As the world celebrates the Paris agreement, after 20 years of fraught meetings, its significance for the future development pathways of the emerging economies of Asia cannot be underestimated. Critically, it will increase the flow of additional public and private finance for vulnerable countries for both low carbon and climate resilient investments. Low-carbon green growth pathways toward a possible 1.5°C limit and 5-year reviews will be played out through the Intended Nationally Determined Contributions (INDCs).
Paris climate agreement
Under the historic Paris Agreement, all nations from 2020 will present INDCs every 5 years. These self-defined national climate action plans should outline mitigation pledges that will increase over time. Although parties reaffirmed previously agreed intentions to hold global average temperatures well below the 2°C rise from pre-industrial levels, they will also pursue best efforts to limit the rise to within 1.5°C. The inclusion of this lower limit came as a surprise to many observers and has been credited to both the efforts of a 43-country coalition currently chaired by the Philippines. The agreement also aims to increase countries’ abilities to adapt to the adverse impacts of climate change by establishing a new global adaptation goal to strengthen climate resilience and reduce vulnerability and make annual finance flows of $100 billion from developed countries, consistent with a pathway toward low greenhouse gas emissions and climate-resilient development. It also strongly encourages developed countries to scale up climate finance and commits to several other processes for boosting interim mitigation and adaptation efforts.
Learning curve and a new bottom-up approach
For many stakeholders, the new climate regime marks a concrete turning point for tackling climate change and accelerating green growth. Under their INDCs, the People’s Republic of China declared it would reduce its carbon emission intensity by 60%–65%, India by 33%, and Indonesia by 29%. This was in contrast to the top-down nature of the Kyoto Protocol, which mandated emissions reduction targets for only 37 developed nations. The principle of “common but differentiated responsibilities and respective capabilities” is also enshrined in the agreement and refers to the idea that parties have different responsibilities and capacities for climate action as defined by their national economic circumstances. The Paris outcome addresses the differentiation challenge in specific ways in almost every article. For example, Agreement Article 4.4 on mitigation stipulates that developed countries should continue to take the lead through economy-wide absolute emission reduction targets outlined in the INDCs, while developing countries should continue enhancing their mitigation efforts and are encouraged to move over time toward these types of goals or “limitation targets.”
Innovation, inclusion, and integration
For all the potential benefits of the INDCs, various assessments have already determined that they are unlikely to limit global warming below 2°C (Figure 1). Nevertheless, mirroring the history of the past climate negotiations and political ambience, the current approach seems to be the only feasible way to proceed. The INDCs offer a rallying point, which is useful because it inspires actions—and actions, once underway, will inspire more actions in a virtuous cycle of innovation.
Figure 1: Average projected warming by 2100
Source: Climate Action Tracker, data compiled by Climate Analytics, ECOFYS, New Climate Institute and Potsdam Institute for Climate Impact Research.
In a surprise move for some stakeholders, the decision text includes a “carbon budget” by noting with concern that current efforts do not fall within least-cost 2°C scenarios, and that much greater efforts will be needed to reduce emissions to 40 gigatons by 2030 from their current projected level of 55 gigatons.
Resistance reportedly also emerged around the 5-year review cycles from the PRC, India, and Indonesia, given that their current intended INDCs cover a 2020–2030 timeframe. This appears to now be accommodated in the decision text, which urges countries that have already outlined 2025 timeframes to present new INDCs by 2020, and a subsequent paragraph requesting countries with 2030 targets to communicate or update these by the same date.
The agreement also specifies that developed country parties shall biennially communicate quantitative and qualitative information on climate finance mobilization, with other parties doing so on a voluntary basis. The decision text stipulates that before 2025, all parties will decide on a new collective quantified financing goal from a floor of $100 billion per year, reiterating that developed countries intend to continue to mobilize the figure up to that time based on their previous pledge.
Scaling up the right technologies for climate mitigation and adaptation is critical, but has thus far faced challenges including those related to capacity, finance, and expertise. To this end, the Paris agreement has established a new technology framework to provide overarching guidance for this work. A separate Paris Committee on Capacity-building will be set up, with the aim to address capacity gaps along with current and emerging needs for developing countries. A work plan for the period 2016–2020 will be defined and further terms of reference as well as membership will be worked out in due course.
