Q&A: How groundbreaking is the Paris climate agreement? - "Keeping costs low is essential for emissions reduction goals to be reached"

For many, an historical breakthrough was achieved at the end of the UN Climate Conference in December of last year: 195 nations ratified an agreement with the concrete goal of limiting global warming in a best case to 1.5 degrees Celsius. In previous years, negotiations were plagued by the inability to reach a consensus. Did the world really take an historic step in Paris? Or does the agreement merely represent the enshrinement of a weak consensus that does not go far enough? ZEW environmental economist Oliver Schenker argues that a turning point in global negotiations over carbon emissions has been reached – however, the true test will come with the implementation of the agreement.

How should we assess the most recent UN Climate Conference agreement – the first reached since Kyoto in 1995?

The agreement ratified in Paris is a milestone, despite its shortcomings. After twenty years of climate diplomacy and six years following the debacle in Copenhagen, we have reached an international climate agreement that requires for the first time the vast majority of states to reduce emissions, regardless of whether they are developing, emerging or industrialised countries. The agreement that was achieved in Paris was much more robust than could be realistically expected at the beginning of the conference, not least because of the change in the structure of the negotiation process. Rather than implementing a "top down" approach to impose binding reductions on participants, the conference gathered voluntary commitments from nations in a "bottom up" fashion. ZEW's research in the area of behavioural economics has shown that by harnessing a "bottom up" approach, improved negotiation outcomes can be obtained. In this regard, however, perceptions of fairness play an important role: when negotiations are viewed as fair, the likelihood of an agreement rises considerably.

Is the agreement enough to effectively address climate change?

Without a doubt, the emissions reductions that have been promised by the signatories are not nearly enough to achieve the goals set forth in Article 2 of the agreement – namely, to limit global warming to two degrees. Yet the agreement offers basis for increasing the emission reduction efforts made by the global community, until necessary reduction levels are reached. However, we have a very limited time window for transforming the world's energy systems. The Paris agreement provides a solid foundation as well as a good blueprint, but the actual "building" – that is, protecting the earth from climate change – still needs to be built, and we don't have much time.

How can we get this building built?

Keeping the costs of protecting the climate as low as possible is essential for ambitious emission reduction goals to be achieved. In this connection, market-based instruments, as explicitly mentioned in Article 6 of the agreement, are crucial. It remains to be seen whether climate diplomats will come to adopt the term ITMO (Internationally Transferred Mitigation Outcomes) as a supplement to INDC (Intended Nationally Determined Contributions). Yet in any event, it is important to have a framework in place for implementing carbon abatement measures where they are the least expensive.

And where would that be?

We have finally surmounted the subdivision of the world into industrialised nations that should do something and developing nations that don't have to do anything. In contrast to the Kyoto Protocol, the largest emitters of CO2 emissions – the US and China – are on board. This lowers the cost of Germany's carbon reduction measures. The danger is now lower that ambitious reduction efforts will damage the competitiveness of the German economy and lead production capacities to migrate abroad. The success of the Paris agreement will depend on whether a mechanism exists for auditing the promised contributions. The fact that it was possible to avert the renewed subdivision of the world into developing and industrialised nations and to create the same rule for all countries will make it easier in the future to elaborate on the duties set forth in the agreement and to enable the comparison of the efforts made by individual nations in clearly defined cycles.

For more information please contact

Dr. Oliver Schenker, Phone +49 (0)621/1235-229, E-mail schenker@zew.de