By Pianpian Wang & Leo Leibovitch
The twenty-second session of the Conference of the Parties (COP 22), the twelfth session of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (CMP 12), and the first session of the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA 1) were held in Marrakech, Morocco from 7-18 November 2016.
COP 22 was marked as the “Action COP” before it opened. That’s because the main goal of COP 22 is to develop a detailed implementation plan to the Paris Agreement on Climate Change, which was approved in COP 21 in Paris. The importance of the Paris Agreement lies in the reason that it will set the direction for international climate action for the coming decades. The Paris Agreement entered into force on November 4, 2016, just before COP 22 started. So far, 116 Parties of 197 Parties to the Convention have ratified, which represents the majority of the total global greenhouse gas emissions sources.
After the two weeks of effort, Parties (countries) at the COP 22 adopted 35 decisions that are mostly related to the implementation of the Paris Agreement, including the following:
- Set 2018 as the deadline for developing a rulebook for the implementation of the Agreement, based on transparency and accountability.
- The Adaptation Fund, which was created in 2001, will serve the Agreement.
- Adopted a five-year work plan for the Warsaw International Mechanism for Loss and Damage.
- The Parties endorsed the Marrakech Action Proclamation, which reaffirms their commitment to implementing the Paris Agreement. They established the Marrakech Partnership for Global Climate Action, a platform that facilitates the involvement of non-state actors in pre-2020 climate action.
With these decisions in place, we need to think about what the decisions mean for the private sector and how they will affect business operations in a general sense.
Carbon Reduction has to be bolder by action, not talking
This indication lies in three aspects.
First of all, countries came to an agreement and committed to put the Paris deal into action by 2018, after years of endless negotiations. This set a tone for motivating countries to make their own intended nationally determined contributions (INDCs) count and even go bolder for some countries. For example, outside the formal negotiations in Marrakech, the ‘Climate Vulnerable Forum‘, a group of 48 developing countries, declared their intention to switch to 100 % renewable energy between 2030 and 2050. Canada, Germany, Mexico, and the USA laid out strategies for decarbonising their economies by 2050, with more countries to follow. With the INDCs got laid out, some business sectors will be the targets to reduce carbon emissions.
Secondly, market-based carbon reduction tools could be heavily affected by each country’s domestic laws and policies by 2018. While many professionals in the field estimated that the market mechanisms should be one of the elements worth watching in Marrakech, COP 22 made no decisions on rules for mechanisms under Article 6 of the Paris Agreement on Climate Change, nor made any finalization of the reform of Clean Development Mechanism modalities and procedures.
Considering that the provision of market mechanisms was just added last year, the Parties may require more time on exploring potential options under this provision as well as accessing them. In this context, the more practices that we will have, the more examples and options there are for selection. Furthermore, companies may consider to invest in advance technologies to preempt the field before specific mandatory requirements are out.
Thirdly, regional cooperation is happening in the carbon market despite the international agreement is stuck. China will officially launch a national carbon trading program in 2017, meanwhile, China, Japan and South Korea plan to jointly develop a regional carbon market to maximize their respective domestic carbon markets’ impact.
Non-state Players are playing a significant role
COP 22 was all about financing, since COP 22 is a technical COP – focusing on how to translate into actions, and finance being a key element of such translation. However, the previous finance deadlock suggested that other funding sources should be considered besides the traditional financing route from developed countries. That’s how the business sector was brought into the game since COP 19.
Business sector holds and manages a crucial amount of financial resources in most countries, which means that the sector has capacity to contribute to sustainable development and low carbon economy. During COP 22, a Business and Industrial Day (Nov. 9) was designated to the business sector for their importance. Representatives from the private and public sectors showcased corporate action and discussed how it can be rapidly scaled-up ahead of 2020. Business leaders are taking heed; more companies are now committed to leadership on climate action than at any time in history, in order to reduce carbon emissions. Nowadays, businesses aim to measure and cut carbon emissions from their energy use, transportation, and supply-chain operations.
It is worth mentioning that more than 300 U.S. companies, including 72 with annual revenues exceeding $100 million, have sent an open letter to President-elect Donald Trump, urging him not to abandon the Paris climate agreement.
Meanwhile, international industrial organizations, such as the International Civil Aviation Organization and the shipping industry, are undertaking more responsibilities to curb carbon impact via various ways, including purchasing carbon credits. With the Marrakech Partnership for Global Climate Action established, we should expect further engagement from these international industrial bodies to bring out greater impact. Additionally, many cities’ climate change agendas are becoming more and more diverse than those on state and national levels. According to a report published by C40 Cities Climate Leadership Group, the world’s cities must invest around $375 billion in climate action and low carbon infrastructure over the next four years in order to avoid catastrophic global climate change. Government funding cannot satisfy this finance demand alone, so it opens up opportunities for investments by the business sector. That is why public-private partnerships are increasingly gaining popularity.
In the recent years, in particular after COP 20, the business sector has undertaken more responsibilities to tackle climate change. Yet it also means that more policy incentives and favors are emerging. Doing business as usual cannot help your company to go further in the context of climate change and low carbon economy development. One must look toward a long-term perspective and change the mindset built within your company today to achieve a brighter, cleaner future tomorrow.