Worldwide: Finance, Transparency And Compliance – Key Features Of The Paris Agreement (Part Two)

Article 6

This part of the Agreement establishes a "mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development", a device to support implementation through both market and non-market instruments; the latter reflecting an aversion of a number of Parties to market mechanisms such as carbon trading. There is little indication as to the shape the mechanism will take beyond that it is intended to be "income-generating" and "self-financing". Whilst this is encouraging given limited resources, a question remains as to the usefulness of yet another "mechanism" under the Convention supervised by yet another "body designated by the COP" given the convoluted plethora of "bodies", "mechanisms", "working groups" and financial mechanisms in the ever-growing spider's web of the UNFCCC. There is perhaps a danger of more and more overlapping functions, more and more meetings, more and more liaison without necessarily a lot more action. The other apparent weakness with the new mechanism is the lack of common understanding as to precisely what "sustainable development" is, which could hinder the effectiveness of the mechanism in meeting its stated objectives.

Article 7

Article 7 sets out the Parties objectives and obligations on adaptation. In the pre-COP negotiations, there were strenuous calls for adaptation to be given enhanced importance and placed on an equal footing with mitigation. Given that less robust language has been selected for the Article 7 provisions than for Article 4, it is far from clear that this objective has been achieved.

One similarity with Article 4 is that adaptation also now benefits from a "global goal" – another top "ask" of many developing country parties. Unlike its counterpart, however, it is both non-quantified and non-qualitative, being to "enhance adaptive capacity, strengthen resilience and reduce vulnerability to climate change". As a goal whose realisation will be difficult to measure and evaluate, its purpose is largely symbolic, as is the official recognition that will be afforded to the adaptation efforts of developing country parties; a key component of their "participation" in the global climate change effort.

The language deployed in Article 7 is noticeably less robust than elsewhere in the Agreement, with one of the main provisions worded as follows:

The use of "should" rather than "shall", together with the inclusion of "as appropriate" creates more of a voluntary, opt-in provision relating to adaptation efforts which appears to conflict with the mandatory requirement in Article 3 for all Parties to produce and make adaptation efforts under an NDC. It is therefore unclear how Articles 7 and 3 fit together. Further confusion follows in subsection 10 which states that:

Contrast the "should submit and update periodically an adaptation communication" with the requirement that the adaptation communication "shall" be submitted and updated periodically as a component of or in conjunction with other communications or documents". The level of "binding force" behind the adaptation provision is therefore unclear, particularly given the ambiguity in the words "as appropriate", which suggests that Parties are free to determine that it is not "appropriate" for them to contribute an adaptation communication.

Article 8

Relating to loss and damage, this is one of the most contentious parts of the Paris Agreement. Indeed, the debate over the very inclusion of a loss and damage provision was only resolved at a late stage in the negotiations, representing another small victory for developing country parties. The key provisions in subparagraphs (1) and (3) are as follows:

The common view is that Article 8 does not give rise to any legally enforceable rights for those countries affected by loss and damage following climate change-induced weather events, this being the intention of developed country parties such as the US who fear being sued by low-lying coastal states. Reference is made to paragraph 52 of the COP Decision which states that the COP:

Although of some legal significance, a COP Decision does not have legally binding status. There is therefore perhaps an argument that Article 8 could found a claim for damages and/or compensation, as if the Parties had wanted to ensure that such potential was excluded, they would have expressly so stated in Article 8 of the legally-binding Agreement. Whether one of the countries regularly affected by climate change-related weather events, and/or sea-level rises decides to put Article 8 to the test in a court of law remains to be seen.

Article 9

One of the other most hotly contested parts of the Agreement both in and prior to the COP was Article 9 which presents a very streamlined set of provisions relating to finance.

Contrary to vocal demands of developing country parties, the Article does not contain a quantified figure for financial flows from developed country parties. For the time being, there is no increase on $100 bn/year of finance that developed countries are meant to provide to developing country parties. However, the COP Decision provides that before 2025, a new figure is to be agreed, while subparagraph 3 of the Agreement states that developed country party mobilisation of climate finance should represent a progression beyond previous efforts.

