate conference in December by Indian Prime Minister Narendra Modi and French President François Hollande. It was one of many new initiatives involving business, civil society, and public-private partnerships launched in Paris.
The alliance will comprise 121 countries located between the Tropic of Capricorn and the Tropic of Cancer that typically have 300 or more days of sunshine a year. Companies involved in the project include Areva, HSBC France and Tata Steel.
According to the Renewable Energy Policy Network for the 21st Century (REN21), global solar capacity experienced record growth in 2015, with the annual market for new capacity up 25 percent over 2014. More than 50 gigawatts were added, bringing the total global capacity to about 227 gigawatts. That’s about 10 percent of the total amount of electricity the U.S. produced in 2015.
In developing and emerging economies, affordable financing is a challenge. The alliance will work to expand solar power primarily in countries that are resource-rich but energy-poor by mobilizing public finance from richer states to deliver universal energy access. Strategies include lowering financing costs, developing common standards, encouraging knowledge sharing and facilitating R&D collaborations.
President Hollande laid the foundation stone of the International Solar Alliance at the National Institute of Solar Energy in Gurgaon, Haryana in January, marking the first time India has hosted the headquarters of an international agency. The Indian government is investing an initial $30 million to set up the headquarters. The French Development Agency has earmarked over 300 million euros for the next five years to finance the alliance’s first batch of projects.
The solar alliance complements India’s own ambitious solar energy goals, which include a 2030 target of 40 percent of electric power capacity from non-fossil fuel energy sources as part of its intended nationally determined contribution to the Paris Agreement. India also plans to develop 100GW of solar power by 2022, a 30-fold increase in installed capacity.
The growing support for the solar alliance is evidence of rising political momentum around the world to act on climate change and transition to a low-carbon economy. Look for a third major milestone in September, when the Alliance meets for its inaugural Founding Conference in Delhi.
The Montreal Protocol on Substances that Deplete the Ozone Layer is considered the world’s most successful international environmental treaty.
Under the Protocol, nations phased out chlorofluorocarbons (CFCs) – a class of compounds that were used mostly in aerosol sprays, refrigerants, foams and as solvents, and were damaging the protective ozone layer that shields the planet from harmful ultraviolet radiation. Recent evidence shows that the ozone hole over Antarctica is beginning to repair itself because of efforts under the Protocol to reduce ozone-depleting substances.
Because ozone-depleting substances and many of their substitutes are also potent greenhouse gases, their phase-out under the Montreal Protocol is critical to international efforts to address climate change.
Negotiations are under way to amend the Montreal Protocol to now phase down the replacements for CFCs and hydrochlorofluorocarbons (HCFCs). These alternatives, hydrofluorocarbons (HFCs), while not harmful to the ozone layer, are a fast-growing source of potent greenhouse gases contributing to climate change.
Because HFCs have a relatively short atmospheric lifetime (compared to carbon dioxide), their phasedown could reduce temperature changes in 2100 by an estimated 0.5 degrees Celsius. These reductions are critical to meeting the long-term goal of the Paris Agreement to keep warming well below 2 degrees.
The Montreal Protocol is a part of the 1985 Vienna Convention for the Protection of the Ozone Layer, which commits its 197 parties to protect human health and environment against “adverse effects” of human-induced changes to the ozone layer.
The Montreal Protocol, which was adopted in 1987 and entered into force in 1989, limits the consumption and production of ozone-depleting substances. Since its entry into force, the Montreal Protocol has phased out over 98 percent of the world’s consumption of ozone-depleting substances.
Key Issues Ahead
Under the Dubai Pathway adopted in 2015, parties to the Montreal Protocol have agreed to work toward adoption of an amendment in 2016 to phase down HFCs. HFCs are widely used in refrigeration and air conditioning, foam blowing, and other applications and often replace CFCs and HCFCs. Though they now account for less than 1 percent of global greenhouse gas emissions, HFCs are extremely potent greenhouse gases whose use is projected to grow rapidly, particularly in developing countries phasing out HCFCs.
Parties are meeting in October 2016 to attempt to finalize an amendment to the protocol. Key issues include:
- Funding for developing nations for HFC replacements
A significant feature of the Montreal Protocol is its Multilateral Fund, established to provide funds and facilitate the transfer of technologies to help developing countries comply with their obligations under the protocol. Although the costs associated with patents and royalties are eligible for funding under the Multilateral Fund, parties have raised concerns that patents on the production and use of recently developed low global warming potential substitutes for HFCs could restrict their access to, or increase the cost of, transitioning to these alternatives.
