Paris Agreement alone will not hold back fossil fuel investments — what comes next?

Paris Agreement alone will not hold back fossil fuel investments — what comes next?
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I’m of two minds on the current state of climate policy. I’m overjoyed with the Biden administration’s policy focus on climate action, it’s invigorating to have the United States back in the game, but I’m vexed by the abiding global negligence with regards to investments in the fossil fuel industry.

At a time when nations are promoting their pledges to reduce greenhouse gas emissions, China’s carbon emissions are skyrocketing far more than can be explained by a post-pandemic rebound, with plans for continued expansion in carbon-intensive sectors. Just in the past year the G7 nations (Canada, France, Germany, Italy, Japan, the U.K. and the U.S.) invested $189 billion in fossil fuels — tens of billions more than they invested in renewable sources of energy.

The 2020 international Production Gap Report shows that countries are indeed planning on continued expansion of fossil fuel investments, rather than the contraction necessary to reach the mid-century goal of a carbon-neutral economy.

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Meanwhile, international governance is faltering as well. The International Maritime Organization, the notoriously secretive United Nations agency with responsibility for the prevention of marine and atmospheric pollution from shipping, a carbon-intensive sector, has been slow-walking climate action on behalf of the shipping industry for so long it’s competing with fossil fuel industries for public scorn.

On top of these distressing facts, there is evidence that the clean energy transition is not likely to be a transition at all, but rather just an increase in consumption fueled by more modern sources of energy that do not actually displace yesterday’s fossil fuel sources.

The hope, of course, is that somehow, despite these worrying signs, countries will turbo-charge their Paris Agreement pledges in order to massively reduce emissions, and civilization will achieve carbon-neutrality by midcentury as necessary to avoid the worst consequences of climate change. Surely, the flexibility and ambition of the Paris Agreement is vigorous enough to pull this off, isn’t it? Well, that’s not entirely clear.

The Paris Agreement called for emissions-reduction pledges, called Nationally Determined Contributions (NDCs), from every signatory nation by 2020. It is expected that these NDCs are elastic — and are meant to increase in ambition over time as needed to achieve a carbon-neutral economy by midcentury. An independent review provided via a mechanism called the “Enhanced Transparency Framework” will assess progress and, in 2025 and every five years thereafter, NDCs will be altered to meet the mid-century goal.

However, while the UN’s Framework Convention on Climate Change website calls the Paris Agreement “mandatory” and legally-binding, the only way this agreement could get signatures from countries such as the United States was to make the NDCs voluntary — with no penalties for noncompliance. As Captain Barbossa in “Pirates of the Caribbean” said, “the [pirate] code is more of what you’d call ‘guidelines’ than actual rules.” The same holds true here, a fact that was frequently raised by observers who were baffled by former President TrumpDonald TrumpFormer New York state Senate candidate charged in riot Trump called acting attorney general almost daily to push election voter fraud claim: report GOP senator clashes with radio caller who wants identity of cop who shot Babbitt MORE’s zeal to withdraw from the pact — a withdrawal that President BidenJoe BidenBriahna Joy Gray: White House thinks extending student loan pause is a 'bad look' Biden to meet with 11 Democratic lawmakers on DACA: report Former New York state Senate candidate charged in riot MORE has since reversed.

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Predictably, some think tanks support keeping the NDCs voluntary, suggesting that as long as the spigot of climate finance for developing countries is turned on, a voluntary framework will get the job done. Thus far that spigot has been but a trickle, however, and the voluntary commitments fall woefully short of what’s needed. The UN’s Framework Convention on Climate Change own website acknowledges that the ambition demonstrated in the 2020 targets will need to be “massively increased.” Another weakness is that the agreement does not mention anything about constraining the supply of fossil fuels, the primary source of greenhouse gases causing climate change.

So, perhaps it’s time to raise the nagging questions once again: Is it time to hold nations accountable on NDCs? In addition to demand-side measures such as a carbon price or trading schemes, is it time for legally binding commitments that address the supply of fossil fuels?

One group of 100 Nobel Laureates and over 1,000 scientists and academics thinks so. In a world in which even the International Energy Agency says addressing the climate crisis will require an immediate end to fossil fuel investments, this host of experts has appealed for a fossil fuel non-proliferation treaty (FFNPT). Patterned after the treaty on the non-proliferation of nuclear weapons and the Montreal Protocol, it aspires to attain the breakthrough success credited to those international measures.

Introduced last year and promoted during the climate leadership summit hosted by President Biden in April, this initiative echoes the refrain of the “keep it in the ground” chorus and adds the international gravitas of Nobel Laureates and a host of climate experts. In promoting the FFNPT, advocates note that nowhere in the Paris Agreement will you find text on fossil fuels — in other words the supply side of the equation is completely left out.

Diplomats may scoff at the concept of a supply-focused treaty — and of course the full financial leverage of the fossil fuel industry stands against it. Yet, organizations around the world are tooling up for an eventual non-voluntary regulatory framework of some kind, one that would complement the Paris Agreement by addressing the supply side of the equation.

The Carbon Tracker Initiative and Global Energy Monitor are developing a global registry of fossil fuels to begin the work of accounting for reserves and fossil fuel production around the world. That type of information is currently unavailable or non-transparent, and it will enable the type of accounting mechanism necessary should a regulatory framework emerge.

Other supply-side strategies focus on leveling the energy playing field by removing fossil fuel subsidies. While not limiting supply directly, the impact of deleting such subsidies would be profound.

The International Monetary Fund has estimated that in 2017 the U.S. spent over $5 trillion on fossil fuel subsidies and a Forbes article noted that it was over 10 times more than the nation spent on education in that period. From the public opinion point of view, taking back these taxpayer dollars will appeal to small businesses as well as economists that loathe market distortions. From the energy transition perspective, who can argue with a level playing field?

The lack of policy action on the fossil fuel supply side is no secret. The question is: What will it take to spur the international community to cross that Rubicon? At what point does diplomatic futility get embarrassing in the face of aggressive industry actions to slow climate action? Time is running out for that mid-century carbon-neutral aspiration, and people are already suffering around the world.

The Paris Agreement was a monumental accomplishment. It’s a complex but important tool for addressing the climate crisis. It is also not enough. We need a transparent, common-sense set of policies to restore our faith that public institutions can lick this thing. As the head of the International Energy Agency Fatih Birol said, “If governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now – from this year.” So, are we indeed serious about the climate crisis?

Joel Clement is a senior fellow at the Harvard Kennedy School's Belfer Center for Science and International Affairs and a senior fellow with the Union of Concerned Scientists (UCS). Prior to joining UCS and the Belfer Center, Clement served as an executive for seven years at the U.S. Department of the Interior. Since resigning from public service in 2017, he has received multiple awards for ethics, courage, and his dedication to the role of science in public policy. Follow him on Twitter: @jclementmaine.