The Paris Agreement Is Failing. This Is How We Can Make It Work.

A couple of weeks ago Danny Kennedy presented on GreenBiz the Speedwell Call to Action, an effort to involve more entrepreneurs, startup incubators and investors in building pressure on policymakers to take bolder and quicker action on climate change. Kennedy, Managing Director of the California Clean Energy Fund hopes this petition will demonstrate how entrepreneurs can be “key agents of change in the climate struggle”, especially in developing a clean energy economy. His goal is to create a momentum around using innovation to address climate change at the Global Climate Action Summit that will take place next month in San Francisco.

The call refers not only to the potential role entrepreneurs can play in supporting the implementation of the Paris Agreement, but also to the urgency of the situation, asking: “Our only question is can we all, working together, make it happen in time?”

The answer, I believe, is no. Not if we continue to take the same approach we have taken so far to address climate change, which is based on voluntary commitments of countries to implement to the Paris Agreement.

Using startup terminology, it is time to acknowledge the experiment we did so far with the Paris Agreement is failing and that we need to make a pivot – “a change in the strategy without a change in the vision” (Eric Ries). This pivot does not guarantee success, but without it failure is all but certain.

First, it’s important to be honest about the failure of the current strategy - most countries have been failing so far to adhere to the Paris Agreement goals (“to hold warming well below 2°C, and pursue efforts to limit warming to 1.5°C above preindustrial levels”). One of the best places to see it is the Carbon Initiative Tracker’s assessment of the efforts countries have been making so far to meet the goals. It shows only two small countries’ efforts are consistent with the Paris Agreement 1.5°C limit (Morocco, The Gambia) and 4 countries (Bhutan, Costa Rica, Ethiopia, Philippines, and India) are in the range of the 2°C goal. The rest of the world’s performance is somewhere between insufficient (<3°C world) to critically insufficient (4°C+ world).

We also need to be honest about the fact that even if all the countries around the world would fulfill their commitments in time it actually won’t be enough to meet the Paris Agreement goals. A 2017 U.N. Emissions Gap Report warns “that as things stand, even full implementation of current national pledges makes a temperature rise of at least 3 degrees Celsius by 2100 very likely.”

So, what do we do about it? One option is to continue with the current strategy, calling everyone to do more. This seems to be the U.N.’s approach: “To avoid overshooting the Paris goals, governments – including by updating their Paris pledges – the private sector, cities and others need to urgently pursue actions that will bring deeper and more-rapid cuts.” The same sentiment was echoed in the Speedwell call for action I’ve mentioned earlier, as well as many other calls and activities.

While stakeholder activism is very important and should be practiced by everyone, we need to accept the fact that it is probably cannot move the needle in time, i.e. move countries to fulfill their commitments, not to mention going beyond these commitments to actually meet the Paris Agreement goals. Without a binding regulation forcing the needed change these efforts are not enough to make a difference in time. You can think about it as a plier with two gripping jaws, one that is relatively strong (stakeholder activism) and one that is extremely weak, almost non-existent (regulation) – if this plier is not working properly, it probably won’t help much making the strong jaw even stronger. You need to fix the weaker one!

The main consideration we have to take into account is time, or the lack of it - roadmaps to meeting the Paris Agreement goals (see examples here and here) point out that “annual emissions from fossil fuels must start falling by 2020”. Therefore, as I wrote in the past the first question we need to ask should change from "why" (what’s the business case?) to "when" (can it have the necessary impact in time?). Alex Steffen articulates it best, pointing out that “winning slowly is basically the same thing as losing outright.”

Reframing the conversation around time and urgency requires us to make difficult strategic decisions, or otherwise the gap between the incremental progress we now have and the exponential change we need to address climate change will keep widening. We need to look for a smart way to overcome some of the main barriers to effective climate action – as The Economist suggests in its August edition, these include soaring energy demand, economic and political inertia (“the more fossil fuels a country consumes, the harder it is to wean itself off them”) and the technical challenge of decarbonizing energy-intensive industries like steel, cement, farming, and transport.

With that in mind, I would like to offer a new strategy that will be based on five simple principles:

1) Firm-focused: Shifting from a country-based to a company-based model.

Clearly the country-based model doesn’t work, and given the political volatility around the globe, as demonstrated by the withdrawal of the U.S. from the Paris Agreement and the difficulties to force countries to adhere to global agreements, it doesn’t make much sense to continue with the current country-based model.

I find it more sensible to switch to a company-based model due to the following reasons: 1) companies are the ones that need to implement the changes, 2) they have greater sensitivity to stakeholder activism comparing to governments, and 3) they have already proven their ability to adjust to new requirements, when they are enforceable and involve heavy penalties for non-compliance, as we’ve seen in the case of the EU General Data Protection Regulation (GDPR) regulation.

