Thursday, April 4, 2019

Climate change rule book agreed

But it is a compromise that lacks the requisite urgency

By Wai-Shin Chan

Head, Climate Change Centre of Excellence

An international rulebook for implementing the Paris Agreement on climate change was largely agreed at the annual climate talks in Poland in December 2018. But it is a compromise that fails to match the urgency of the issue – with several key points pushed out to future meetings.

The new rulebook covers most of the crucial elements, including guidance on climate pledges, adaptation and support – with one big success the emergence of ‘flexibility.’

While the rulebook applies to all parties, it offers flexibility to developing economies, especially the most vulnerable, such as Least Developed Countries and Small Island Developing States. And where developed parties are urged to act, others are being invited or encouraged to do so voluntarily.

Transparency was another major success. It helps build trust that the parties will do what they promise. Transparency is the largest section of the rulebook and is threaded throughout it.

The rulebook is the culmination of three years of negotiations since the Paris Agreement was adopted by 200 countries in 2015 with an aim to limit the rise in global temperatures to 2°C, or even 1.5°C, from pre-industrial levels.

However, it does not spell out how ambitious subsequent climate pledges must be – especially in light of recent climate-related extreme events and the Special Report on Global Warming of 1.5°C produced in 2018 by the Intergovernmental Panel on Climate Change, the UN’s climate science body.

It was hoped that the report would add a sense of urgency at the Katowice conference, but the urgency was in delivering a rulebook rather than in limiting global warming. No compromise on wording could be reached regarding the science; the overall conference simply ‘expressed gratitude’ to the UN body and ‘welcomed the timely completion’ of the report without commenting on its findings.

Hence ambition was largely left out of the rulebook in the rush to agree operational issues. Compromises were necessary to garner consensus on key issues. Decisions on common timeframes and co-operative approaches were deferred until 2019.

Guidance on the features of each nation’s climate pledges was scant: they remain a list of ‘may include’ options with further consideration on providing comprehensive guidance pushed out to 2024.

Individual pledges remain flexible in what they set out to achieve and although those implemented from 2031 should apply ‘common timeframes’, the actual period of duration was not agreed.

Adaptation still remains optional, but it took greater prominence than at previous meetings, if not quite reaching parity with mitigation, and the final text uses a newer term – ‘mitigation co-benefits resulting from adaptation’.

Overall, we think the 22,000 delegates in Poland achieved a balanced outcome, given the political distractions. Investors and businesses will be relieved that the Paris Agreement remains in place, and with greater clarity on how countries might follow through with policy.

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Analyst Certification

The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Wai-Shin Chan, CFA

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