- Exemption for air conditioning in countries with high ambient temperatures
One critical concern is whether suitable alternatives for air-conditioning applications are available and adequately demonstrated for cooling capacity and energy efficiency under conditions of high ambient temperatures. Given the critical importance of these applications, one option being considered by parties is to provide a time-limited exemption for those uses in extremely hot countries.
- Baseline and phase-down schedule
A range of proposals have been put forward by parties for setting baselines and phase down schedules for both developed and developing countries. Past control schedules have typically allowed for a 10-year delay between controls on developed and developing countries. A control schedule that sets near-term baselines, limits the lag time between controls developed and developing countries, and achieves an ambitious phase down schedule will deliver the greatest climate benefits.
- Maximizing Energy Efficiency Gains
In shifting to new low global warming refrigerants, parties have the opportunity to select new refrigerants and equipment that maximize the gains in energy efficiency. Air conditioning and refrigeration are significant and rapidly growing energy use sectors in developing countries and efforts under the Multilateral Fund to incentivize energy efficiency gains could double the climate change benefits from a shift to low global warming gases.
- Blog: Advancing toward an HFC phasedown (2016)
- Ten Myths About Intellectual Property Rights and the Montreal Protocol (2016)
- Status of Legal Challenges: Patents Related to the Use of HFO1234YF in Auto Air Conditioning (2016)
- Approaches to Structuring a High Ambient Temperature Exemption (2016)
- Technological Change in the Production Sector under the Montreal Protocol (2015)
- Patents and the Role of the Multilateral Fund (2015)
- Addressing Short-Lived Climate Pollutants
Statement of Bob Perciasepe
President, Center for Climate and Energy Solutions
June 29, 2016
On the North American Climate, Clean Energy, and Environment Partnership Action Plan:
By pledging to power their economies with more clean energy, the leaders of Canada, Mexico and the United States are showing the way toward a more sustainable future.
Generating half of North American electricity from non-emitting sources by 2025 is ambitious but it’s achievable.
By developing goals and strategies for 2050 and beyond, the three countries also will be charting a clearer course toward achieving the aims of the Paris Agreement, and setting a strong example for other countries.
Canada, Mexico and the United States have connected economies. Working together can make all three economies stronger and more sustainable, and reduce the costly risks of climate change.
To speak to a C2ES expert, contact Laura Rehrmann at email@example.com
About C2ES: The Center for Climate and Energy Solutions (C2ES) is an independent, nonprofit, nonpartisan organization promoting strong policy and action to address the challenges of energy and climate change. Learn more at www.c2es.org.
A central feature of the Paris Agreement is a stronger transparency system requiring countries to regularly report on their emissions and their national climate efforts.
At the international level, this provides a critical means of accountability by letting countries see whether others are sticking to their commitments.
But one of the key messages that emerged at last month’s U.N. climate negotiations in Bonn, Germany — including at a side event organized by C2ES — is that greater transparency has important benefits back at home, too.
The May climate meeting, the first since negotiators adopted the Paris Agreement, featured a first-ever facilitative sharing of views (FSV) for developing countries. Thirteen developing country parties gave presentations on their first biennial reports on their efforts to reduce emissions, required under the 2010 Cancún Agreements, and responded to questions from other parties.
These countries, were applauded for their efforts and their achievements. Most of them focused on the challenges they faced in fulfilling their reporting obligations, the lessons learned in addressing or overcoming these obstacles, and what they might need to do more.
Many of these lessons were echoed in a C2ES side event, “Learning from UNFCCC Transparency Experience: Perspectives of Parties and Expert Reviewers.” The event featured negotiators and technical experts from Canada, the European Commission, New Zealand, South Africa and Brazil, with the latter two countries just having completed the FSV.
Both developed and developing countries said compiling their reports benefited them domestically by stimulating regular conversations among various levels of government and with nongovernment stakeholders. The process also helped institutionalize measurement, reporting and verification (MRV), and identified opportunities to strengthen domestic climate policies.