2) Legal compliance framework: Making it mandatory for businesses to meet the Paris Agreement goals.

At the core of the new strategy is a requirement from all companies to meet at minimum the Paris Agreement goals. Based on the GDPR model, this new framework should be enforceable and include heavy fines for non-compliance, as well as a strict timeline for implementation. Unlike attempts in the past to create a similar mechanism, this one will not focus on carbon pricing methods such as carbon tax or cap and trade system because, as Jeffrey Ball explains in length in the July/August issue of Foreign Affairs carbon pricing is a good idea in theory but doesn’t work well in practice. “The time has come to acknowledge that this elegant solution isn’t solving the problem it was designed to solve”, Ball writes. I agree with him, which is why I suggest that the clear signal the regulation will send companies will focus on the Paris goals, not the price of carbon.

3) Rigorous implementation: Using the Science-Based Targets initiative (SBTi) as implementation mechanism.

As I have discussed in the past, I find SBTi to offer a credible, science-based roadmap for companies seeking to meet the Paris Agreement goals, which is why I believe it can become an effective mechanism, helping all companies deliver on the agreement. We need to ensure that the implementation of the new strategy is driven by science, rigor and the need to consider particular circumstances of different industries, which is exactly what we can find at SBTi. Created by a number of respected environmental organizations, this initiative is currently the best tool we have to ensure the execution of the new strategy. While it will probably need to be complemented by another body that will be responsible for enforcement, the SBTi is already functional and can be expended to fulfill a broader mission.

4) Innovation-based: Companies will have the flexibility to decide what measures they want to take to meet the Paris Agreement goals, as long as they generate the desired results.

While companies will be provided with a very clear destination (i.e. meeting the Paris Agreement goals) that they need to reach in a timely manner, they are the ones to figure out and decide how they want to get there. In other words, while the ‘what’ component of this journey is pre-determined, the ‘how’ is very much up to the companies (pending the approval of the SBTi to ensure the ‘how’ and the ‘what’ are aligned). The idea is very simple – regulation is needed to provide clear and strong signal for companies, but the solutions to climate change should be grounded in innovation.

5) Paris ≠ the peak of Mount Everest: Changing the narrative and optimization of the new system that is put in place to consider Paris Agreement as the starting point, not the end of the journey.

Influenced by the difficulties to make it work, the Paris Agreement is considered now as the peak of Mount Everest – the end point of a very difficult journey. While this is indeed a very difficult journey we should reframe Paris Agreement as the starting point of this journey, not the final destiny – if you think about the journey in terms of climbing Mount Everest, the agreement is like Everest Base Camp, not the top of the mountain. This is more than just a semantic difference as there’s a growing concern that even if the current goals are met the world is still “at risk of entering “hothouse” conditions where global average temperatures will be 4-5 degrees Celsius higher.” Therefore the new strategy should encourage companies to consider the Paris Agreement goals as a baseline and incentivize them to move beyond them.

If you find this strategy to be radical you are not wrong. I believe it has to be one to generate the necessary speed and scale required to address climate change. However, a radical approach, or in John Elkington’s words “the necessary radical intent” is not enough. You need to ensure it’s also practical or else it has very little value.

In this case I do see a clear, if not easy way to make it work. Based on the GDPR model, I believe this new strategy should be constructed and delivered first by the E.U. (perhaps together with California), which will apply it to every company that is doing business in the E.U. (and California if it is also on board). Similarly to what we’ve seen with the GDPR, such regulation will not only cover most of the companies around the world, but will also create a regulatory momentum, driving similar regulation in other parts of the world. Thus, in a very short time after being implemented by the E.U. this strategy can be globally deployed.

Going back to the Speedwell Call for Action’s question: “Can we all, working together, make it happen in time?,” I would suggest that the answer can be positive if we work on the right strategy. Time is of essence and the real challenge is ensure the necessary legislation required for the new strategy will be completed in a relatively short time, or at least much shorter than the six years passed between the initial GDPR proposal in 2012 and its implementation earlier this year.

Therefore, my call to Danny Kennedy, or for that matter, to anyone working to promote a bolder climate change agenda is to focus on convincing policymakers to make this pivot. Stakeholder activism is necessary to promote the required legislative agenda, creating what I call the Plier Effect – two strong gripping jaws that can actually get the job done.

We are at a critical point in time, when we need to shift our thinking from "doing the thing right" to "doing the right thing" and work together to make it happen. It’s time to consider a radical, yet practical strategy and start designing for it. Are you in?