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December 15, 2015Client Alert

More Than 190 Countries Agree on Climate Change Pact

On December 12, 2015, more than 190 countries reached consensus on The Paris Agreement (the “Agreement” or “Pact”), a climate change pact that will serve as the framework for reducing global greenhouse gas (GHG) emissions. This consensus was reached at the 2015 United Nations Climate Change Conference held in Paris. The Agreement will be formally signed at a ceremony to be held at the United Nations in April 2016 and will take effect in 2020. Participating countries have until April 2017 to take whatever steps each jurisdiction must to ratify the accord.

The Agreement “aims to strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty.” Its objective is to hold the average global temperature increase to below 2 degrees Celsius over pre-industrial levels. The Agreement also sets a more ambitious target of limiting temperature increases to below 1.5 degrees Celsius. Advocates for climate change regulation have expressed disappointment over the magnitude of the GHG reduction targets in the Pact. However, many acknowledged that the Agreement is merely a starting point and forms the framework from which to advocate for more aggressive reductions in the future. 

Each signatory country agrees to prepare and maintain successive nationally determined GHG reduction contributions that it intends to achieve under the Pact. These countries must also pursue domestic mitigation measures to achieve these contributions. Successive iterations of these commitments are anticipated every five years and must reflect the “highest possible ambition.” Developed countries, such as the United States, also commit to undertake “economy-wide absolute emission reduction targets.” Importantly, the Agreement does not make any nation’s GHG reduction targets a binding, international commitment. This was done, in large measure, at the insistence of the United States negotiation team which took great pains to avoid making commitments that might require Congressional approval.

The Agreement expresses the need for equity and to eradicate poverty. To this end, the signatory developed nations agree to provide financial support to developing countries to help them implement the Agreement and build generation capacity. This effort must be guided by country driven processes that are “cross-cutting and gender-responsive.” To fund this effort, the Agreement “strongly urges” developed nations to scale up their level of financial support to jointly provide $100 billion annually by 2020 for mitigation, adaptation and capacity-building support. Here again, this is not a binding commitment and therefore is unlikely to be subject to Congressional approval.

The Pact declares that climate change impacts will cause loss and damage to nations. However, the Agreement explicitly disclaims any liability or compensation requirement that would be associated with these impacts. This too helps in avoiding the need for Congressional approval of the Pact. 

For its part, the United States has committed to cut carbon emissions in the range of 26% to 28% by 2030 (2005 baseline).The Clean Power Plan (CPP) forms the centerpiece of the United States’ efforts to meet this commitment. The CPP requires existing power plants to cut their GHG emissions by 32% during this same time period. The CPP is subject to a robust set of legal challenges and may not be upheld by the courts. The litigants defending the CPP will likely rely on the Paris Agreement to argue for upholding the rule. 

It is difficult to predict with any certainty the impact of the Agreement on individual GHG emission source sectors within the United States. Clearly, the Agreement will put tremendous pressure on the extraction and use of fossil fuel resources in the United States and other developed countries. How those resources will be affected in developing countries remains to be seen. The power sector will also see a transformation from the use of coal to lower carbon fuels and technologies.

Notably, agriculture is not mentioned within the Pact. However, the Agreement calls for fostering “climate resilience and low greenhouse gas emissions development in a manner that does not threaten food production.” The Pact also encourages policies and incentives for reducing emissions from deforestation, forest degradation, sustainable management of forests and enhancement of forest carbon. This could have long term consequences for the forest products sector.

There is also uncertainty surrounding the financial subsidies that will flow to undeveloped nations from the United States and other countries. Will this affect trade? How will this be paid for? What, if any, impact will there be on our industrial sector? The Pact will frame the climate change policy debate moving forward at least through the end of the Obama Administration.

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