Certainly, the scale of the climate crisis requires urgent emissions reductions, which Paris did not secure at anything like the necessary scale. Questions also remain over the agreement’s legal status, how future commitments will be made, and what enforcement mechanisms (if any) will be in place.
In Australia, fears that the post-Paris situation would simply return to business as usual seemed borne out by a RepuTex analysis that predicted Australia’s emissions would rise for the next decade and a half. The Turnbull government has announced no new policy to deepen or even meet its emissions targets, while the national science agency CSIRO is making severe cuts to its climate science workforce.
But for many analysts and advocates at the time, particularly those in Paris, the agreement had three important outcomes.
First, the Paris deal provides a foundation for international climate cooperation post-Kyoto. Second, it was an important moment in the politics of climate change, demonstrating the possibility of cooperation and action in response to civil society. And third, it has sent important signals to the market, promoting increased investment in renewables and driving down the profitability of fossil fuels.
The third of these was always the one with the best potential for immediate influence. And we’ve started to see it bite, here and abroad.
The power of pricing
In recent years, the price and profitability of fossil fuels have been declining. Recent analysis in Australia suggests that superannuation funds, for example, have lost money for their members by investing in fossil fuels over the past three years. Renewable energy investments have performed much better.
The Paris agreement seems to have compounded this trend, prompting an almost immediate and significant drop in the price of coal.
As Andrew Vesey, chief executive of power company AGL, told The Guardian today, his firm needs to get out of the “CO₂ emissions business”, if only for reasons of managing financial risk. The company, Australia’s largest emitter, has already walked away from coal seam gas projects in New South Wales and Queensland.
Coal firm Adani, meanwhile, has reportedly suspended its investment in the controversial Carmichael coal mine in Queensland in response to falling coal prices. For some in Paris, Carmichael had cast a huge shadow over the Australian government’s claimed commitment to climate action, and also the broader possibility of avoiding dangerous climate change.
While it’s true that the Carmichael mine and the coal seam gas industry have been subjected to loud public protest, these decisions were fundamentally economic ones, made in response to market conditions. And alongside smaller miners requesting state government help in the face of falling fossil fuel prices, these decisions raise fundamental questions about the long-term profitability of the sector, not just in Queensland but in Australia and the world. It seems the writing is on the wall for coal.
Economics v environment?
For Australians, there is something odd about the market serving environmental ends. We have long been told that economic imperatives and environmental preservation are mutually exclusive, and that economic interests will always win out.
On climate action, this was a refrain of the Keating Labor government and was warmly embraced by the conservative governments of John Howard and Tony Abbott. Jobs and growth, they insisted, should not be threatened by “irresponsible” action on climate change.
But recent economic developments threaten to turn this logic on its head, aligning (even short-term) economic and environmental considerations in ways we haven’t seen before.
Perhaps we shouldn’t be too surprised. Trends suggest that markets are orienting towards longer time frames for investment, while governments elected on three- or four-year electoral cycles are increasingly concerned with 24-hour media ones. And senior executives of fossil fuel companies have long indicated a willingness to shift business practice in the context of clear pricing signals. Having waited in vain for politicians to deliver such a clear, stable signal, the market has gone ahead and developed one itself.
Even before Paris, it was the divestment movement that seemed most promising in shifting the often toxic politics of climate change. Campaign groups such as 350.org have promoted divestment as a way to hit fossil fuel companies where it hurts unless they acknowledge the realities of the carbon situation.
The market can be a fickle beast. It certainly cannot be relied on to provide us with a moral compass on climate change. Avoiding dangerous climate change still needs both political leadership and civil society mobilisation.
But the market is responsive. And the power of international agreements like Paris, along with divestment movements, may ultimately be the capacity to send messages that companies concerned with long-term profitability simply can’t afford to ignore.