In two other side events hosted by the UNFCCC secretariat, Uruguay, Vietnam, Ghana and Peru reflected on their experiences under the existing transparency framework. Regular reporting and review is a significant undertaking, and they learned how much time and coordination is required. Even so, their initial experiences proved to be interactive and facilitative. Countries were provided assistance in their own language, and could communicate easily with experts and staff through technology like Skype.
The co-chairs of a new working group that will develop detailed decisions implementing the Paris Agreement also took up these themes, asking parties to share their experiences and lessons learned from the existing MRV arrangements. These lessons will also inform the next session of FSV, which will take place in Marrakech, Morocco, during COP 22.
Parties hope these lessons will inform the new rulebook that must be developed for the “enhanced transparency framework” called for in the Paris Agreement. One of the key takeaways is that by learning as they go, countries significantly improve the quality of their reporting, and their own policymaking becomes more effective as a result.
Statement of Bob Perciasepe
President, Center for Climate and Energy Solutions
June 7, 2016
On US-India efforts on climate change:
The United States and India are taking another positive step toward a low-carbon future with Tuesday’s joint statement on climate and clean energy. Prime Minister Modi’s announcement that India will strive to ratify the Paris Agreement by the end of the year puts the agreement closer to entering into force and builds momentum for more nations to do the same. The sooner the agreement takes effect, the sooner all nations can begin fulfilling its promises.
The pledge of cooperation between the two nations on phasing out hydrofluorocarbons (HFCs) under the Montreal Protocol is also encouraging news. Curtailing this potent greenhouse gas will further accelerate efforts to avoid further warming and reduce global temperatures by the end of the century.
To speak to a C2ES expert, contact Marty Niland at firstname.lastname@example.org
About C2ES: The Center for Climate and Energy Solutions (C2ES) is an independent, nonprofit, nonpartisan organization promoting strong policy and action to address the challenges of energy and climate change. Learn more at www.c2es.org.
PREPARED REMARKS BY ELLIOT DIRINGER
EXECUTIVE VICE PRESIDENT, CENTER FOR CLIMATE AND ENERGY SOLUTIONS
THE PARIS CLIMATE AGREEMENT: A TURNING POINT FOR THE OIL AND GAS INDUSTRY?
JUNE 6, 2016
Thank you, Martin, for the kind introduction. And my thanks to APPEA for inviting me to be with you here this morning.
I appreciate the opportunity to share some views on the landmark Paris Agreement, and on its implications not only for the future of natural gas, but for the future of the oil and gas industry as a whole.
I’d like to touch on five areas:
- First, the logic, and the most pertinent aspects, of the Paris Agreement;
- Second, what the agreement’s long-term goals imply for future energy use;
- Third, how the Paris Agreement is intensifying social and political pressures on the fossil fuel industry;
- Fourth, how I see the industry responding; and
- Finally, some thoughts from an interested observer on how the industry can work to ensure a more sustainable path for itself, and for the planet.
First, though, I’d like to tell you who we are. C2ES is a US-based NGO working to advance practical and effective climate policies in the United States and internationally.
We’re an independent organization, but we work closely with major companies committed to addressing climate change.
Our Business Environmental Leadership Council includes 30 companies, most in the Fortune 500. They span the major sectors of the economy, and include large energy producers and consumers, including three members of APPEA – BHP Billiton, BP and Shell.
In addition to our work with companies, C2ES undertakes in-depth policy analysis, and we facilitate dialogue among diverse stakeholders. One recent example is the role we played behind the scenes convening informal discussions among governments leading up to the Paris conference last December.
Over 15 months, we brought together senior negotiators from two dozen countries – Including Australia – for eight very candid, very in-depth sessions debating the key issues and the best options. The report we drew from these discussions and released last July laid out the essential landing zones for the agreement that was concluded five months later in Paris.
From our perspective, it’s a good agreement, one with the potential to be truly transformative. The Paris Agreement draws lessons from the past 20 years of climate diplomacy to establish a more pragmatic and more inclusive framework for global action.
It’s what we describe as a hybrid agreement; it combines bottom-up and top-down features to strike the right balance between national flexibility, to achieve broad participation, and international rigor, to ensure accountability and to promote rising ambition.
The strong, high-level political momentum that produced the Paris Agreement is continuing.
- More than 170 countries signed the agreement when it was formally opened for signature in April in New York.
- The United States and China have said they will soon go the next step and complete their domestic approval procedures.
