Ai Group’s Tennant Reed will be in Paris over the next two weeks to provide regular updates on the 2015 Climate Change Conference and its implications for Australian industry. This post provides a preview of what can be expected and links to further information.
From 30 November to 11 December this year, more than 190 nations will meet in Paris to conclude a new international agreement on dealing with climate change.
While expectations for these meetings have often been unrealistic – think Copenhagen in 2009 – Paris is shaping up as a genuinely important turning point with implications for Australian industry. Ai Group will be there, observing closely and providing regular updates.
What is the Paris meeting about?
Every year the nations that are part of the UN Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol (KP) meet to agree new elements of the global effort to combat climate change, or flesh out existing agreements. While there is a lot of other stuff going on – official and unofficial grandstanding, information exchange between business, scientists, NGOs and so forth – the negotiations are the core business.
Previous meetings led to major legal agreements being concluded and sent to nations to ratify, like the UNFCCC itself (1992) which sets out a broad framework for efforts to avoid “dangerous anthropogenic interference with the climate system”, and the KP (1997) which translated this into specific greenhouse gas (GHG) emissions reduction commitments, albeit only for a subset of advanced economies and so far only through to 2020.
These agreements impact Australian industry by:
- inducing Australian governments to make and meet commitments to reduce GHGs. This can have impacts on any business that uses power, burns fuel, clears land or does business with others who do these things – i.e. everyone – though domestic policy design also shapes costs;
- inducing other governments to make and meet GHG reduction commitments. Maximising participation is in industry’s interest, since it helps reduce the competitive disadvantage Australian businesses might face if we were acting alone; and
- shaping how Australia can go about reducing emissions, from accounting rules to rules for international trade in emissions rights and offsets.
Having a business voice at these meetings is important to ensure that business concerns about competitiveness, compliance costs and investment are visible in a process easily dominated by diplomacy and activism.
One issue that particularly needs a business voice is ensuring that Australia and Australian industry can get access to international units. For many businesses and the economy as a whole, options to cut emissions may be fewer and more expensive here than in other countries. Being able to buy genuine abatement from overseas has a key role to play in easing compliance costs.
While the current policy of the Turnbull Government is not to use international units, this will be reconsidered in 2017. It is important that the international rules continue to allow countries and businesses to use high-quality international units to meet their domestic and international obligations.
The Paris meeting – also known as COP21, the 21st meeting of the Conference of the Parties to the UNFCCC – is expected to adopt a major new agreement that deals with climate change beyond 2020.
What’s going to happen?
The Kyoto Protocol was about a binding, tightly defined legal approach under which nations would assign each other emissions targets and impose penalties if these were not met. While initially only advanced economies would accept the targets, it was hoped that ultimately this top-down approach could be extended to all significant economies and the targets would be made consistent with a global effort to contain climate change.
This hope basically died in Copenhagen in 2009. A “Kyoto on steroids” deal is not happening and almost nobody is still pursuing it. In practice, even many advanced economies were reluctant to participate in Kyoto, and the purportedly binding nature of the targets proved illusory when Canada simply left the Kyoto Protocol rather than accept the consequences of missing its target.
Paris will mark the start of a new approach that has been taking shape since Copenhagen: a more accommodating bottom-up “pledge and review” framework. The idea is that all nations will be asked to define their own commitments to contain or reduce emissions, adapt to climate change and so on.
Their performance against those commitments will be monitored. Over time, nations will become more confident in their own ability, and each other’s willingness, to deliver on these commitments, and will update and deepen their pledges.
This sounds a bit vague and optimistic – but it’s worth a try given the failure of the top-down approach, and so far it is working: 143 nations, including all the biggest emitters, have made pledges in the lead-up to Paris. Those from China, the United States, Europe and most other major emitters are detailed and involve substantial but realistic emissions reduction effort.
Most of the wrangling at Paris will be about details within this framework: which parts should be binding? How much of the old 1992 distinction between ‘developed’ and ‘developing’ countries should remain? How much scope should there be for trade and markets?
There is much wrangling to be done. The current draft of the agreement, as is traditional, is filled with competing options for the text, marked in square brackets, where parties have not yet been able to nut out a compromise.
What emerges could be a very minimal agreement – little more than tying a ribbon around the pledges that countries have already made and agreeing to come back in five years. Or it could add a lot of useful infrastructure around transparency, markets and more. In any case, the breadth and depth of the Paris commitments mark a major change and a significant step forward – both in dealing with climate change, and in reducing the risk that uneven climate action will damage Australian industry’s trade competitiveness.
The bottom line for industry is that governments around the world are getting serious about reducing emissions, and Australian governments can be expected to do likewise. The Paris agreement will not create a single global policy structure, certainly not a universal emissions trading scheme. But there is considerable flexibility for each country to design domestic policies that suit their economic circumstances, including with respect to shielding trade-exposed industries and linking up with other countries to reduce costs.
How can I find out more?
I will be representing Ai Group at COP21 and future posts here at Ai Group’s Blog will explore specific issues of interest to industry, including markets, technology, actions by trade-relevant economies and the implications of the final outcome for Australia and industry. So watch this space!
Blow-by-blow information on the negotiations will best be found at the Earth Negotiations Bulletin, which provides widely read daily summaries of the major events and discussions.
Other information on the conference proceedings and outcomes can be found at the official UN website for the negotiations.
If you have any specific questions relating to the Paris negotiations, post your query to this or any of Tennant’s subsequent Blog posts for a direct response.