The Paris Agreement

The Paris Agreement

The Paris Climate Agreement, also known as the Paris Accord or Paris Agreement, is a landmark international treaty adopted on December 12, 2015, during the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change in Paris, France. 

The Paris Agreement aims to combat climate change and mitigate its adverse effects by reducing global greenhouse gas emissions and limiting global warming. To achieve the agreement’s goal of limiting warming to no more than 1.5°C, emissions must be reduced by 45% by 2030 and reach net zero by 2050. 

Reaching net zero means reducing carbon emissions to a level that can be absorbed and stored by natural processes. In other words, everything we add, gets pulled back out and stored.

That’s an incredibly difficult goal. The world must overcome its reliance on cheap, dirty energy. That requires sacrifices and expenditures that will be difficult for many countries.

King Coal

Coal is known as the king of energy because it’s cheap and plentiful. However, it remains the dirtiest of fuels from both carbon and traditional pollution. It’s chief among the fossil fuels and still has a significant grip on the global energy market. However, the global reliance on oil remains strong as well.

Despite growing investments in renewable energy and advancements in technology, fossil fuels remain the dominant source of energy worldwide. Breaking the grip of fossil fuels and any chance at meeting the net zero goal will require addressing economic, technology, and political barriers.

Is It Possible?

Currently, the world is not on track to hit the goal of net zero by 2050. However, it can still get there, but it is going to take huge effort. More importantly, it will take a lot of political buy in.  And when I say “buy in” I do mean money. A recent report from BloombergNEF has reported:

“On the energy supply side, for every dollar that goes to fossil fuels, an average of $3 needs to be invested in low-carbon energy over the remainder of the decade – up from parity today. A fully decarbonized global energy system by 2050 could come with a $215 trillion price tag – not an insignificant amount, but only 19% more than in an economics-driven transition, where the Paris Agreement goals are missed, and global warming reaches 2.6C.”

This represents a significant financial commitment but is essential to avoid the far greater costs associated with the impacts of climate change.

More than money

Reaching net zero will not happen without huge investments but it is going to take whole lot more. Let’s forget about the economic and financial barriers, there will be even greater hurdles including:

Global Political and Policy Coordination

• Countries have varying levels of commitment to implement climate policies. Some nations have ambitious targets and robust policies, while others lag due to economic constraints, instability, or lack of political will.
• Changes in political leadership can result in shifts in climate policies. Policy rollbacks or reduced ambition can occur when new administrations take office, undermining long-term climate goals.
• Aligning interests of nearly 200 countries under the Paris Agreement is complex and requires sustained diplomatic efforts.
• The Paris Agreement relies on voluntary commitments and lacks effective enforcement, making it challenging to ensure compliance.

Technology Challenges

• While there are many promising technologies, they are not yet fully developed or ready for scale.
• The existing infrastructure for energy, transportation, and industry needs significant upgrades to support renewable energy integration.

Social Change

• Achieving net zero requires changes in consumption patterns, energy use, and transportation habits. Encouraging individuals and businesses to adopt sustainable practices will be challenging.
• Ensuring that the transition to a low-carbon economy is fair and inclusive is crucial. Policies must address the needs of vulnerable populations and prevent economic disparities from widening.

There is Still Hope

The pathway to achieving the COP21 net zero goal is loaded with challenges that span global political, economic, technology, and social dimensions. Addressing these challenges requires a concerted effort from governments, businesses, and society worldwide.

Breaking free from the grip of fuel will require collective action and bold leadership. Despite all the challenges, it offers limitless opportunities. 
A new energy era is on the horizon, poised to transform the shadows of the past into the light of a sustainable future.

For The Good,

Michael Nichols

Numbers You Need to Know

1.5°C

There’s an important number in the world of climate change jargon that scientists and politicians have warned not to cross.  That threshold is considered to be 1.5 degrees Celsius (1.5°C) (Mongabay)

13.49%

Even though the United States no longer leads the world in total annual carbon dioxide emissions, it was still, as of 2021, releasing about 5 billion metric tons of carbon dioxide per year, which was about 13.49 percent of the total global emissions—more than twice that of all 28 countries in the European Union combined. (Climate.gov)

196

The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris, France, on 12 December 2015. It entered into force on 4 November 2016. (United Nations Climate Change)

What’s New in Sustainable Investing

Investors Pressure ExxonMobil Board on Climate

ExxonMobil XOM is being widely watched this proxy season as the largest freely traded company in the industry that many blame for global warming. As such, Exxon frequently faces resolutions from independent shareholders wanting the oil major to grapple with the consequences of climate change. (Moringstar)

Three barriers to sustainable investing

Sustainable investing faces three barriers to entry: inconsistent data and reporting, financial performance misperceptions and investor cynicism about making a difference. (J.P. Morgan)

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