Managing the transition to a low-carbon economy
With a historic accord just inked in, implementation will need to begin immediately and ramp up. The agreement in Paris is increasing but if the ambitions do not continue to increase in future, then the achievement of a 1.5°C or even a 2°C target and many of the Sustainable Development Goals will be in danger. Asian leaders need to express more ambition and more realism when taking the next steps for implementing the agreement. Ambition requires increasing the options outlined in the agreement. A broad commitment to quickly diversify the energy mix with more low-carbon sources would be more welcome than anything they could offer (ERIA 2015). Well-designed carbon pricing can boost renewable energy and encourage energy saving (IEA 2015). Radical innovations are needed in implementing INDCs, which will not stop climate change from getting worse. This is where reality comes in, and many communities in the region will have to adapt to a warmer world. The trouble is that it is not clear what counts toward the announced $100 billion a year or what the money is for. Strong carbon mitigation actions must be complemented by a concerted effort to bolster resilience. The priorities should be developing new crop varieties that can survive extreme weather, better sanitation for poor, and health care to make vulnerable groups more resilient to climate shocks. Creating the most resilient communities while unlocking adaptation co-benefits requires crucial public–private partnerships in financing.
Fundamental changes are occurring at the regional level in Asia on the frontiers of economic and financial integration. Asian countries can show solidarity to ensure climate actions on the following, which would have implications for the ASEAN Economic Community.
First, cyclical improvement. Countries’ commitments through INDCs and associated action plans should be transparent and quantified. The pressure for continuous cyclical improvement of contributions rests essentially upon comparisons between countries. In order to ensure that given INDCs are implemented, a comprehensive compliance mechanism is needed, which could have attached rewards. Countries should be encouraged to make more ambitious commitments in a progressive manner.
Second, technology cooperation. The Paris Agreement should include a provision on market and non-market mechanisms that encourages new cooperative technology agreements and standards on low-carbon energy systems. For example, the following issues require further consideration: (i) identifying technology needs and priorities for the INDCs; (ii) financial allocation under market and non-market mechanisms; and (iii) coordination among technology suppliers and recipients. Market mechanisms could transfer information on abatement costs and contribute to price harmonization, but need clear and detailed rules and institutions.
Third, investments in low-carbon, climate resilient development. These investments are often perceived as risky, mainly due to uncertainty of information and public policies, sending crucial messages for financial markets. The scale and sources of climate finance in the Paris Agreement must be agreed upon. This could be achieved, for example, by perceiving the international public climate finance as seed money that attracts funding from other sources. Thus the scale would have two dimensions: (i) quantitative targets for public finance, and (ii) qualitative targets for private finance.
The good news is that there is a wealth of evidence demonstrating that the above three could be achieved in ways that are socially just and economically prosperous. The work to forge low-carbon green growth can build on the considerable knowledge and experience that ADB, ADBI, ERIA, and others have already gathered in recent years, New evidence also comes from research set out in the ADB–ADBI (2015) book, Managing the Transition to a Low-Carbon Economy: Perspectives, Policies and Practices from Asia. The volume maps out how different actors at the national, regional, and city levels are already implementing low-carbon development that can be up-scaled and replicated. Achieving low carbon development is about more than carbon emission reductions; the book highlights a range of issues, such as a better, more stable economic system, greater equity, increased health and well-being, and strengthened communities. The key conclusions from the book are as follows
- Actions toward a low-carbon economy are pro-human development. Policies that reduce or eliminate greenhouse gas emissions go in hand with increasing equity and supporting the more vulnerable people.
- Time is up for the wasteful use of resources. We can drastically reduce energy and material demand by creating smart, efficiently distributed low-carbon energy use models while redesigning our urban spaces and reconfiguring lifestyles
- Scale up free trade. The technologies to achieve low-carbon development or zero emissions already exist—we can capture enough of the energy naturally available to us using technologies available today at minimum extra cost through liberalization of trade.
- If we manage the transition well, we can reach low-carbon development without disruption to industry. Technologies to balance supply and demand from renewables already exist and are part of a rapidly growing mix of technologies and tools driving the clean energy revolution.
- Everyone must be ambitious—we must work together. We need finance and knowledge and hence collaborative platforms that work across borders and across disciplines. There is much scope for regional cooperation—countries working together through market and non-market mechanisms—to complement and augment the INDCs.
ADB-ADBI. 2015. Managing the Transition to a Low-Carbon Economy: Perspectives, Policies and Practices from Asia. Tokyo: Asian Development Bank Institute.
IEA. 2015. Energy and Climate Change: Special Report of World Energy Outlook. Paris: International Energy Agency.
ERIA. 2015. Invigorating Low-carbon Energy Systems: Implications for Regional Cooperation. Proceedings of Working Group, Economic Research Institute for ASEAN and East Asia. Jakarta: ERIA.