Perspectives

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Global  
Lack of progress in climate talks  
The COP24 only succeed in agreeing on rules on measuring, reporting and verifying carbon emissions. In the meantime, the world is  
falling behind the objective to limit global warming to 1.5°C. CO emissions are set to rise to 2030, whereas they should peak by 2020.  
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Countries are underestimating the urgency for action or held back by commercial interests. Moreover, environmental legislation is  
met by growing public resistance. It demands a better framing of climate policies. Moreover, the climate change discussion should be  
broadened to the WTO.  
Minimal results at the COP24  
1- CO  
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emissions continue to grow  
The Paris agreement, concluded at the 21st Conference of Parties  
COP21) in 2015, was a milestone in the process of reducing CO  
GtCO  
2
per year  
(
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emissions worldwide. The almost 200 participating countries agreed  
on limiting global warming to 2°C above pre-industrial levels and  
continue efforts to keep it below 1.5°C. In addition, the developed  
countries reiterated their commitment to jointly mobilise  
USD 100 billion annually for climate action in the least developed  
countries.  
The agreement is not very demanding. Before the COP21, the  
countries had announced their own climate objectives, the so-called  
Nationally Determined Contributions (NDC), which were in many  
cases not very ambitious. The signatories decided that details of the  
deal, such as the measurement of the emissions and the  
procedures of upscaling the national pledges would be worked out  
at the subsequent COPs.  
Source: Global Carbon Project  
 An unfavourable political environment  
The process has not been a very smooth. Hardly any progress has  
been made in finding agreement on the USD 100 billion for climate  
finance by 2020, even though the promise was already made at the  
COP15 in 2009. Last year’s COP24 held in Katowice (Poland) was  
a deception. It only succeeded at the last moment in accepting rules  
on measuring, reporting and verifying carbon emissions.  
Although early signs of climate change have already appeared,  
many participants at the COP still deny the urgency for immediate  
action, as for most of them the catastrophic impacts will be felt well  
beyond the traditional planning horizons. Bank of England’s  
governor Mark Carney has called it “the tragedy of the horizons”.  
Normally, governments should have a responsibility in overcoming  
such market failure through developing policies and an appropriate  
regulatory environment.  
Ahead of the COP24 at Katowice (Poland), the Intergovernmental  
Panel on Climate Change (IPCC), the UN organisation for climate  
analysis, published a special report, “Global Warming of 1.5 °C”.  
The main message is that the world is warming up quickly and more  
action is needed to bring the world economy back to a low carbon  
trajectory. It underlined the importance of keeping global warming  
below 1.5°C, which would require much more investment in  
particular in renewable energy sources. The conference failed to  
endorse the IPCC report “Global Warming of 1.5°C” because of  
opposition from four oil-producing nations, the United States, Saudi  
Arabia, Russia and Kuwait.  
Some countries are held back by commercial interests. Fossil fuel  
supply and thermal power investment are increasingly dominated by  
state-owned enterprises. During the COP24, both the US and  
Australia openly supported the coal industry. The Australian  
delegation argued that emissions could be effectively reduced by  
the development of carbon capture and storage. This is at odds with  
the recommendations of climate scientists who argue that countries  
should transition as soon as possible to renewable energy sources  
in order to avoid catastrophic levels of climate warming.  
Time is running out for the negotiators to find solution how to  
upscale the national climate ambitions. The UN Secretary General  
Antonio Guterres has called for a special summit for head of states  
and government leaders in September 2019, ahead of the COP25.  
At the COP25, to be held in Chili, the process will be determined for  
upscaling the new climate objectives.  
In June 2017, President Trump announced to pull the US out of the  
Paris Climate Agreement. For the moment, the US remains involved  
in the climate talks, as the rules stipulate that the country cannot  
leave before November 2020. The main argument of the US is that  
the treaty is not in its commercial interest. Thanks to deft diplomacy,  
in particular from the EU countries, the strongest backer of the  
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EcoPerspectives // 1 quarter 2019  
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accord, no other country followed the US initiative. Also inside the  
US, the decision has been heavily contested. Some US states,  
municipalities and businesses have stepped up their action to  
compensate for the lack of action by the federal government.  
absolute terms, they would face the highest costs. According to the  
authors, the bottom income deciles would experience the greatest  
net gains.  
A second problem is that the Paris climate agreement is rather non-  
committal. Countries are free to formulate their own objectives,  
there are no sanctions if these objectives are not met and they can  
leave when they want. However, some changes in attitude can be  
observed. The EU is already arguing that trade agreements should  
include environmental and social obligations. William D. Nordhaus,  
the 2018 Nobel laureate in Economic Sciences suggests that  
countries could form coalitions, the so-called climate clubs that  
accept a carbon price. Import duties will be levied on goods from  
countries that do not belong to the club. These duties can be  
dependent on the carbon contents of the goods. It is an interesting  
idea that may require broadening the climate change discussion to  
the WTO.  
It is possible that Brazil may follow the US example. During his  
campaign, the newly elected President Jair Bolsonaro had pledged  
to pull his country out of the Paris Agreement. The country already  
withdrew its offer to host the COP25, officially for budgetary reasons.  
That conference will now be held in Chili. A departure of Brazil could  
be fatal for the treaty, as other developing countries could revise  
their position.  
However, commercial interests may withhold the country from going  
down this road. During his address at the UN general assembly,  
French President Emmanuel Macron announced that his country,  
and by extension all the EU, will not sign any trade agreement with  
a country that do not respect the Paris agreement. Moreover, the  
EU trade commitments should include its environmental and social  
obligations. His position has been publicly backed by EU Trade  
Commissioner Cecilia Malmström. A possible withdrawal of Brazil  
from the Paris Agreement may halt the negotiations on a free trade  
deal between the EU and Mercosur countries. This would be very  
harmful for Brazil’s very large agricultural sector. Moreover, Brazil is  
also one of the main beneficiaries of the Paris Agreement. The large  
rainforest acts effectively as a carbon sink. For this, the country  
receives subsidies in order to halt deforestation.  
A different approach is needed  
In order to limit global warming to 1.5°C, greenhouse gas emissions  
should peak by 2020. However, during the COP24, it was  
announced that the CO emission had risen once more in 2018.  
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According to the UN Emissions Gap Report, GHG emissions of the  
G20 countries, as a group, will not have peaked by 2030 unless  
there is a rapid increase in ambition and action within the next few  
years.  
Unfortunately, many countries fall even behind on national  
environmental agendas. One problem is that environmental  
legislation is met by growing public resistance. As long as climate  
change does not seem a very pressing problem, it is very tempting  
to become free-riders and let the coming generations make most of  
the effort in cutting back greenhouse gases.  
In particular, carbon taxes are often resisted, as users cannot  
change quickly to cheaper alternatives without incurring heavy costs.  
Moreover, for the tax payer, the link between carbon taxes and  
climate objectives is not always clear. These taxes could be  
perceived as just another way to finance the budget. In 2018, a  
modest increase in French carbon taxes triggered off heavy street  
protests which forced the government in reversing the measure.  
Voters in Washington State also recently rejected a carbon tax.  
A solution could be the better framing of climate policy. Recently,  
George Shultz and Ted Halstead have proposed the so-called  
Carbon Dividends Plan. A carbon fee will be levied and the  
proceeds, the so-called dividend, will be directly put back into the  
people’s hands. As the wealthier households tend to pollute more in  
QUI SOMMES-NOUS ? Trois équipes d'économistes (économies OCDE, économies émergentes et risque pays, économie bancaire) forment la Direction des Etudes Economiques de BNP Paribas.
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