Dan Delurey Posts from COP-21 in Paris

Monday, December 14

COP-21 – The Nations are United

When I learned on Saturday that a Climate Deal had been agreed to at COP-21 by all 196 nations attending, I had only one regret – that I had had to return to the states before the final “overtime” day and did not get to personally see a gaggle of always-staid and dignified diplomats high-fiving each other.   As I reported at the mid-way point, everyone at the COP thought a deal coming at the end of the two-week process was a certainty, but I also saw a lot of fingers crossed as I walked around the facility at Le Bourget.

So what happened and what does it mean to you and the electricity sector?

First, let’s look at some of what I think are the key elements of the agreement:

Emissions

In a big move at the end, the agreement calls for “efforts” to try to limit temperature increase to 1.5 degrees Celsius by 2100, while effectively committing to a target of 2.0 degrees.

It is important to understand that the crafting of the deal has never talked about about tons of CO2 reduced.  It has relied on a computation that is made that combines tons of CO2 or (CO2-equivalent) reduced combined with other efforts that might create a “sink” and take greenhouse gasses out of the atmosphere, e.g. forest growth and expansion.  That computed number is then tied to outcome scenarios such as sea level rise, icecap melting, etc.  A poignant fact at the COP was that no one disputed this method, and no one disputed that a number of island nations would disappear under the 1.5 degree scenario.  Moreover, no one disputed that the emissions reduction pledges made by countries prior would not even keep things at a 2 degrees scenario unless efforts are wratcheted up beyond what is in the final agreement.

Transparency 

Commitments are great, especially when no one really ever checks to see if you are keeping one that you made.  This was a major issue right up until the end, with a push from the U.S., EU and developing nations for a monitoring process, but also a review of contributions process every five years where nations would have a more serious review.  The five year mark is also discussed as a time when additional contributions might be brought forth if the need for such is demonstrated.

Funding 

Everyone tried to follow the money during the two weeks of COP 21, and as with everything else in life and business, that is a good thing to do.   There was a tremendous amount of anteing up by the private sector and by various governments during the 2 weeks, but everyone knew and agreed that it was not enough.  The final deal has a large target of $100 billion. That money has to come from a lot of places and it has to come fast.  There is not a lot of detail on that in the final deal, and not a lot of teeth for extracting it.  But the mood at the COP was not dampened by the unknowns regarding this issue.

But where will the money necessary for the Global Green Fund and other funding mechanisms come from?  Will it ever come?

To answer the second question first, I personally cannot think of a scenario where it will not happen based on the seriousness of the situation.  That may sound like I am suddenly suffering from blind optimism.  But just as countries and sub-national entities have played chicken and exercised brinkmanship on emissions reductions, they will certainly do the same when it comes to forking over money.  But I look at the funding situation glass as half-empty.  Like a battleship making its well-known slow turn, the Paris Climate Accord is going to cause all sorts of funding channels and mechanisms, both private and public, to shift where money goes, and funding climate mitigation and adaptation is going to rise in the priority ranking.

Is the Deal Real?  Will it Stick?

Can you name the last time 196 nations agreed to the words on any one document?  I can’t.  Given the seriousness of climate change scenarios, I cannot see this deal getting scuttled or getting stuck on shelf.  My view is that it will not only stick but It will be modified to get more aggressive over time as more climate data (and awareness) exists and a greater need for such is identified.

In my earlier post I described the structure of the then-likely deal to be akin to a funding or reduction policy “vehicle” that is often created in Washington.  One established, the gas pedal can be stepped on if the situation calls for it, and/or more fuel can be put in the tank if necessary.  The important thing is that you don’t have to go back and build a new car each time you want to do something or react to something.

Will Countries Cheat on their Commitments and Obligations?

Of course they will try.  But the key thing about COP-21 is that no country was against a deal even before coming in to Paris.  No country at the COP was denying climate change.  No country is unaware that when it comes to climate change, the whole world is now watching the whole world.  And the deal does contain provisions on transparency and reviews.

There is the obvious question of whether a country might simply change politics and adopt a denial position.  But while some in a legislative body (like our Congress) might maintain denial, will a national leader do that in the face of rising public awareness and support for addressing climate change, and see themselves judged for having led their country in the wrong direction?  I think not.   See the recent examples in Australia and Canada (and its province of Alberta) on this point.

So what does all this mean to you as someone involved in the U.S. electricity sector?

