The Climate-Train beyond Paris and Hangzhou: challenges ahead and implications

As US and China ratify the Paris climate agreement within the backdrop of the G20 summit in Hangzhou city, we are now closer to turning the agreement into reality. Both countries account for 40% of global carbon emissions and their ratification sets an impetus for other industrialized countries to move faster with their pledge over the coming months. It is likely that the agreement will come into force legally by the year’s end as forecasted by many leading research institutes. The adoption of the Paris climate agreement by 196 Parties to the UNFCCC has been a huge diplomatic success however it has raised more questions than it answers. Huge challenges lie ahead in not only implementing the agreement but also in assessing a realistic pathway.

Firstly, the target to limit global temperature rise to 2°C is based on voluntary pledges by individual governments and not what science demands. It is clearly evident that the emission reduction under the Paris agreement would not meet the 2°C target. At the current commitment level, Climate Interactive estimates 3.5°C of global warming and Climate Action Tracker projects a warming of 2.7°C. There is crucial need for ratcheting up the current commitment considerably and efforts need to be made by both the civil society and governments to set more ambitious targets in the coming years.

Secondly, under the Paris agreement there is no standardized measurement unit to assess the real quantum of emission reduction achieved in each country. The 1.5°C aspiration is meaningless if there are no measures for achieving it. The current individual pledge for reduction of carbon emission is not consistent across countries – most countries in Europe use the absolute reduction method whereas many countries such as India and china use emission reduction per GDP. There is a need for a standardized unit to monitor the quantum and verify the reduction in emission achieved in each country to avoid duplication of efforts and free riding. It will provide credibility of the process of monitoring, reporting and verification.

Paris agreement has set the roadmap for joint implementation and in term of specific policy instruments, harnessing existing emission trading markets remains one of the low hanging fruit. Emission trading market offers amongst the best cost effective instrument and has huge potential for raising finance and encouraging divestment into renewable energy. However, the current emission trading markets are plagued with inefficiency as it is fragmented across different market in EU, US, Asia and Australia. Global joint implementation efforts for emission reduction will require synchronization of such markets in terms of price and quantity for efficient market expansion. A good place to start such multilateral synchronization in carbon regime can begin with the G20 nations and gradually work to integrate other existing markets.

At the individual country level, aside from emission trading there are various market and non-market policy instruments for mitigation of climate change. Nations will need to identify the optimal policy instruments depending on their resource endowments, levels of industrialization and local institutional environment. It needs to ensure that chosen policy instruments are environmentally effective, cost-effective, incorporate distributional considerations and are institutionally feasible. Currently, the underlying reason for failure of efforts for reducing carbon emission in most countries is because national climate policies are often not aligned to their energy policies. IMF estimates that despite efforts for promotion of clean technology, the current global fossil fuel subsidy stands beyond 5 trillion USD per year. To ensure long-term success in emission reduction and to make policy instruments more effective, national policy initiatives will need to be aligned across various sectors such as transport, manufacturing, energy and urban planning.

The success of global climate mitigation efforts in essence will depend on the commitment of the political leaders and collective effort from governments, businesses, civil society organizations as the implementation of the INDC pledges and financial contributions are legally non-binding. It will require cooperation at both bilateral and multilateral level for policy implementation and support in capacity building. The world is in a race against time indeed, and efforts for leaving a better future for the coming generations will require not only working together within the broad framework of the UNFCCC but innovative individual efforts from each nation. Countries need to move away from the tendency of political bargaining of the carbon pie and plan their national policy for future generations.