Signal and Noise at the Paris Climate Summit

In the past ten days, at the United Nations Climate Change Summit, in Paris, the word “signal” has become a kind of meme.  It began with President Barack Obama’s introductory address, last week. “Let’s show businesses and investors that the global economy is on a firm path toward a low-carbon future,” Obama said.  “There are hundreds of billions of dollars ready to deploy to countries around the world if they get the signal that we mean business this time.  Let’s send that signal.”  A few days later, in a meeting with sixty C.E.O.s, Ban Ki-moon, the U.N. Secretary-General, echoed Obama. “Across the world, businesses and investors are standing up for a strong agreement in Paris that sends the right market signals,” he said.  On Wednesday, in jumped Secretary of State John Kerry. “What we’re doing is sending the marketplace an extraordinary signal,” he said onstage in Le Bourget, where the climate talks are taking place.
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But exactly how the goals expressed in the I.N.D.C.s will be achieved remains vague, as does what happens if nations fail to meet them.  Achim Steiner, the director of the United Nations Environment Programme, told me that his office had assessed the I.N.D.C. targets and found them wanting.  Scientists have determined that, to stave off the most catastrophic impacts of climate change, we must limit warming to no more than two degrees Celsius—or no more than one and a half degrees, if we wish to protect vulnerable low-lying and island nations.  “Right now, these targets still take us beyond three degrees Celsius of warming,” Steiner said.  For this reason, he and other leaders in the negotiations, including Kerry, have argued that the final agreement should require five-year reviews of each country’s targets, to account for the ever cheaper and cleaner technologies that become available.  They have also pushed for a transparent monitoring and reporting process, with verification by the U.N. or another external party, so that each signatory is bound by law to uphold its own commitments.

Early drafts of the agreement show that the basic contours of such a system are in place.  The sense in Paris is that the means of adhering to such a framework are more accessible today than they were two decades ago, in Kyoto—or, for that matter, six years ago, at the time of the Copenhagen summit.  “Copenhagen happened before the clean-energy economy had hit its stride,” Mindy Lubber, the president of Ceres, a nonprofit that develops climate-smart investment strategies for major firms, told me.  “This may be the first conference that’s less about politics than it is about economics.”  Lubber argued, furthermore, that the overwhelming presence of business leaders at the Paris summit made it “essentially too big to fail.”  She added, “The signal is getting out there loud and clear.  The real question is, will it catalyze billions of dollars of investment, or trillions?”

Perhaps the only marketplace signals that would be strong enough to catalyze that level of investment would be eliminating oil and gas subsidies and implementing penalties on CO2 pollution.  “We won’t see a significant shift away from fossil fuels in the energy industry until an honest price is imposed on carbon-dioxide emissions,” Marie-José Nadeau, the chair of the World Energy Council, said.  Such a price could be imposed either with a tax or with a cap-and-trade system that rewards clean companies.  Given how this year’s agreement is structured, though—around individual pledges made voluntarily—there is no chance that it could mandate a single pricing scheme or trading system among all the signatories.  Still, a growing number of business leaders worldwide are now throwing their weight behind carbon pricing.  At his press briefing last week, Ban Ki-moon announced a coalition of a thousand major international companies that have pledged their support for it.  Inherent in this message was perhaps the most hopeful signal of all, said the Secretary-General:  “Leading companies are showing that they can address climate change and thrive.”

Read more at Signal and Noise at the Paris Climate Summit