Here is my take:

1. The EPA Clean Power Plan is now embedded even stronger than before based on a global agreement being in place.  The idea that the U.S. should not act on carbon has been fading anyway but now one of the key practical reasons that opponents have used is gone, i.e. that the U.S. would be acting unilaterally and that the rest of the world would be free riders.  Another argument, that it is too costly and uneconomic, also loses more steam as apparently the entire rest of the world would be doing something “non-smart” while we are the only smart ones.  Yes, there is always a strain of isolationism embedded in the U.S. and some will still make the argument that we shouldn’t or don’t need to do anything, but the existence of a global agreement, combined with the data bolsters the CPP and makes it harder to see it go away, even under a new President who may not like it.

One interesting development, based on my numerous discussions in Paris with delegates from other countries, the U.S. may get a lot of visitors in the near future as others look at our CPP and how States are putting together their plans.

1. Climate is going to increase in prominence as a filter, screen or criteria in all sorts of decision processes and decision-making – including on funding.  One of the things that has been happening somewhat under the radar in recent years is the sharp attention that the financial sector – in particular the insurance industry – has been paying to the risk of climate change.   This started to become more evident over the past year (even at the World Bank) but burst onto the Paris scene with a high degree of visibility.    Financing and issuing insurance is, at it should be, a cold-hearted business that relies on numbers and time periods.   That sector is starting to act based on both when it comes to climate as they further analyze the risks of climate change and the potential for stranded assets.   The potential for stranding of a carbon-based asset, like a coal-fired power plant, is higher than it was before the COP agreement.   You can’t draw a straight line between the two, but the indirect impact will start to show up.
2. There will be more support for carbon pricing.  As I said in my previous post, this was a main topic of both formal and informal discussions at the COP.   Page 19 of the Agreement includes the following provision:  “recognizes the important role of providing incentives for emission reduction activities, including tools such as domestic policies and carbon pricing”.

To be clear, carbon pricing does not refer only to a carbon tax.  Cap and trade is considered carbon pricing, and there was a lot of discussion about what the governments of Quebec and Ontario, and the State of California have been doing in that area.  The little-known success of the carbon tax in British Columbia was also talked about.

Most people, once they step over the line on the need to address climate change, gravitate towards the sensibility of a carbon tax or some other way to embed carbon pricing. Various business executives over the years, including some prominent ones from the utility industry, have talked of a carbon tax as being something that makes sense if something needs to be done.  I see the Paris agreement as a new platform for some of the groups in the U.S. that have been quietly working behind the scenes to find a way to monetize carbon, whether it be in a CPP State Plan or a change at the national level unrelated to it.

1. The opportunities for cleantech and smart grid companies abroad ought to increase significantly.   Remember, key to this deal was assuring the developing world (including India, which some say will overtake China at some point as the number one emitter, yet for UN classification purposes is a developing country) that they can join the “developed” world.  Get familiar with the words “energy access”, as that is what these countries will be trying to give their people, while also building their economies and also keeping their emissions in check.   That will be no easy trick, but it opens up a lot of opportunity for U.S. companies.  As I noted in my previous post, one of the things that stood out for me at this COP was the high level of interest among delegations from countries around the world in what the U.S. is doing in areas such as demand response, microgrids, DER, etc.

Part of the post-COP world will be countries trying to refine their individual country plan that they submitted to the UN going into the COP.  They are hopefully taking back some of the ideas and examples they learned about at the COP.   Institutions like the Global Green Fund and the World Bank, and programs like Power Africa and the various efforts of USAID and the U.S. Trade and Development Administration have already talked about how they are gearing up to help.

1. R&D is getting more validity because of Paris.  Everyone agrees that there is no lack of technology options to address climate change – both in terms of emissions reductions and sequestration.  But in the informal discussions at the COP and in the words there of Bill Gates and his new band of funding brothers, the need for new “things” is becoming accepted as something that will be necessary to reach the 2 degree cap.  That means that the electricity sector is going to be looking at even more technology options coming down the road that will help it lower its emissions further and better optimize its operations.

1. The COP raised the level of awareness of adaptation and resiliency as not just side issues of climate change.  The essence of the agreement is built upon adaptation, particularly in the developing world. My own experience in the U.S. in putting on the National Summit on Smart Grid and Climate Change has been that people were most surprised to find it had a separate track on resilience, and came away from it with increased understanding of how more attention needs to paid to it.  In the U.S. utility and electricity sector, the COP will help support the need for “grid smartening”, and not just
   “grid hardening” when it comes to resiliency, since the former helps with mitigation as well as adaptation.

In my first Washington event since returning from the COP, I attended an electric utility industry event today that featured several utility executives and other industry experts.  The topic was not about Paris or even climate change in general, but when it came time for Q&A, someone in the audience asked what they thought of the Agreement reached there.    The responses were what I will label “pre-COP” answers in that they ranged from comments about the economics, and the willingness of the rest of the world to do something, and the caution and deliberation that the U.S. should exercise in addressing climate change.