- And there are strong signs the agreement will formally come into force as early as this year, but more likely next – much earlier than had been anticipated.
So what, specifically, does the agreement require?
- It commits all parties to make national contributions, backed up by domestic mitigation measures;
- It commits them to regularly report on their emissions and on their progress in implementing their contributions;
- And it commits them to update their contributions every five years.
These contributions are nationally determined – every country decides for itself what it will do – and they are not legally binding. But the binding procedural commitments – to regularly report, and to periodically update your contribution – will provide stronger accountability, and should work to promote rising ambition.
Rising ambition toward what? The agreement sets a number of long-term goals. It sets a temperature goal: keeping warming well below 2 degrees Celsius, and striving to limit it to 1.5. And it sets two emissions-related goals: first, to peak global greenhouse gas emissions as soon as possible; and second, to achieve net zero emissions in the second half of the century.
I’ll repeat that: net zero emissions in the second half of the century.
Of course, the agreement itself can’t ensure that these goals are met. But it establishes mechanisms that will periodically call the question; that will periodically require us to consider – both in capitals and at the global level – whether our near-term actions are in line with these long-term objectives.
So what do these long-term goals imply for the future of fossil fuels?
First, they quite clearly suggest that we need to shift as rapidly as possible to lower-carbon sources of energy – which leads me, of course, to the promise of natural gas.
In the United States, we know firsthand the important role that affordable natural gas can play in reducing emissions.
- By our calculation, more than half the cut in carbon emissions from the U.S. power sector achieved over the past decade came from the substitution of natural gas for coal.
- Natural gas has risen from 19 to 33 percent of our generation mix.
- Going forward, we anticipate bigger increases in natural gas use as the U.S. works to further reduce power sector emissions.
How representative is the U.S. experience? Is it an isolated example? Or is it replicable in other major regions of the world?
The answers depend heavily on local and regional circumstances. But one thing seems clear: the case for natural gas as a bridge fuel really only holds if its increased use is accompanied by a corresponding decline in the use of higher-carbon fuels.
The International Energy Agency forecasts that, under a business-as-usual scenario, natural gas will be the fastest growing fossil fuel through 2040, with global consumption increasing by 70 percent. But the IEA also forecasts that coal use will continue to rise as well.
Here’s another thing that seems clear: The climate benefits of natural gas can be realized only if we do a much better job reducing flaring and reducing methane leakage throughout the natural gas value chain.
I know that estimates of leakage vary widely. But whatever the real levels, they are too high. And there are cost-effective measures available to bring them down. What’s standing in the way?
And here’s one more thing that seems clear: Let’s say we can ensure that rising natural gas use substitutes for, rather than supplements, coal use. And let’s say we do a fabulous job reducing flaring and leaks. That’s still not enough.
Remember, the goal is net zero emissions in the second half of the century. Natural gas is a lower-carbon fuel. It’s not a no-carbon fuel.
So if we envision producing and burning growing quantities of natural gas, we need ways to keep the resulting carbon emissions from reaching the atmosphere. Which leads me to the role of carbon capture utilization and storage – CCUS.
The IEA calculates that nearly 15 percent of the emission reduction needed by 2050 to put us on a 2-degree pathway must come from CCS.
Billions have been invested in CCS and we’re making some headway. I understand that here in Australia, the Gorgon CO2 Injection Project – which is expected to be the largest CO2 storage project in the world – is projected to come on line next year. That will be a critical milestone.
We also need to be thinking about the “U” in CCUS – utilization. Just recently we’ve heard promising developments on that front.
The Ford Motor Company announced a project to capture carbon from its manufacturing emissions. They’re going to use that carbon to make the foam put in auto seats and interiors.
And last month, Exxon Mobil announced it’s expanding its partnership with FuelCell Energy. They’re working on a technology that can capture CO2 from coal and natural gas plants and use it to power fuel cells.
Breakthroughs like that are exactly what we need if we’re ever going to come close to achieving carbon neutrality.
I‘ve talked about some of the technological challenges your industry faces in navigating its way into a low-carbon future. I want to turn now to some of the social and political challenges you face coming out of Paris.
It’s no news to you that the fossil fuel industry faces growing opposition on many fronts. I understand that last month in Newcastle, 2,000 activists managed to shut down the world’s largest coal port for a day, one of 20 coordinated actions against fossil fuel installations on six different continents.