Although only developed country parties have an obligation to provide finance, for the first time, the Agreement provides for developing countries themselves to also contribute financially to the global climate change effort, albeit on a voluntary basis. Given that there are a number of countries within the "developing country party" bracket that are as wealthy as those in the "developed country bracket", this is an important first step in reflecting current economic realities.

The Agreement also opens the way, gently, to private sources of finance contributing to the funding of climate change actions. Although public sector funds still have "significant role", the recognition of deep austerity in many developed country parties but now open to a wide variety of other sources, instruments and channels.

One other notable part of the finance provision are that, in order to reflect the equal status given to adaptation, the deployment of climate finance is to balance between finance for mitigation and adaptation. Article 8 also includes a mandatory reporting requirement for developed country parties to report biannually, quantitatively and qualitatively, on their provision of finance and wider mobilisation efforts. Developing country parties can do so voluntarily.

Article 11

This maps out the key features of a new aspect of the global climate change regime – capacity building – which is intended to enhance implementation of the Agreement in developing country parties, and specifically the Least Developed Country Parties and Small Island Developing States. By subparagraph 5, the Conference of the Parties will define the institutional arrangements to support and enable the capacity building objectives to be fulfilled.

Although enhancing capacity is undoubtedly of great potential benefit to the implementation of the Agreement, with so many "institutional arrangements" under the Convention already, including two financial mechanisms – the Global Environment Facility and the Green Climate Fund – the further expansion in international climate change architecture does raise a concern about whether this may lead more to additional bureaucracy than to greater action.

Article 13

Another part of the Agreement that gives rise to the same concern of "institutional overload" is Article 13 on transparency which establishes an "enhanced transparency framework" to build trust and facilitate implementation. Transparency is undoubtedly one of the most important parts of the whole Agreement as at present, there is no way of knowing if the Parties' NDCs are based upon accurate assessments of "business as usual" baselines, or if emissions reductions are being calculated in consistent, reliable ways. The lack of transparency could, together with the absence of proper accounting, undermine the whole Agreement by preventing the accurate assessment of progress.

The intention of Article 13 is to build on the transparency mechanisms under the Convention such as national communications, biannual reports and international assessment, and presumably to make them more robust and capable of painting an effective overall picture. The framework, the detail of which will be defined by the Ad Hoc Working Group on the Paris Agreement, is comprised of two limbs; the first is a "framework for the transparency of action" to provide "a clear understanding of climate change action" including "clarity and tracking of progress" in respect of Parties' NDCs. The second limb is the "framework for transparency of support" to provide "clarity on support provided or received", including financial.

Whilst the detail of the transparency framework is being developed, Article 13 stipulates that Parties are to provide regularly:

1. A national inventory report of anthropogenic emissions by sources and removals by sinks of greenhouse gases, prepared using good practice methodologies accepted by the Intergovernmental Panel on Climate Change, and agreed upon by the COP;
2. Information necessary to track progress made in implementing and achieving its NDC.

This information is to be provided by Parties in their NDC, and will be assessed as part of the "global stocktake" in Article 14.

The obvious problem with the national inventory reporting requirement is that for a lot of developing countries, sources of emissions and removals by sinks are not what matters – what matters is minimising emissions as the country develops economically. The reporting will therefore not give an accurate overall picture of the efficacy of Parties' mitigation efforts.

Article 14

Article 14 introduces the means why which Parties' efforts will be collectively assessed and aggregated as part of a "global stocktake". This is in order to monitor progress towards meeting the aim of the Agreement without crossing the politically unacceptable line of individual assessment of Parties' efforts. The first global stocktake is scheduled for 2023, and will take place every 5 years thereafter. Parties will not be obliged to increase their domestic efforts in light of deficiencies highlighted in the global stocktake; rather, the hope is that Parties will choose to do so in "a nationally determined manner". Perhaps the greatest value of the global stocktake is that it will shine the light of accountability onto the international climate change regime and highlight, in a very public manner, the extent of any inadequacies, and thereby place Parties' collectively under pressure to do more. What it will not do, of course, is shine any light on who is not doing enough, and where the responsibility for the inadequacies lies. Only with time will we know whether this just provokes more finger-pointing and passing of the buck, or whether the collective emphasis of the Paris Agreement means that everybody agrees to be "in it together" and to increase their own efforts.

