The COP21 Paris Agreement is not legally binding yet but does
offer an outline of the path ahead. It has set ambitious targets to
combat climate change and, whilst the precise route to meeting
these targets isn't yet certain, in order to achieve the
Agreement's objectives it is clear that significant finance
will be needed in a range of areas, including technology
investment, disaster planning and insurance.
In our recent post, we highlighted that the total
of intended nationally determined contributions (INDCs) submitted
was less than half of that required to meet the 2ºC reduction
target for mitigating climate change.
The Paris Agreement, signed by all 195 parties,
stated a target of 2°C but with the addition of a supplementary
target of 1.5°C. Whilst the INDCs don't meet either
target, a lower target does suggest a political appetite to support
and finance increased investment in combating climate change.
Loss and Damage
The Agreement included an article dealing with the issue of loss
and damage from climate change and this is a positive step. It
adopted the Warsaw International Mechanism for Loss and
Damage, and stressed that the signatories to the Agreement must
work towards supporting measures to mitigate and adapt to risk
through, amongst other strategies, greater investment in
preparedness for the effects of climate change and insurance
Finance for developing countries
The Agreement targets financing of $100 billion per year to
developing countries to adapt to, and mitigate the effects of,
climate change. Whilst undoubtedly a positive ambition, there is
significant uncertainty as to when and how this money is going to
Not yet legally binding
The Agreement will not be legally binding until it has been
ratified by at least 55 countries representing 55% of global
greenhouse gas emissions. This means that, for now, the UK
government isn't restrained by the Agreement in its policy
options in addressing climate change. However, the government is
still subject to the legally enforceable EU target for 2030 and it
appears clear that further investment in impact mitigation and low
carbon technologies will be needed to meet these targets.
What does this mean for the finance and low carbon technology
Whilst the Agreement does not have the precision that many hoped
for on key issues such as the provision of finance to developing
countries and adoption of low carbon technologies globally, it is a
step in the right direction. Furthermore, as the parties provide
details on how they intend to meet their obligations under the
Agreement, there should be significant investment opportunities on
the horizon even before the Agreement becomes legally binding.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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In this client alert we discuss the implications of the transition to a ‘circular economy' for producers of, and traders in, raw and/or recycled materials of all kinds, manufacturers of products and actors in all stages of the commodity and product value chain.
Fears that the momentum from COP21 in Paris would fizzle in the following months appear to have been dashed at the official Paris Agreement signing session which took place in New York last Friday 22nd April.
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