For a large and growing activist community, the Paris Agreement sounded the death knell for the fossil fuel industry.
These activists are committed to pulling every lever they can, under the agreement or elsewhere, to realize their vision of a fossil-free future. And they don’t necessarily distinguish among fossil fuels – for them, the potential carbon benefits of natural gas are outweighed by other perceived risks.
This is not a ragtag band of protestors. It’s an increasingly sophisticated movement, with significant resources, that is getting attention on Wall Street and among policymakers.
Companies are under growing pressure to disclose – indeed, in the U.S., some are under investigation for alleged failure to disclose – and investors are under growing pressure to divest.
- The governor of the Bank of England, Mark Carney, drew a fair bit of notice a few months back when he warned of rising financial risks related to climate change.
- Just a couple of weeks ago, at the Exxon and Chevron shareholder meetings, resolutions calling on the companies to conduct climate-related stress tests were only narrowly voted down.
- Later this year, we’ll hear recommendations on the disclosure of climate-related financial risks from a Financial Stability Board task force chaired by Mike Bloomberg.
A recent headline in the Huffington Post showed how the issue is being portrayed to the public. Here’s how it read: “Climate Change Poses A Big Risk To Your Retirement Savings.”
Alongside the article, I noticed a link to an online petition. The message? “Tell world governments: Keep 80 percent of fossil fuels in the ground.”
My message is that these pressures will not fade away. More likely, they will continue to grow.
So, how, so far, is the industry responding? From where I sit, it’s a mixed picture.
On the one hand, I see companies investing in alternative technologies that could help them diversify.
- I mentioned Exxon’s investment in a novel fuel cell technology.
- It’s been reported that Shell is creating a separate division focused on low-carbon power.
- Total is spending a billion dollars to acquire an advanced battery manufacturer.
- Statoil is developing a utility-scale battery system to go with its offshore wind farms.
I also see some companies – some CEOs, even – signing on to statements in support of policies such as carbon pricing. At the same time – while these are exactly the kinds of investments we need – they represent a tiny fraction of these companies’ assets.?
I hear policymakers saying that when it comes down to brass tacks, and they put specific policy proposals on the table, industry support is nowhere to be found. And I hear some companies arguing that the Paris Agreement is a lot of wishful thinking; that governments won’t follow through; and that climate change poses no real risk to their business models.
So does the Paris agreement represent a turning point for the oil and gas industry? For the moment, at least, it seems to depend who you ask.
My organization is about building common ground, because we believe that’s the only way to make real progress. We worry when we see signs that the demonizing tactics of one side lead the other side to simply dig in. No one’s going to win that way.
We know there’s no solution to climate change without business. But we believe real and lasting solutions are possible only if business shows leadership, rather than fobbing the responsibility off entirely on governments. Governments, on the whole, are showing greater resolve than ever on climate change. But who are we kidding? They can’t possibly do it on their own.
There’s probably no convincing the zealots that the oil and gas industry has a legitimate role in a carbon-constrained future.
But it seems to me you need to do a better job convincing the many others who are not zealots, but who are increasingly, and quite reasonably, concerned about the genuine risks posed by climate change.
I’m not a business analyst. I can’t advise companies on how to best serve the interests of their shareholders. But in the interest of achieving consensus solutions, and avoiding prolonged gridlock, I would offer three suggestions:
First, I would urge the industry to rapidly scale up investment in low-carbon energy; in carbon capture, utilization and storage; and in other viable means of sequestering carbon.
Second, I would urge the industry to chart, and to clearly articulate, a long-term vision for itself that is compatible with climate protection.
And third, I would urge companies to come to the table, roll up their sleeves, and work with policymakers and other stakeholders to enact and implement the policies we need to facilitate a smooth low-carbon transition.
To sum up, the Paris Agreement marks a critical turn in the global climate effort. It sets ambitious goals, and it guarantees a succession of highly visible political moments when our efforts will continually be held up against those goals.
And this puts the oil and gas industry at a crossroads.
Yes, natural gas can be part of the solution. But the broader question is whether the industry will cling as long as possible to its established business model; or whether it will choose to reinvent itself – to work with others to deliver the policies, the technologies, and the investment needed to ensure a more sustainable path for itself, and for the planet.
To me, at least, the choice is clear.
Again, I appreciate the opportunity to share these views. And I thank you for listening.