By: John Auers and Elizabeth Hilbourn
Long live the planet! I would hazard to say that most everyone (with the possible exception of ISIS, Lex Luther, Dr. Evil, or some other real or fictional crazies) supports that statement. Last month, most of the 196 nations in attendance at the Paris Climate Conference put that sentiment into writing by signing the Adoption of the Paris Agreement, a treaty meant to reduce greenhouse gas emissions on a global basis. In many ways the agreement raises more questions than it provides answers. For instance, what does the agreement really mean and will there be any real, quantifiable consequences? Who is responsible for protecting the climate, anyway? Will this put an end to fossil fuel and coal? It seems fitting to include a blog on climate change after devoting the last three blogs to alternative fuels. Last week in “For Auld Lang Syne, My Dear, Let’s Take a Cup of Cooking Oil and Turn it into Diesel Fuel”, we detailed how renewable diesel is making its move as a “planet-friendly” fuel. As we learned, twenty percent of all biomass-based diesel RINs are now generated from renewable diesel. Despite this significant growth, we also learned that it, along with the other “green” alternative fuels discussed in previous blogs are still very minor players in the energy world, with petroleum and natural gas still the lead actors, and expected to stay that way for quite some time. Will the developments at the Paris conference change this or was it “Much Ado about Nothing?” Although it is way too early to provide a definitive answer to this or the questions we posed earlier, we will attempt in this blog to provide some commentary on what led up to the developments in Paris and highlight some of the key provisions of the agreement which was implemented.
“Long live the planet. Long live Humanity. Long live life itself.”
The international political response to climate change began at the Rio Earth Summit in 1992, where the ‘Rio Convention’ included the adoption of the UN Framework Convention on Climate Change (UNFCCC). The first Conference of the Parties (COP) took place in Berlin in 1995, and significant meetings since then have included COP3 where the Kyoto Protocol was adopted, COP11 where the Montreal Action Plan was produced, COP15 in Copenhagen where an agreement to succeed the Kyoto Protocol was unfortunately not realized and COP17 in Durban where the Green Climate Fund was created. This year marked the 21st annual Conference of Parties (COP21) also known as the 2015 Paris Climate Conference. Its aim was to achieve a legally binding and universal agreement on climate, with the goal of keeping global warming below 2 degrees Celsius. The chart below shows four potential scenarios for the course of global emissions.
The two-week conference included almost 200 nations, 50,000 participants, and 25,000 official delegates. Ahead of the agreement, 186 countries submitted plans detailing how they plan to reduce their greenhouse gas pollution through 2025 or 2030. The U.S. concentrated its efforts in its clean power plan described below. The agreement requires all countries to submit updated plans that would ratchet up the stringency of emissions by 2020, and every five years thereafter. The deal requires countries to monitor, verify and report their greenhouse gas emissions using the same global system. The agreement gives countries leeway in determining how to cut their emissions. Every five years, nations will be required to assess their progress toward meeting their climate commitments, and to submit new plans.
Is the Agreement Binding?
For the agreement to have legal force, it must be ratified by at least 55 of the 195 countries that adopted it. Those 55 countries must represent at least 55% of all global-warming emissions. The agreement, if ratified, is binding in some elements like reporting requirements, while other elements (such as setting emission targets for any individual country) are nonbinding. On the front page of the 32-page Adoption of the Paris Agreement are the words, “Adoption of a protocol, another legal instrument, or an agreed outcome with legal force under the Convention applicable to all Parties.” Many believe the power resides in the countries “show of face” during the next milestone in five years.
Some Highlights of the 32-page Agreement
- Temperature Increase– page 22
“Holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.”
- Reach Global Peaking of Greenhouse Gas Emissions ASAP– page 22
“In order to achieve the long-term temperature goal set out in Article 2, Parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country Parties, and to undertake rapid reductions thereafter in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty.”
- Preservation of Forests– page 23
“Parties are encouraged to take action to implement and support, including through results-based payments, the existing framework as set out in related guidance and decisions already agreed under the Convention for: policy approaches and positive incentives for activities relating to reducing emissions from deforestation and forest degradation, and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries; and alternative policy approaches, such as joint mitigation and adaptation approaches for the integral and sustainable management of forests, while reaffirming the importance of incentivizing, as appropriate, non-carbon benefits associated with such approaches.”
- Addressing Loss and Damage– page 26
“Parties recognize the importance of averting, minimizing and addressing loss and damage associated with the adverse effects of climate change, including extreme weather events and slow onset events, and the role of sustainable development in reducing the risk of loss and damage.”
Transparency– page 28
“In order to build mutual trust and confidence and to promote effective implementation, an enhanced transparency framework for action and support, with built-in flexibility which takes into account Parties’ different capacities and builds upon collective experience is hereby established.”
Establish a Climate-Related Financing Goal– page 8
“…shall set a new collective quantified goal from a floor of USD 100 billion per year, taking into account the needs and priorities of developing countries.”
U.S. Clean Power Plan
As a lead up to COP21 to show it’s good intentions, the Obama Administration announced in early August the Clean Power Plan (CPP), a policy to reduce carbon pollution from power plants, the nation’s largest source. The effective date of this initiative was December 22, 2015. Fossil fuel-fired power plants are by far the largest source of U.S. CO2 emissions, making up 31% of U.S. total greenhouse gas emissions. When the CPP is fully in place in 2030, carbon pollution from the power sector is targeted to be 32% below 2005 levels.
The Show
Other nations are talking about implementing programs similar to the CPP and addressing transportation fuels as well, while proposals for more green energy will surely be pushed further at both the state and federal levels in the U.S. in coming years with the goal to meet the targets set forth at COP21. Whether these will come to fruition and change the energy environment is unknown. What we do know is that the delegates in Paris sure make a show of being “green”. Keeping with the theme of the conference, all the food at United Nations Environment Programme (UNEP) events was sourced from rescued food, resources that would otherwise have been destroyed. They used recyclable cups and handed out USB keys instead of printing documents. 300 electric cars were provided by Renault-Nissan to anyone seeking a ride. 10,000 loafs of bread were baked on site to avoid having them trucked in. But then they all flew back to their home countries on planes powered by petroleum derived jet fuel – oh well.
A section on regulatory initiatives will be included in our 2016 Crude and Refined Products Outlook, scheduled to be issued in early February. Also included in this report will be detailed forecasts of supply, demand and prices for crude and refined products, both in the U.S. and throughout the world, with our measured assessment of how all these will be impacted by changes in the regulatory environment. We also use this analysis, which we update on a regular basis, in our other industry studies and work products. For more details about any of our publications, studies or other TM&C services, please visit our website, send us an email or give us a call.