FROM AMBITION TO ACTION

Transcription

1 THE PARIS AGREEMENT What It Means for Business FROM AMBITION TO ACTION The Paris Agreement on climate change is a historic turning point. Together, governments are sending a decisive market signal that the transition to a thriving clean economy is inevitable, irreversible and irresistible. Paris calls to businesses and investors to accelerate this transition, and to seize the trillions in opportunities to bring clean energy and prosperity to all. The Paris Agreement marks a watershed moment for the global economy. For the first time the international community has committed to net zero greenhouse gas emissions in the second half of this century in order to hold global warming well below 2 C (with a stretch target of 1.5 C). This commitment to decarbonize the global economy sunsets the fossil fuel era. For the first time, climate ambition is now universal. All major economies, including the United States and China, are committing to restructuring their energy systems: changing transport patterns, and transforming infrastructure, buildings and land use. The transition to a thriving clean economy is already underway. China has embedded many of its Paris commitments into the 13th Five-Year Plan, that will guide its economic and social development through Europe has been leading this transition for over two decades. The US is implementing its emissions reduction target under the Clean Air Act and other domestic laws. Paris has immediate and long-term implications for business operations, supply chains, investor preferences and consumer demand in the global marketplace. As the global economy undergoes a deep transformation, businesses can: Seize new and expanded lowcarbon market opportunities Align investment decisions to longterm policy certainty Benefit from policy coherence across borders and into new markets Increase investor confidence and protect operations by managing climate risks Be recognized as leaders among their peers by taking climate action through We Mean Business With ambitious policies in place, the time for business action has arrived. ARON CRAMER, President & CEO PAUL SIMPSON, CEO MINDY LUBBER, President KEITH TUFFLEY, Managing Partner & CEO MARK KENBER, CEO SANDRINE DIXSON-DECLÈVE, Director PETER BAKKER, President & CEO

2 SEIZE THE MARKET OPPORTUNITY Under the Paris Agreement, 188 countries have submitted national climate plans of unprecedented scale and ambition. These plans mark a structural transformation decoupling economic growth from greenhouse gas emissions. 1 Taken together, these plans put us on a path towards 2.7 C of warming by 2100 compared with previous projections of up to 4.8 C 2, and create a new global economy in their wake. The agreement requires that countries pursue measures to achieve the objectives in their national climate plans, 3 that include new targets from both emerging economies and developed economies. 4 The US doubled the pace of its decarbonization with a new target of 26-28% emissions reductions below 2005 levels by China committed to peaking carbon dioxide emissions around 2030, reducing the carbon intensity of GDP by 60-65% below 2005 levels and reaching 20% nonfossil fuel energy in the process. 6 Accomplishing this will require the addition of renewable energy capacity equivalent to all electricity generation in the US today. The European Union committed to at least 40% emissions reductions below 1990 levels by India committed to reaching 40% non-fossil fuel electricity, reducing the carbon intensity of GDP by 33-35% below 2005 levels and US$5.2 Trillion Largely to decarbonize the power sector LOW-CARBON ENERGY INVESTMENT THROUGH 2030 WITH THE NATIONAL CLIMATE PLANS 13 US$1.0 T Hydro Power capturing 2.5 to 3 billion tonnes of carbon dioxide through additional forest cover, all by Brazil was the first emerging economy to shift from targeting the carbon intensity of GDP to an absolute emissions reductions target, of 37% below 2005 levels by 2025 and 43% by The market opportunities unlocked by the agreement are remarkable. Over the next 15 years, US$90 trillion will be invested globally in infrastructure where emissions are currently concentrated. 10 Collectively, the national climate plans under the Paris Agreement represent at least a US$13.5 trillion market for the energy sector alone in energy efficiency and low carbon technologies through US$1.3 T Wind Power This will only continue to grow as national climate plans improve over time. The global clean technology market is growing significantly faster than the global economy as a whole, 12 and the new national climate plans from developing countries will open new market opportunities. These include expanded markets in building efficiency and demand-side energy management; low-carbon and electric vehicles; solar, wind, hydro and geothermal energy; and water and waste management. Businesses that act boldly and swiftly will reap the rewards of these market opportunities. US$8.3 Trillion Improvements in energy efficiency in the transport, buildings and industry sectors US$ 1.2 T Solar Power

