23 Nov 2017
It’s almost three years since the Paris Agreement was struck between major economies to address climate change. Now time is closing in on a consensus over how the rules will be implemented.
Deadlines loom to understand how the process, most notably on carbon emissions, will be shaped and the implications this will have on business.
"The rules will have implications for how markets, technology, trade and capital flows develop.”
Under Article 6 of the agreement there are two paths to transfer and trade carbon emissions between countries. One is on a bilateral basis; the other a multilateral model which will have more significant implications for trade exposed countries, such as Australia.
“Parties recognise that some Parties choose to pursue voluntary cooperation in the implementation of their nationally determined contributions to allow for higher ambition in their mitigation and adaptation actions and to promote sustainable development and environmental integrity,” the text states.
While there are differing views between blocs of countries on the preferred way forward, the rules will have implications for how markets, technology, trade and capital flows develop in response to the transition to a low-carbon economy.
In November 2017 I was an observer at the United Nations Climate Change Conference (COP23) in Bonn where the largest business and investor attendance ever at a COP delivered a uniform message: the transition to a low-carbon economy is underway - and business is acting.
Business recognises the weight of investment required to drive the low-carbon transition is immense. Just as importantly, so are the associated opportunities.
A report released by the UN and the World Bank following COP23 forecast investment of more than $US22 trillion is needed to 2030, just to keep countries on track to meet their Paris commitments.
September’s Global Climate Action Summit in San Francisco – a Summit designed to lift momentum ahead of COP24 in Katowice, Poland – will bring together business, investors and civil society to showcase climate action around the world across five areas - energy systems, inclusive economic growth, sustainable communities, land and ocean stewardship and climate investment.
The mobilisation of finance will cut across each of the themes in San Francisco, including the role innovation will play in underpinning investment in infrastructure resilience - a key determinant in future global growth and prosperity.
In this regard, a hot topic will be the role capital markets and the development of mechanisms to trade carbon will need to play in supporting this investment and the achievement of carbon emission reduction commitments under the Paris Agreement.
Thinking ahead to Katowice, as is the case with multiparty negotiations, and indeed any innovation, parties who are not at the table are at an immediate disadvantage, foregoing the chance to further their interests.
As I observed on the back of COP23, Australia has a lot to offer the development of carbon markets and much to miss out on if not actively involved – a year later, my opinion is unchanged.
Paul Orton is Head - Project & Export Finance, Institutional Banking at ANZ
The next UN Framework for Climate Change Convention’s (UNFCCC) annual Conference of the Parties (COP24) will be held December 3 to14 in Katowice, Poland. A key outcome of COP24 will be for Parties to the Convention to formalise the Paris Agreement rulebook.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
23 Nov 2017
30 Nov 2017