Role Of Private Sector In Paris Agreement
The Paris Pact will enter into force in 2020, when 55 nations, representing at least 55% of global emissions, ratify the agreement at the United Nations in New York. Four years can seem like an eternity in today`s business landscape, where many companies make decisions that soothe investors` short-term approach and where quarterly performance often generates equity volatility. With the Paris Agreement on the horizon, companies in all sectors have begun to recognize the urgency and scale of integrating business sustainable development goals into long-term financial goals. Indeed, the private sector`s presence in the negotiations and its important commitments to combat climate change have been one of the key factors that have contributed to the success of COP21, experts say. First, it will be difficult to achieve the ambitious objectives of the agreement unless the private sector participates in content and relevance, but to do so, companies need the right political and financial signals to justify a redesign of their strategies. Signals should focus on the removal of fossil fuel subsidies, the introduction of carbon prices, green construction performance standards or guaranteed electricity benefits contracts for renewable energy. A carbon price creates the basis for carbon markets to enable countries and businesses to reduce their greenhouse gas emissions at the lowest cost. This was widely recognized at COP21 and, furthermore, the Paris agreement recognized that markets were needed to put countries on a low-carbon development trajectory and to strengthen ambitions to keep warming well below 2 degrees. The IFC, part of the World Bank Group, has continued on several fronts in this area. Despite these unprecedented and ambitious objectives, it is important to take into account the limited capacity with which the agreement can enforce its provisions. In accordance with the provisions of the Paris Agreement, countries are required by law to present only NDCs and report their progress in achieving specific NDCs. This is a positive development, but it is potentially problematic that the United Nations does not have the legal authority to impose sanctions on those who fail to achieve their goals. There is also a language for country financing to help developing countries move to clean energy, but this commitment of at least $100 billion a year is not legally binding.
Given the lack of legal authority, some experts doubt that the agreement is applicable. But it doesn`t matter. U.S. economic leaders have long been vocal supporters of the Paris agreement – especially since the president has announced his intention to step down.