3 TAKE ADVANTAGE OF LONG-TERM CERTAINTY The Paris Agreement sets our direction towards a thriving clean economy with clear goals: NET ZERO GOAL To reach net zero greenhouse gas emissions in the second half of this century, 14 in order to hold global warming well below 2 C with a stretch target of 1.5 C 15 RESILIENCE GOAL To become resilient to the climate impacts we will inevitably face, by reducing our vulnerability to them and increasing our capacity to adapt 16 FINANCIAL GOAL To guide global finance towards low greenhouse gas emission and climate-resilient investments 17 Governments have made our economic destination clear a world with warming well below 2 C and net zero greenhouse gas emissions in the second half of the century. To move us towards this destination, the Paris Agreement requires governments to formulate new national climate plans every five years. 18 Each new plan must progress beyond the previous one and represent the country s best efforts. 19 After taking stock of their collective progress in 2018, governments will submit new or updated plans in The Paris outcome also asks countries to provide, by 2020, long-term strategies to reduce emissions through midcentury, that will provide additional long-term policy certainty for the private sector. 21 This long-term arrangement outlasts any one administration or set of political circumstances, enabling businesses and investors to make low-carbon investments, build low-carbon operations and switch to low-carbon procurement. National climate plans will be strengthened as low-carbon technologies mature, continuously pushing the global emissions trajectory downward. Businesses that align investment decisions to long-term policy certainty won t be caught short as policy evolves. LEAD ON A LEVEL PLAYING FIELD The Paris Agreement is universal; all countries agreed to reduce greenhouse gas emissions and build climate resilience. It was adopted by consensus and now includes national climate plans from countries covering virtually all global greenhouse gas emissions. Governments committed to simultaneously improving climate targets at five-year intervals, which will draw down emissions across all regulatory jurisdictions. For the first time global business operations, supply chains and investment portfolios are all subject to the same international policy framework. This will promote comparable effort by all countries, minimize competitive imbalances between economies and help to harmonize global standards for low-carbon technologies. 96% of countries globally have now submitted national climate plans collectively representing 98.7% of global greenhouse gas emissions Businesses that lead will benefit from policy coherence across borders and into new markets.

4 MANAGE YOUR CLIMATE RISKS Failure to mitigate or adapt to climate change is the highest impact risk to business for the years to come, according to the World Economic Forum s 2016 Global Risk Assessment Report. 22 Three quarters of suppliers recently stated that climate risks could significantly impact their business operations, revenue or expenditure. Recognizing the risks we face even if we keep warming well below 2 C, the Paris Agreement establishes a global goal of strengthening resilience to climate change. 24 It encourages countries to assess climate vulnerabilities and impacts and to formulate national adaptation plans to build resilience. Nearly 90% of the national climate plans submitted so far include policies to build climate resilience. 25 Paris now address climate change. 26 Businesses are also increasingly disclosing how they manage climate risks, either voluntarily or as increasingly required by regulation. Businesses with robust climate risk management and resilience strategies will increase investor confidence and protect their operations from climate impacts. Yet only half of these are currently managing this risk. 23 By managing climate risks and building resilience to climate impacts, businesses protect both their operations and their license to operate. By establishing a global policy framework and focusing stakeholder attention on whether businesses and investors are matching a 2 C emissions trajectory, the Paris Agreement also increases the risks of high-carbon investments. A record number of shareholder proposals in the US after