Article 15

The shape of the compliance provision was another of the most sensitive, and bitterly fought over, parts of the Agreement. The Bolivian proposal for an international climate justice tribunal survived until the start of the Paris COP, and stands in stark contrast to the very weak compliance mechanism that stands in its place. "Non-adversarial and non-punitive" the mechanism's approach is to facilitate and "promote" compliance. In this way, it is weaker than the compliance mechanism established under the Kyoto Protocol. Given, however, the KP compliance mechanism famously failed to deal with Canada's non-compliance, a facilitative approach may perhaps be more successful. The design of the compliance mechanism as non-adversarial and non-punitive may also increase the willingness of national courts to adjudicate on the sufficiency of a particular Party's climate change efforts.

Article 24

The final point of particular interest is found in Article 24, which states that the provisions of the Convention relating to the settlement of disputes apply to the Paris Agreement. The door is therefore open to the potential use of arbitration to resolve issues pertaining to the international climate change regime. At present, such arbitration could only take place between Parties, rather than being instigated by a non-Party stakeholder. Nevertheless, it may form part of the tools that environmental lawyers opt to deploy in due course with a view to maximising the implementation of the Agreement.

Conclusion – The strengths and weaknesses of the Paris Agreement

As most commentators are agreed, the key virtue of the Paris Agreement is both the universal participation and the legitimacy that stems from it. Although seemingly weaker than the Kyoto Protocol by virtue of power being vested in the Parties' themselves, much of the Agreement's strength may be shown in time to reside in its "bottom-up" approach. By allowing the Parties' considerable ownership of their own efforts, Parties may feel more willing to take greater action than if it was being dictated to them from above. The regular, collective evaluation of the adequacy of Parties' efforts under public scrutiny provides an incentive for each Party to make its best efforts.

Nevertheless, in order to be effective a bottom-up approach requires some elements to be set at the top level and apply to all. The Paris Agreement contains some of these elements – primarily in respect of procedure, such as the regular production and communication of an NDC, and reporting requirements. One of its greatest weaknesses, however, is the continued absence of an agreed system of accounting for and verifying emissions reductions, the lack of a common approach to the calculation of baselines and reference points upon which those reductions are based, and the lack of an effective transparency process. Efforts will be made to address these deficiencies in the four years to 2020 as set out in the COP Decision, but that will be too late for them to shape the initial swathe of NDCs. It is likely, therefore, to be at least another decade before we have an accurate idea of the adequacy of Parties' efforts relative to the global temperature goal.

The second significant weakness is the insufficient emphasis on ensuring that developing countries that are going to be the focus of economic development in the years ahead adopt low-carbon pathways. There is very little to prevent Parties from following China's approach of rapid, high-carbon economic growth, and then trying to reverse the damage by reducing emissions. If even a few developing countries follow this example, the chances of the global temperature goal being met are remote.

The third key weakness in the Agreement is the absence of a mechanism to address the gap in the aggregate effect of Parties' mitigation pledges. The UNFCCC Secretariat's pre-COP assessment of INDC pledges revealed that, even if they were all fully implemented, and accurate, we would still be heading for 2.7 degrees of warming- significantly above the objective of "far below 2 degrees". Although the Agreement requires Parties mitigation efforts to reflect ever-greater levels of ambition, the only proposal in the COP Decision is a "facilitative dialogue" commencing in 2018 to discuss the shortfall. The Agreement also fails to reflect the scientific awareness that the longer it takes to make deep cuts in emissions, the greater the chance of the climate breaching a "tipping point" and experiencing high levels of irreversible warming.

Lastly, both the Agreement and the COP Decision are silent on the means by which the Parties' obligation to increase the level of ambition in each NDC will be assessed. Given the implicit prohibition on each Party's NDC being individually evaluated, it is unclear how it will be possible for the "ambition" requirement to be monitored. Even if such monitoring does occur, it is unclear what consequences will follow – does a failure to increase ambition result in a referral of the Party in question to the compliance committee, for example? The lack of any detail as to when the compliance committee will be called upon to facilitate compliance is a further weakness of the Agreement.

All things said and done, the Agreement is an achievement, particularly given the very real risk of no Agreement being reached at all. Yet it is difficult to underestimate the task that lies ahead if it is to show itself up to the task of preventing dangerous anthropogenic interference with the climatic system.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.