COP21 and What It Means for Companies

From most public points of view, the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) held in December 2015 in Paris was a successful event. “The Paris Agreement” may prove to become the foundation for a true global climate policy in this century. The final draft agreement released on December 12, 2015 established a commitment to hold the increase in the global average temperature to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C. The Agreement will be open for signature in New York, from April 22, 2016, to April 21, 2017. It will be effectively entered into force on the 30th day after the date on which at least 55 Parties, accounting in total for at least 55% of the total global greenhouse gas (GHG) emissions, have ratified the agreement.

Commitment from Countries’ Intended Nationally Determined Contributions

To date, 160 Parties representing 187 countries, covering 98.6% of global GHG emissions, submitted their intended nationally determined contributions (INDC). Table 1 summarizes GHG emission reduction contribution commitments by the top seven GHG emitting countries’ INDCs. However, these pledged reductions of global GHG emissions by 2030 will fall short of delivering the target earth temperature caps set by the Agreement. After the Agreement becomes effective, Parties will need to submit NDCs in future years to track their progress toward mitigating the growth of GHG emissions. The Agreement also includes a set of actions that will accelerate the implementation process once the Agreement become effective.

CountryINDC Commitment
China60% to 65% reduction per unit of GDP by 2030 from 2005
USA26%-28% reduction by 2025 from 2005
EU (28) 40% reduction by 2030 from 1990
India33% to 35% reduction per unit of GDP by 2030 from 2005
Russia70% to 75% reduction by 2030 from 1990
Japan26% reduction by 2030 from 2013 
44.8% reduction by 2030 from 2005 
Brazil 37% reduction by 2025 from 2005 
66% reduction per unit of GDP by 2025 from 2005 

Source: UNFCCC and CAIT Climate Data Explorer

COP21 Implementation Actions – Capacity Building Initiatives

 The Agreement is legally binding only in participating countries that have their own committed targets. Although the targets are not legally binding, all countries are obliged to prepare, communicate, and maintain their targets and pursue domestic measures to achieve them. One of the primary concerns for implementing the actions is transparency of NDCs. As a result, the Agreement includes strong legally binding provisions setting forth a consistent approach to measuring, reporting, and verifying emission reduction commitments.

In support of this provision, the Agreement establishes a Capacity Building Initiative for transparency to assist countries that will be required to strengthen their capacity in preparing NDCs, to meet their requirements on adaptation, as well as to apply for finance and technology transfer. Guidelines for accounting, reporting, and verification will be fully developed by 2018 and formally adopted by 2020.

Commitments from Non-State Organizations

In addition to the Agreement, a large number of commitments were made by countries, regions, cities, investors, and corporations leading to or during the COP21 events under the Lima to Paris Action Agenda (LPAA), which was started at COP20 in 2014. These actions were entered to the UN-hosted NAZCA (Non-State Actor Zone for Climate Action) portal and were considered as essential to the rapid implementation of the Paris Agreement. Over 300 companies and 80 investors in the US made public commitments on NAZCA. Figure 1 shows the countries with the leading number of pledges made on NAZCA.

COP21 and what it means for companies fig 1

Based on the actions pledged in the INDCs and commitments by various levels of organizations, it was estimated that renewable energies will represent nearly 80% of new global energy development projects. The world will inevitably shift to a lower-carbon economy.

Taking Action for Climate Change at Your Company

In the US, GHG emission reduction commitments from companies today may become regulatory requirements tomorrow. The low carbon energy strategy will affect energy producers and consumers. If it’s not already a company priority, start now to consider how to position your organization to effectively respond to the low-carbon mandate.

  1. Set carbon/energy reduction targets:
    • Meet/exceed regulatory requirements
    • Stay in-line with industry initiatives
  2. Conduct a risk/opportunity assessment on climate change policy
  3. Establish a comprehensive carbon footprint baseline, beyond currently regulated sources, with transparency
  4. Identify potential areas of GHG reduction via a set of actions:
    • Energy efficiency improvement plans
    • Low carbon energy sources
    • Investment in renewable energy / low carbon alternative technologies

A carefully constructed approach to lowering a company’s carbon impact can be beneficial in many ways, including cost structure, regulatory preparedness, investor relations, and perceived corporate social responsibility.