5 STAND UP AND BE COUNTED The cost of not taking climate action is growing while the cost of action is falling. Leading businesses taking bold climate action benefit from a 27% average internal rate of return on their low-carbon investments, 27 alignment with incoming climate and energy regulation, first mover advantages in low-carbon markets, more resilient operations and supply chains and a stronger reputation among employees, consumers and other stakeholders. Climate action drives innovation, creates new and better job opportunities, helps to grow the economy and increases competitiveness in the global marketplace. In Paris, the Action Agenda showcased leading initiatives in every sector, from energy to finance and buildings to transport. 28 Each annual UN climate conference through 2020 will similarly showcase the latest in private sector climate action, offering a natural platform for business leadership and best practices. 29 The NAZCA portal registers climate commitments by companies, investors and subnational governments, and it counts over 2,000 commitments from companies and 425 from investors. 30 The We Mean Business commitments are the gold standard for taking bold climate action. 31 Some of the key commitments include Science-Based Targets to reduce emissions in line with a 2 C trajectory, procuring 100% of electricity from renewable sources and putting a price on carbon. Businesses and investors who commit to action through We Mean Business are, and will continue to be, recognized as leaders among their peers. As of April 5, 2016, 374 companies with US$7.8 trillion in revenue and 183 investors with US$20.7 trillion in assets under management, have now made almost 1,000 commitments to climate action through We Mean Business. 32 Carbon Pricing 75 Commitments THE GOLD STANDARD RE100 (100% Renewable Power) 57 Commitments SBTs (Science-Based Targets) 122 Commitments WMB (We Mean Business) 686 Company Commitments 226 Investor Commitments NAZCA (Non-State Actor Zone for Climate Action) 2,000 Company Commitments 425 Investor Commitments 374 US$7.8 T 183 US$20.7 T 912 Companies Total Revenue Investors AUM Commitments

6 ENDNOTES 1 International Energy Agency (IEA), Decoupling of global emissions and economic growth, 2016, pressreleases/2016/march/decoupling-of-global-emissions-andeconomic-growth-confirmed.html 2 MERGED TOGETHER: International Energy Agency (IEA), Special Briefing for COP21, 2015 p. 4. IPCC, 2014: Summary for policymakers. In: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Field, C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. Es trada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and L.L.White (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, pp UNFCCC secretariat, Paris Agreement: Article 4.2, The official agreement can be found at: _background/convention/application/pdf/english_paris_agreement.pdf 4 Paris Agreement, Article 2. 5 United States INDC submission to UNFCCC, United%20States%20of%20America/1/U.S.%20Cover%20Note%20INDC%20 and%20accompanying%20information.pdf 6 China INDC submission to UNFCCC, China s%20indc%20-%20on%2030%20june% pdf 7 European Union INDC submission to UNFCCC, LV EU%20INDC.pdf 8 India INDC submission to UNFCCC, INDIA%20INDC%20TO%20UNFCCC.pdf 9 Brazil INDC submission to UNFCCC, INDC/Published%20Documents/Brazil/1/BRAZIL%20iNDC%20english% 20FINAL.pdf 10 New Climate Economy, Better Growth, Better Climate: Executive Summary, 2014, pp International Energy Agency (IEA), Special Briefing for COP21, World Bank, Building Competitive Green Industries: The Climate and Clean Technology Opportunity for Developing Countries, 2014, p International Energy Agency (IEA), Special Briefing for COP21, Paris Agreement, Articles 2.1 (b) and Paris Agreement, Article 2.1(a). 16 Paris Agreement. Article Paris Agreement, Article 2.1(c). 18 Paris Agreement, Article Paris Agreement, Article Paris agreement, Decision 1/CP21, paras. 20, 23 and Paris Agreement, Article World Economic Forum, The Global Risks Report, CDP and BSR, Climate Supply Chain Report, Paris Agreement, Article World Resource Institute, Climate Data Explorer (CAIT), Proxy Preview, Record Number of Climate and Corporate Political Spending Resolutions Dominate 2016 Shareholder Votes, We Mean Business, The Climate has Changed, For more information on Action Agenda, please see the official website: 29 Paris agreement, Decision 1/CP21, paras More information on NAZCA can be found here: 31 Take action with We Mean Business at: #wemeanit