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Climate Agreement IW News 22. April 2016

The biggest emitters need to act

On Friday (April 22), the German Minister for the Environment Barbara Hendricks and many of her colleagues met in New York to sign the first global climate agreement. While this might act as a positive signal for the global climate, clear political action is needed: The major CO2 emitters should agree on a joint action plan to effectively reduce emissions.

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The Paris Climate Agreement only consists of a collection of national targets. Many of these commitments are not helpful as they do not contain clear emission targets and are based solely on numerical variables such as domestic growth. However, only the absolute emission levels are relevant to climate protection.

The levels of ambition are different, as well. Among the biggest emitters, the EU commits to the sharpest reduction target of minus 40 percent compared to 1990. Rather less ambitious, however, is Russia's commitment. Moscow wants to emit up to 30 percent less than in 1990 – which was during the extremely inefficient Soviet economy and hence high emission levels. Furthermore, Russia wants their forests to be considered as CO2 storage. Today, Russia’s emissions are far below the promised 2030 value. Therefore, no additional climate protection measures will be necessary to achieve the Russian 2030 target.

All promised greenhouse gas reductions combined do not even add up to achieve the so-called 2-degree target and mitigate climate change. Small island states even demand a 1.5-degree target. They see their very existence threatened by rising sea levels. Therefore, the actual climate agreement can, at best, only lead the way.

In addition, the agreement does not regulate how the national objectives will be implemented. In this situation, the most ambitious countries face competitive disadvantages. In the European Union, there is the instrument of emissions trading that limits greenhouse gas emissions. Since the maximum of allowed CO2 emissions will be steadily lowered in the coming years, the price of emission is subsequently going to increase, which is the explicit goal of the European Commission. However, if CO2 emissions will be more expensive in Europe, global companies might prefer to invest at other locations. This will not help climate protection as emissions will remain high.

The one possible solution is to coordinate international activities in climate protection. There might be a chance as China, the largest CO2 emitter, experiments with similar instruments to curb the rapidly growing emissions. Only if the biggest emitters coordinate their activities to achieve globally comparable CO2 prices, the EU can overcome the conflict between ambitious climate protection and competitiveness.

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