Paris Agreement comes into force

In almost unheard of speed for an international agreement, the Paris Agreement which was adopted on 12 December 2015 at the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC), will come into force today (4 November 2016).

The momentum which followed COP21 saw 175 countries (out of the 191 countries which are signatories) formally signing the Paris Agreement in New York during a signing ceremony convened by United Nations Secretary-General Ban Ki-moon in April this year. However, each country was then required to formally ‘ratify’ the agreement.

The Paris Agreement provided that it would enter into force 30 days after the following two conditions were met:

• at least 55 parties deposited instruments of ‘ratification, acceptance, approval or accession’, and
• the emissions from parties who had deposited such instruments corresponded to at least 55% of global emissions.

The first threshold was met on 21 September 2016 and the second threshold was reached on 5 October 2016 when 11 countries (including Germany, France and Canada) ratified the Agreement, meaning the Agreement will enter into force on 4 November 2016, just three days before the start of the 22nd Conference of the Parties in Marrakech. At the date of this update, 87 countries have ratified the Agreement.

The Paris Agreement is historic because for the first time all counties (including both developing and developed) agreed to make ambitious efforts to combat climate change and adapt to its effects.

A key outcome of the Paris Agreement was an agreement to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. In order to help achieve these goals each party to the Paris Agreement is required to prepare, communicate and maintain Nationally Determined Contributions (NDCs). NDCs are required to be prepared every five years and each successive NDC is intended to represent a progression beyond the party's then current NDC.

NDCs were prepared and submitted in the form of indicative NDCs prior to the UNFCCC talks in Paris.

The UNFCCC’s Secretariat has published a synthesis of all indicative NDCs submitted to date and their effects. They currently indicate a clear divergence from the business as usual scenario. However, they do not indicate that countries are yet on track to achieve the levels of ambition required to meet the Paris Agreement’s goals. Significantly more ambitious actions will need to be implemented across all sectors of the economy.

Further, the NDCs currently on the table take a wide variety of forms, cover different sectors, vary in detail and content, and express targets/aims in very different ways. Parties will continue to discuss issues such as whether some guidance should be common to all NDCs and some guidance specific to certain types of NDCs; whether there should be a differentiation in respect of NDCs between developed and developing countries;  and how to reflect differences between parties’ ability to prepare and implement NDCs. There are also discussions about what specific areas of NDCs require detailed guidance, and whether the obligation to prepare NDCs should be tied to the obligation of developed countries to provide support for doing so to developing countries.

Outside of NDCs, three “mechanisms” that can be used to implement mitigation of emissions are set out in the Paris Agreement. Working groups have been set up to discuss these mechanisms and those discussions will continue at Marrakech.

One provision establishes a voluntary mechanism in respect of cooperative approaches using internationally transferred mitigation outcomes (ITMOs), which can be produced from any mechanism/procedure/protocol, without any reference to the authority of the COP.

Another provides for the establishment of a mechanism to produce mitigation outcomes and support sustainable development, which will operate under the authority of the COP. This mechanism appears to be similar to the Clean Development Mechanism (CDM) established under the Kyoto Protocol.

The Paris Agreement also provides a framework for “non-market approaches”.

Significant further work will need to be undertaken in order to establish these mechanisms in full. Parties have made submissions on these topics, but they remain relatively conceptual at this stage and detailed rules will need to be developed and adopted in due course for the mechanisms to be able to be utilised by parties to the Agreement.

Another key aspect of the Paris Agreement that remains to be developed is the transparency framework. This is required to ensure that all countries are measuring and reporting on emissions reductions in the same way.

A five-yearly global stocktake will be implemented to assess collective progress towards achieving the purpose and long-term goals of the Agreement and prior to the Agreement formally commencing in 2020, it is intended that a mini-stocktake will be undertaken in 2018 to ascertain whether the levels of ambition currently tabled by parties in the form of their indicative NDCs need to be increased.

The Paris Agreement was not expected to enter into force as quickly as it has done. In particular, it was expected that the first meeting of the parties to the Paris Agreement (which will be known as the CMA1) would not take place for at least another year.

As the Paris Agreement provided for some outcomes to be agreed at CMA1, it seems likely that CMA1 will be suspended over the next couple of years to allow those discussions to take place. Given the number of issues to be agreed, an important outcome of COP22/CMA1 will be a roadmap of how to resolve these issues so that the Paris Agreement can be fully operationalised by 2020. The current work program, which has an extensive list of action items, can be found here.

Notwithstanding the ongoing negotiations outlined above (and many more parallel discussions), action is already happening on the ground.

The International Civil Aviation Organisation has recently proposed an international emissions offsetting scheme, which will offset all emissions growth above a baseline established as at 2020. The International Maritime Organisation has agreed that it will have an initial strategy in place by 2018 to address emissions from international shipping, although the strategy is unlikely to be implemented until 2023 because of the need to collect fuel data.

The cost of renewable energy technologies is falling rapidly, including in respect of solar and offshore wind. Renewable energy deployment is at its highest ever level and companies such as Elon Musk’s Tesla are seeking to revolutionise the rooftop solar market through products described as “beautiful, affordable, integrated”.

New emissions trading schemes are being implemented, with China’s national scheme due to commence in 2017 and Canada seeking to have carbon pricing in place by 2018. A current snapshot of carbon pricing across the globe can be found here.

Corporates are paying increasing attention to carbon disclosure and energy procurement, including entering into direct power purchase agreements with renewable energy generators. We at Norton Rose Fulbright have very recently authored, in conjunction with EY, a report for the World Business Council for Sustainable Development on scaling up renewable PPAs, which can be found here.

COP22

The 22nd session of the Conference of the Parties (COP 22) is scheduled to take place in Marrakech from 7-18 November 2016. Our dedicated COP22 microsite provides you with an analysis of the climate negotiations, and will provide legal updates from developments in the COP22 negotiations in Marrakech and directly from the conference floor.