November 27, 2016 by Billy Hamshaw
The United States is one of 196 countries that helped create and sign the milestone Paris Climate Agreement that aims to reduce global greenhouse gas emissions. As of this writing, 109 countries have ratified the agreement, and have agreed to limit the rise in global temperature to 2 degrees Celsius this century. This is a massive undertaking, so in order to accomplish our common goal, all countries need to work together. Article 6 is a key part of the agreement because of its focus on international market mechanisms that could create a global currency of carbon instruments, making it easier and more efficient for countries to work together.
There are obvious implications from the recent presidential election that could impact both the environment and the Paris Agreement. President-elect Trump has stated publicly that he believes climate change is not real, and plans to withdraw the U.S. from the Paris Agreement. If the U.S. were to back out, not only would the rest of the world see the continued, and possibly increased, implications of our greenhouse gas emissions, but it would also send a divisive message to the other countries that have already ratified the agreement. Such a move would signal that either the U.S. does not value our shared climate, or that we expect the rest of the world to change, while we continue business as usual—prioritizing the maximization of profits over global wellbeing.
Article 28 of the Agreement gives any country wanting to nullify their participation in the Agreement a four-year waiting period before it can back out. If the U.S. started this process now, it would take until the next administration for the exit to occur. However, there are other pathways available that would circumvent this waiting period, including the use of legal shortcuts that could decrease the timeframe to one year; or leaving the UNFCCC (U.N. Framework Convention on Climate Change) altogether—a treaty originally signed by former Republican President George H.W. Bush. Of course, President-elect Trump could also choose to disregard the Agreement completely, which would take no time at all.
If the U.S. does not take part in the Paris Agreement, it follows that it would also withdraw all contributions to any climate finance mechanism as described in Article 9. As outlined, the $100 billion in contributions from developed countries was to be used by the least developed countries and small island states for mitigation efforts. Under the Obama administration, the U.S agreed to contribute to this fund to help other countries meet their Paris obligations. Encouragingly, every country at the recent Marrakech Climate Conference maintained their climate action commitment, however, without U.S. participation in the fund, the ability of these developing countries to reduce their emissions will be diminished.
The importance of Article 6 in the Paris Agreement cannot be overstated, as it opens a path for international greenhouse gas markets. The implementation of additional carbon pricing schemes not only opens the markets up for more transactions, but it could also encourage international carbon market linkage. As part of the Agreement, each country was required to submit a plan of action, in which 91 countries specifically called out the use of markets. Carbon markets hold great potential as a greenhouse gas reduction strategy, and the international interest in market mechanisms as a means to comply with the Paris Agreement is incredibly promising.
Continuing our commitment to the Paris Agreement will enable the U.S. to play a leadership role in addressing the international climate crisis. There is potential for the U.S. to mitigate our enormous impact—18% of global emissions—and what’s more, we have an obligation to do so. As a major contributor to the climate crisis facing the world, we cannot now sit it out and rely on others to find a solution without our aid. Having a global currency of carbon instruments will increase demand, and open the possibilities for an expanded carbon market in the U.S.—an important component in lowering emissions, and one that can be brought to fruition through international cooperation.
If President-elect Trump backs out of the Paris Agreement, as expected, the Clean Power Plan, which places pressure on individual states to create market mechanisms to lower CO2 emissions, would most likely be shelved as well. However, even if a national market does not form under the Paris Agreement, and the Clean Power Plan does not add pressure to individual states to create a market for carbon, states still have the right, and the responsibility, to act of their own accord. It is imperative that we do whatever possible to abide by an Agreement that is in everyone’s best interests as global citizens.
The possibility of the U.S. withdrawing from the Paris Climate Agreement is real, and could be a huge setback in the progress made toward lowering greenhouse gas emissions. What the U.S. should not do is let despair get the best of us and disrupt the progress that has already been made. We need to keep the momentum moving forward, with a focus on lowering emissions and helping the other 195 countries that have signed the agreement meet their goals.
Upcoming Webinar|Canada Clean Fuel Standards: Outlook and Interplay with North American Cl...
January 22, 2021
Weekly Commentary: ICE OI creation booms despite slowdown in weekly volume
January 25, 2021
Weekly Commentary: ICE trading activity resumes, large OI creation leads to...
January 18, 2021
Weekly Commentary: ICE Front rolls over to Vintage 2021 with $0.15 gain
January 6, 2021