COP21 and the Paris Agreement

In brief

Over the weekend in Paris, two weeks of negotiations culminated in the adoption by parties to the United Nations Framework Convention on Climate Change of a conference decision and Paris Agreement to address climate change. The combined Paris Outcome commits parties to limit global temperature rise to 'well below 2°C' with an aspirational target of a 1.5°C limit. Co-Heads of the Allens Climate Change Group, Andrew Mansour and Emily Gerrard (who attended COP21) provide initial comments on the Paris Outcome below.

Background

At the 2011 Durban conference of the parties (COP) to the United Nations Framework Convention on Climate Change (the UNFCCC), countries agreed to negotiate a new climate agreement by the end of 2015. The Durban mandate set out the principles and parameters within which this new agreement should be negotiated and established the 'Ad Hoc Working Group on the Durban Platform for Enhanced Action' (otherwise known as the ADP). The work of the ADP continued through to the end of the first week of negotiations in Paris, when the draft Paris Outcome text was presented to the French COP21 Presidency for further negotiation and refinement in the second week.
In the lead-up to COP21, it was widely acknowledged that achieving a new agreement, with an aim of keeping average global warming to a temperature well below 2°C above pre-industrial levels, would require broad country participation and a flexible regime acceptable to all parties that can evolve over time.

In Paris on Saturday afternoon, parties to the UNFCCC adopted a new 'Paris Agreement' and Decision of the COP, together the 'Paris Outcome'. The Paris Outcome represents the first binding agreement under which all countries have reached agreement on action to address climate change. It also reflects the more flexible agreement structure anticipated in the lead-up to COP21 – the binding and relatively fixed Agreement, which will now need to be ratified, and the more flexible Decision, which may be modified or updated over time by subsequent decisions.

The pathway to this Agreement necessarily involved compromise and, while historic, is broadly framed and focuses on 'carrots' rather than 'sticks'. However, in practice, it is anticipated to facilitate significant domestic action by parties over time, as well as boost existing investment trends and support advances in clean energy technology.

A summary of key aspects of the Paris Outcome is provided below.

The Paris Outcome

The Decision of the COP confirms that the parties decide to adopt the Paris Agreement under the UNFCCC as appended to the COP decision. Importantly it also sets key work programs and actions for the period pre-2020 and provides greater context or detail for content in the Agreement. The Decision also establishes the Ad Hoc Working Group on the Paris Agreement, a body charged with undertaking a number of pre-2020 tasks and reports, including to:

• develop further guidance on features of the nationally determined contributions (NDCs);
• provide guidance for accounting principles for Party NDCs in a manner that ensures that Parties account for emissions and removals in accordance with methodologies and common metrics assessed by the Intergovernmental Panel on Climate Change (IPCC) and that there is consistency in methods (including baselines) which aim to include all categories of emissions or removals (sources or sinks);
• develop recommendations for procedures and guidelines for transparency framework for 'action and support' under the Paris Agreement, which includes clarity and tracking of progress toward achieving NDCs and adaptation action plans and with respect to finance received by developing country parties;
• identify the sources of input for the 'global stocktake' of collective action toward achieving the purpose of the Paris Agreement, including information on the overall effect of NDCs, the state of adaptation actions, the mobilisation of support, latest reports of the IPCC and reports of the subsidiary bodies; and
• to develop the procedures for the effective operation of the committee established under the Agreement to facilitate implementation and promote compliance with the Agreement.

The Agreement and Decision both reflect the flexibility needed for developing country parties, a key aspect in overcoming a negotiation sticking point relating to the UNFCCC principle on 'common but differentiated responsibility'.

