The Paris Agreement is built on the principle of increasing ambition through nationally determined contributions (NDC), with the goal of reaching net zero emissions in the second half of the century. In effect, the Agreement is built on a ratchet mechanism that operates on a five year cycle of;
- Review of NDCs and their achievement or otherwise;
- Assessment of the global impact of all NDCs in terms of overall emissions and the projection of change and therefore temperature;
- And finally, re-submission of NDCs with improved ambition.
Source: Shell Sky Scenario
The pieces of this approach sit in various parts of the Agreement and COP21 Decision Text and include the following elements;
Within Article 3:
. . . all Parties are to undertake and communicate ambitious efforts as defined in Articles 4, 7, 9, 10, 11 and 13 with the view to achieving the purpose of this Agreement as set out in Article 2. The efforts of all Parties will represent a progression over time . . .
Within Article 4:
Each Party’s successive nationally determined contribution will represent a progression beyond the Party’s then current nationally determined contribution and reflect its highest possible ambition . . . .
Within Article 13:
The purpose of the framework for transparency of action is to provide a clear understanding of climate change action in the light of the objective of the Convention as set out in its Article 2, including clarity and tracking of progress towards achieving Parties’ individual nationally determined contributions under Article 4.
Within Article 14:
The outcome of the global stocktake shall inform Parties in updating and enhancing, in a nationally determined manner, their actions and support in accordance with the relevant provisions of this Agreement . . . .
At COP24 in Katowice the national negotiators were charged with developing the so-called ‘rulebook’ to fully shape and specify this process, and they did just that. The text that emerged from the COP specifies in great detail how NDCs should be submitted, how GHGs should be measured and reported and importantly, how the NDCs reflect the outcome of the global stocktake and contribute to the goals of the Agreement.
Common NDC timeframes are introduced along with a drive towards a uniform formulaic structure, a registry is proposed to hold NDCs and the history of submissions and there is a requirement to detail the actions taken to deliver the NDC. For example;
Each Party shall provide information on actions, policies and measures that support the implementation and achievement of its NDC under Article 4 of the Paris Agreement, focusing on those that have the most significant impact on GHG emissions or removals and those impacting key categories in the national GHG inventory. This information shall be presented in narrative and tabular format.
How the Party considers that its nationally determined contribution is fair and ambitious in the light of its national circumstances [NB – these are tests against the Agreement itself where it requires increasing ambition in successive NDCs]:
- Fairness considerations, including reflecting on equity;
- How the Party has addressed Article 4, paragraph 3, of the Paris Agreement;
- How the Party has addressed Article 4, paragraph 4, of the Paris Agreement;
- How the Party has addressed Article 4, paragraph 6, of the Paris Agreement.
- How the nationally determined contribution contributes towards achieving the objective of the Convention as set out in its Article 2;
- How the nationally determined contribution contributes towards Article 2, paragraph 1(a), and Article 4, paragraph 1, of the Paris Agreement.
This stringency in NDC design and greenhouse gas reporting potentially takes the Paris Agreement towards a more Kyoto Protocol Annex 1 structure, but with all nations participating rather than just developed countries. That was a world of carbon budgets, clear numerical reduction targets and emissions trading between Parties. Missing from the Katowice package was the emissions trading aspect, which can be delivered by Article 6, although no agreement was reached on its final structure. It is the accounting provisions of Article 6 that tip the balance in favour of a Kyoto lookalike, which perhaps explains some of the issues left on the table.
Then there is the first global stocktake in 2023, but this is where the fault lines within the process begin to show. While global by design, the stocktake may have no individual Party focus and can only check on collective action. Although this is still useful, it has limits in that overall progress under Paris is entirely due to the sum of component parts, which are the NDCs. The text in the rulebook says;
Emphasizes that the outputs of the global stocktake should focus on taking stock of the implementation of the Paris Agreement to assess collective progress, have no individual Party focus, and include non-policy prescriptive consideration of collective progress that Parties can use to inform the updating and enhancing, in a nationally determined manner, of their actions and support in accordance with relevant provisions of the Paris Agreement as well as in enhancing international cooperation for climate action;
Further, within Article 15 of the Agreement a mechanism is established to facilitate implementation and promote compliance with the Agreement by the Parties, but this is about compliance with the rules (such as having an NDC), not compliance with the goal, since that is a collective responsibility. At COP24 this was addressed by creating a committee and outlining its responsibilities. Again, there is clear wording to avoid finger-pointing at one or more Parties;
In addressing systemic issues, the Committee shall not address matters that relate to the implementation of and compliance with the provisions of the Paris Agreement by an individual Party.
In the Sky scenario, released last year by Shell, there is a strong dependency on the ratchet mechanism working at its best. The story behind the Sky numbers sees widespread re-submission of NDCs at the earliest possible dates, with much greater ambition adopted and therefore a shift downwards in the global emissions curve during the latter 2020s. To achieve this, strong leadership is required along with an underpinning cooperative spirit that transcends simply turning up at the COPs and reporting back. In such a world finger-pointing isn’t necessary as those countries which may be struggling to raise ambition are helped by others.
The ratchet mechanism is both the strongest and weakest aspect of the Paris Agreement. It devolves action to national governments which works very well, but requires a non-confrontational supportive approach to coax out the best from every country. This latter aspect is struggling to shine through in the current world order.
Note: Scenarios are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Please read the full cautionary note in http://www.shell.com/skyscenario.