Grantham Institute report outlines how to build confidence in the raft of national emission goals that underpin the historic Paris Agreement
There were many reasons why the Paris Summit succeeded in delivering a sweeping international climate agreement where other conferences had faltered - French diplomacy, President Obama's pursuit of a green legacy, China's renewables boom - but chief amongst them was the adoption of a system of voluntary national climate targets in the months leading up to the historic meeting. Known as Intended Nationally Determined Contributions, or INDCs, once the deal is signed by almost 200 countries in New York in April, these national climate action plans will become simply Nationally Determined Contributions (NDCs) - providing the solid bedrock of the world's strategy for tackling climate change.
But while attention in the run up to the conference was focused on increasing the ambition of these emissions reduction targets, attention is now beginning to shift to how countries will actually deliver them.
Unlike the Kyoto Protocol, which had some forms of penalties for countries who did not comply with imposed emissions targets - such as being banned from international emissions trading schemes - the Paris Agreement purposefully avoided the threat of putative measures. Instead, it sets up a framework for international assessment of global emissions through a stock taking process to periodically check how countries are doing against their pledges, although the details of exactly how this will be done are yet to be worked out.
In light of this voluntary structure, a new report from the influential Grantham Institute has this week outlined the crucial importance of ensuring the national action plans are regarded as credible as the world moves forward to implement the Paris Agreement. "How credible, actually, are those pledges?" says Alina Averchenkova, co-head of climate policy at the Grantham Institute and co-author of the report. "Do countries intend to do what they pledged, and what is the likelihood of them being able to implement that commitment?" she asks, adding that the way INDCs are seen by the business and investment community will have a major impact on both investment flows and the overall success or failure of the Paris Agreement.
The ability of countries to convince other players they will meet their targets underpins the Paris Agreement in a number of crucial ways, Averchenkova tells BusinessGreen. Many countries will require substantial investment and external financial support to implement their pledges, meaning it is crucial that the plans are perceived as being ambitious and consistent. "Investors will go to the areas where they feel that policies that are being put in place will actually stay in place, they are credible and the will not be abolished," says Averchenkova.
Credibility will also be important if the push to increase international ambition through the five yearly review cycles set up by the Paris Agreement is to succeed. The INDCs submitted before Paris are currently not in line with the stated goal to ensure temperature increases remain "well below 2C", but countries will be reluctant to sign up to more ambitious emissions targets in five years time if they do not believe their competitors are delivering on their initial goals. Consequently, a country which can show its pledges are credible will increase its ability to negotiate effectively in future summits.
The Grantham Institute report focused on G20 countries and looked at several areas to determine the credibility the pledges they have made through their INDCs.
One key indicator was whether whether there is a comprehensive legislative and policy basis in place - and a transparent and solid enough decision-making process to limit the risk of climate policy reversals. Another factor considered was whether there are supportive bodies that would enable the deliver of the INDC, including dedicated public organisations, such as the UK's Climate Change Committee, and supportive private bodies. Alternatively, the report also considered if there are substantial private budgets lobbying against climate action that could lead to the INDCs being undermined. "[Public organisations like the CCC] increase the credibility of policy pledges because governments are given a qualified independent opinion before taking a decision," says Averchenkova.
The report also looked at how climate-aware public opinion is, the history of active international engagement on environmental issues, and if the country has a track record on keeping up with - or bailing on - climate change commitments.
The results of the analysis gives some considerable cause for optimism. "One of the key findings was that all G20 countries have at least some basis for credible implementation of Paris pledges," says Averchenkova. "No country will be starting from scratch." However, big differences were still evident. The EU and its individual members Germany, Italy, France and the UK all scored well, as did South Korea, with most of the factors assessed deemed 'largely supportive' of their respective INDCs.
Meanwhile, Australia, Brazil, Japan, Mexico, Russia, Turkey, South Africa and the US were classed as countries who had at least one area needing significant improvement. And the rest of the G20 countries - Argentina, Canada, China, India, Indonesia and Saudi Arabia - still had significant scope for increasing credibility across most of the indicators.
Averchenkova said there were clear steps governments could take to increase the credibility of their pledges and bolster green investor confidence. "That would include establishing comprehensive legislative and policy bases, and [implementing] for example legislation on climate change - which is missing in a number of G20 countries - or strengthening decision making processes and engagement of stakeholders," she says.
One distinction that emerges from the analysis is the difference between industrialised and emerging economies in the amount of experience and institutional capacity they have to implement climate change policies. However, Averchenkova notes that this is not a a uniform trend - emerging economies like South Korea and Mexico have quickly developed institutional capacity and passed ambitious climate legislation.
Meanwhile, given the recent changes to several key green policies in the UK, it may surprise some observers that it actually emerged as one of the countries with the most credible set of climate goals. However, Averchenkova points out that the report focused on longer term and more engrained policy and institutional factors, which serve to minimise shorter term changes in the political landscape and policy. "Having those fundamental elements in place, like the CCC, the Climate Change Act legislated and in force, actually minimises the impact of temporary changes in the government position," she argues.
Now post-Paris challenge is for many of these countries, as well as those outside the G20, to implement measures to increase the credibility of their pledges. With many of the emissions reduction targets put forward by through the system of INDCS not yet adequately backed by currentpolicies or legislation reforms are urgently needed in countless jurisdictions. If policy makers act over the next few years to deliver the legislative foundations and institutional mechanisms their INDCs require then the Paris Agreement could close its current credibility gap pretty quickly.
This article is part of BusinessGreen's Road to Paris hub, hosted in association with PwC.