How Will the Paris Climate Agreement Impact Private Businesses?

By Casey C. Sullivan, Esq. on October 20, 2016 | Last updated on March 21, 2019

Last December, 195 nations reached a historic agreement to reduce greenhouse gas emissions and fight climate change. The Paris Climate Change Agreement marked the most aggressive, concerted action the international community has taken to addressing the climate crisis, but the agreement didn't go into effect automatically. First, it needed to be ratified by at least 55 countries, representing at least 55 percent of global emissions.

That threshold was crossed in early October, as ratification by European countries, India, Canada, Bolivia, and Nepal brought more than 55 percent of global emissions under the agreement's umbrella. As a result, the Paris Agreement will enter into legal effect on November 4th. But what will this intergovernmental accord mean for private businesses?

Paris and the Government

The Paris accord seeks to limit global temperature increase to less than 3.6 degrees Fahrenheit. To accomplish that, the agreement calls for global emissions reductions, with different countries agreeing to different reduction targets.

Now that the agreement will soon be in effect, the hard work of actually meeting those reductions begins. America's first job under the accord will be setting specific emissions reduction goals and adopting policies to meet them. Absent new legislation, much of that policy is likely to be pursued by the EPA, under the authority delegated to it by the Clean Air Act. That could higher restrictions on the most polluting energy sources, which can take years to establish (and litigate). More immediately, the government could pursue greater public funding for renewable energy projects and enterprises and changes to public land use policy. But at this point, there are no hard and fast plans.

Paris, You, and the Great Unknown

Because government plans remain tentative, it's hard to predict their impact on business with any certainty. But, there are a few probable outcomes. Alternative and renewable energy industries could see increased growth, as could less-polluting energy sources like natural gas, for example. Outside of the U.S., the agreement could reinvigorate carbon trading markets such as the European Union's Emissions Trading System.

That the agreement goes in to effect just days before the election only adds to the uncertainty. Hillary Clinton has backed the accord and has expressed her support for efforts to fight climate change. Donald Trump is likely to have a less enthusiastic approach, having referred to climate change as a "hoax." Though the agreement will remain ratified no matter who wins the election, the next president could simply ignore the United States' responsibilities if he (or she) so desired.

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