It will be easy for some to label COP-21 as a protected bubble where everyone was drinking the same green kool-aid. But that falls apart when you look at the make-up of the people who were there inside the blue zone and the many other zones and conferences around the city.  It was not just environmental activists.  The utility sector was there.  The financial sector was there.  Local governments, including many U.S. governors and Mayors were there.   This was not some temporary feel-good tent-city.  This was an assembly of the people that understand climate change and how to address it.  It was the creation of not only a common worldwide platform and framework for addressing climate change, but a partnership among nations, business and NGOs that is only going to grow.

Climate Change in one sense is an illness that has symptoms and which needs options for treating it.   It may be that one of the ways that Paris will be remembered is as something akin to a medical convention where all the doctors in the world agreed that an outbreak was underway that required intervention before serious consequences occurred.   Paris will be remembered as where the world started to take its medicine and got on the path back to good health and the prosperity that comes with it.

Postscripts

Here are a few random thoughts as I reflect on COP-21.

U.S. Business was there.  The business presence overall from around the globe was huge, with the U.S. being amply represented.  And what business was saying is that they are ready to move forward.  It almost felt at times like business was impatient for government to act.  In other words, as they look at the data, they know that government will have to act, and they understand that action will be required.  Many seem to be saying “let’s just get on with it”.

Non-Feds were also there.  COPS usually draw a fair amount of U.S. Federal Officials and Staff, and there is always a delegation of Members of Congress and their staff.  But this year saw Governors from many states, and Mayors from many US Cities, here to talk about what they believe they are facing, and what they are planning and doing in their jurisdiction to address climate change mitigation and adaptation.

Uncle Sam Scored.  The Clean Power Plan meant so at COP-21 in so many ways.  The U.S. has not always been seen as wearing a “white hat” at COPs.   Much of that was due to our insistence on the need for all countries to do something before we did much ourselves.  Some of it was due to the tension between our country and China.  It has to be remembered that not so long again in Copenhagen, China was still considered to be part of the Group of 77, which were developing countries that formed a block within a COP.  That’s right, China was considered to be in the same category as a country like Botswana.   That of course is not the case now, with China being the biggest emitter of them all and hardly a non-developed country.  With China and the U.S. having become climate change pals earlier this year and showing off that friendship in Paris, and with the Clean Power Plan on its way towards implementation, that made all the difference in the world….and to the world.

The World is discounting our Congress.   I was not of course behind the closed doors of the negotiations, and was not always talking to foreign delegates about the negotiations and the Text.  So I don’t know what kind of questions may have been asked of U.S. negotiators regarding the threats of our Congress to not play ball.  As I mentioned in my previous posts, I was often trying to support the US delegation and interact with other countries and NGOs to educate them about how they can introduce new technologies to their electricity system and see climate benefits.  But I have to say, never once did anyone ask me during the two weeks if the U.S. would pull back on its announced and planned climate efforts because of opposition in the Republican Congress.  I am sure it came up in a few conversations that U.S. Officials found themselves in, but in my case it simply never came up.  In reflecting back, it is almost like that opposition is so unfounded and irresponsible at this point that other countries see it as not worth thinking about.  They are focused forward on what to do and how to do it fast.

French COP.   Our oldest ally did a fantastic job.  Every accredited person got a metro pass for the two weeks and the rail system worked perfectly.  Lines were short, food and food options were plentiful.   The layout of the many Halls and meeting rooms was great.  Everywhere you went there was an official greeter to say Bonjour!, even if you had a dead giveaway that you were not French.    The worker were not just nice, they were happy and cheerful in a way that could not have come from strong orders to “be cheerful”.

French Resistance.  Many of us arrived from elsewhere thinking that we would be going into the midst of a populace that was still in mourning due to the terrorist attacks.   We also expected to be find an armed, locked-down city, with soldiers on every corner or at least at every metro station.  Neither was the case.  Taking the last one first, there was certainly a presence, but not a militaristic one, and it was obvious that they were picking their spots to make a showing of force. As for the people themselves, it was Paris as one wants Paris to be, happy people out and about doing happy things.  The terror attacks did not take away the Joie d’Vrie.  Tres bien, Paris!  Merci!

COP 22.  Next up is Marrakesh.  Morocco will be hosting and the dates will be in November instead of December.  I visited the Moroccan pavilion to talk with some representatives there and they were eager to try to match the content and competence on display here in Paris.   Some say at this juncture that we are in a cycle of big COPs (like Copenhagen and Paris) and smaller recent COPs like Cancun and Durban.  I think differently.  I think that nothing can match a COP in terms of bringing together the business, NGO and governmental community on climate change, including the business side of it.  I also think that from an emissions and adaptation standpoint, there is a lot of work to do and it needs to be done fast.  I think they all the COPs will be big going forward.