Key aspects of the Paris Agreement include:

• the clear purpose to hold the increase in global average temperature to 'well below 2°C above pre-industrial levels' and the requirement for parties to communicate NDCs which represent a progression over time to achieving this purpose;
• the aim for parties to reach global peaking of greenhouse gas emissions as soon as possible and to undertake rapid reductions after this peak, so as to achieve a balance between human generated emissions sources and sinks of greenhouse gases in the second half of this century;
• submission of country NDCs every five years, steadily increasing their ambition over time starting with dialogue in 2018 to review collective efforts against the long term goal of peaking emissions as soon as possible and achieving a balance between emissions sources and sinks. Concern is noted in the Decision that current Intended Nationally Determined Contributions (INDCs) do not meet the Agreement purpose and that greater reduction efforts will be needed;
• encouragement for parties to implement and support conservation and enhancement of greenhouse gas emission sinks and reservoirs, such as forests, including through results-based payment frameworks such as reduced emissions from deforestation and forest degradation (or REDD);
• preservation of a voluntary mechanism for the international transfer of mitigation outcomes and the ability to use these outcomes in achieving NDCs (a market mechanism) and also the recognition of non-market approaches being available to assist with the implementation of NDCs;
• provision for adaption planning, including in relation to vulnerable people, places and ecosystems and the reporting of adaptation efforts;
• finance to assist with the transition of developing economies to green energy and assist resilience efforts and adaptation in relation to climate change impacts. The key obligation to provide financial resources rests with developed economies, however other parties are encouraged to provide support voluntarily;
• cooperation on climate-safe technology development and transfer and building capacity in the developing countries to address climate change;
• an enhanced transparency framework which builds on arrangements under the UNFCCC and provides clarity and tracking of progress under NDCs, as well as clarity in relation to adaptation actions and support, technology and capacity building efforts and financial support;
• a 'Global stocktake'  - the periodic review of the implementation of the Agreement and assessment of collective progress against its purpose and long-term goals. The first stocktake will be undertaken in 2023 and occur every five years thereafter, unless agreed otherwise by the parties; and
• the creation of an expert committee to facilitate implementation and promote compliance with the Agreement in a transparent and non-punitive way.

The agreement will enter into force after 55 countries that account for at least 55 per cent of global emissions have provided their instruments of ratification, approval or accession.

The Paris Outcome also expressly refers to, and welcomes, climate action by sub-national governments, cities, businesses, investors and non-government organisations. The Decision encourages engagement with non-party stakeholders, including with respect to further voluntary actions under the Lima-Paris Action Agenda (LPAA).

The LPAA Non-State Actor Zone for Climate Action (NAZCA) drew climate action pledges from over 7000 cities from over 100 countries, over 5000 companies together representing the majority of market capital and close to 500 investors managing assets totaling over $25 trillion.¹ The Allens climate change blog reported on a number of business and investor initiatives over the two week COP21 negotiation period, as well as opportunities for the private sector.

What does this mean for Australia?

The Paris Outcome alone is unlikely to precipitate a significant change in policy in Australia in the short term. However the combination of the Paris Outcome, a Federal election in 2016 and the review of the Emissions Reduction Fund Safeguard mechanism by 30 June 2017 is likely to lead to shifts in greenhouse gas emissions mitigation policy.

The Australian Government has indicated it is set to achieve its current INDC (26-28 per cent reduction in greenhouse gas emissions below 2005 levels by 2030). However, with the Paris Outcome proposed dialogue on collective effort set for 2018, and request for parties who submitted INDCs out to 2030 (such as Australia) to communicate or update their contribution by 2020, there will be international pressure for all countries, including Australia to revise their ambitions for the period post 2020. Australia, along with other parties, will also be invited to provide its 2050 long-term low greenhouse gas emissions development strategy by 2020. In this way, there are likely to be material changes to climate policy in Australia over the medium term. The Paris Outcome sets a net zero greenhouse gas emissions trajectory.

Coupled with an innovation agenda, changes to Clean Energy Finance Corporation investment policy and State and local government action, COP21 in Paris and its outcomes have certainly signaled a turning point for governments as well as non-government, business and investment action on climate change.

There will be a number of opportunities and issues facing different sectors over the coming years. We look forward to discussing these with you.