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Based in Washington, DC, Hayward leads a global landscapes and livelihoods team responsible for design of Rainforest Alliance’s worldwide field strategies for agriculture, forestry, climate change, education, finance, tourism, and other key practices.
There was unprecedented private sector engagement in and around the UN Climate Talks in Paris than ever before, with thousands of businesses, investors and trade coalitions involved over the year and active during the two weeks culminating in the Paris Agreement in December at COP21.
Business came to Paris armed with solutions-oriented requests: putting a price on carbon, ending fossil fuel subsidies, ratcheting ambition in emissions reductions every five years, and urging world leaders to commit to net-zero emissions by 2050.
Leading up to this round of climate meetings, pledges to climate action of one sort or another were made from 5,000 diverse global companies representing virtually every industrial sector and over 90 countries. Altogether, companies pledging climate action represent combined annual revenue over $38 trillion — about half of global GDP — and the majority of the world’s market capitalization.
The Agreement reached in December was celebrated globally, applauded as a remarkable, unprecedented, and catalytic decision and on the whole, the historic accord received positive press – except for the climate realists and advocates of climate justice who deemed it a huge failure.
What does the Paris Agreement mean for business and why will it propel the private sector towards taking on the greatest of all environmental challenges?
Provides political confidence
With all countries committing to a shared global goal, the playing field is increasingly leveled. The Paris Agreement makes it more certain that the world is aligning around a long-term pathway to decarbonize the global economy. Business should view the future with greater confidence that governments will progressively raise their emissions-reductions targets, ratcheting up ambition.
More regulations, policies, and measures
The agreement will bring new actions by governments, in order to attain the GHG emissions targets indicated in the Intended Nationally Determined Contributions (INDCs). Over 90 of the country INDCs proposed options, from emissions trading to carbon taxes that will put a price on carbon. The INDCs signal increasing regulation and other policy measures, which will effect businesses in oil, gas, chemicals, steel, manufacturing, and transport. Sectors that are not so carbon-sensitive should benefit from new opportunities.
Future carbon pricing
While the Paris Agreement didn't and won’t single-handedly put a price on carbon, these mechanisms that increase the cost of carbon pollution, will price CO2. Inevitably countries will find that pricing carbon is the surest way to achieve their emissions’ reductions goals. Companies that can lead in low emission production, processing, and services will benefit in a new carbon economy.
Spur new investment in low emissions development
In a recent analysis by Standard & Poor, the commitments made in Paris could stimulate the renewables market, and would need an estimated $16.5 trillion in investment in cleaner, greener energy, technology and finance. Already, the global market for low-carbon goods and services is estimated at $5.5 trillion per year. The Paris Agreement should increase investor confidence and help stimulate the market for low-carbon goods and services, especially if carbon-intensive industries become more costly. In addition, the expectations of the public sector will be lifted in hopes that more private sector investment will come to the aid of policy-makers.
Greater attention to climate risk and exposure
The Paris Agreement should raise global attention on the associated costs of losses and damage to countries, economies, livelihoods, and the physical environment. Not only these costs, but the price tag for adapting to the current and projected severe impacts, estimated at USD 150-300 billion a year through 2030 in a report of the United Nations Environment Program.
Expressed more starkly, climate inaction could cost $44 trillion by 2060, according to a Citigroup report – a staggering amount, and more than the combined market capitalization of all the global companies who pledged climate action in Paris.
There is considerable risk posed by climate change to companies, something that is increasingly understood. Of more than 400 global fortune 500 companies that disclosed over 1000 physical risks to CDP in 2015, changes in temperature and precipitation extremes, tropical cyclones, and droughts were over half of the total risks reported. Paris marks a merging of forces around risk and cost. Attention should lead to more investment in adapting and insuring supply chain resilience and stability in the face of climate change.
Meeting the challenge to halt deforestation
For my organization, the Rainforest Alliance, we acutely aimed our attention at the provisions for forest conservation, cemented prominently in Article 5 of the Agreement. Prior to Paris, hundreds of global businesses were already setting and pursuing their own goals for stopping deforestation from their supply chains, including those conducting about 90 percent of the trade in global palm oil.
At the U.N. climate talks, Unilever and other big businesses announced plans to stabilize forest cover by 2030 and restore forest cover to 1990 levels by 2050.
This agreement should strengthen measures for payments for protecting forests and there will be room for carbon markets and non-market based approaches to results-based finance. And this will be important to the companies and governments who signed the New York Declaration on Forests and pledged to halve natural forest loss by 2020 and halt it by 2030. What matters most is turning those declarations into effective action. Currently there isn’t a framework to verify company progress to meeting no deforestation commitments and that is a weakness, which could strain credibility. A new era of business accountability and transparency may have been ushered in with the Paris Agreement, and this will certainly be put to the test with forest protection.
Looking beyond the forest sector, recall the 5,000 companies that made pledges to climate action before Paris. It is now that these companies must make good on their company-specific goals. Whether as signatories to the American Business Act on Climate Pledge, the CDP/We Mean Business Coalition, the World Economic Form CEOs group, the B Team and many others. For example, those who signed the American Business Act on Climate Change pledged to:
Reduce emissions by as much as 50 percent,
Reduce water usage by as much as 80 percent,
Achieve zero waste-to-landfill,
Purchase 100 percent renewable energy, and
Pursue zero net deforestation in supply chains.
Set an example for their peers.
And, as the page has turned to 2016, the next milestone is Earth Day in April, when at least 55% of the countries who agreed to the text in Paris must sign it to give it life. Assuming this takes place, enshrining the first round of global emissions reductions by all countries, the clock starts ticking on implementing the brutally hard steps of de-carbonizing the global economy.
By Jeff Hayward, Vice President, Climate Programclimate carbon fossil fuel emissions reduction CO2 deforestation supply chain Rainforest Alliance climate change