Greater Flexibility and Integrated Action Bring “Cautious Optimism” to Upcoming Paris Climate Talks

I recently participated in the Latin American Carbon Forum (LACF) in Santiago, Chile, speaking about how climate-enabling technology transfer is being articulated in small and medium-sized enterprises in Latin America. My experience at the event highlighted a trend in multi-party engagement that is broad and encouraging for the prospect of a positive outcome at the Paris climate talks this December.

Having participated in most LACF sessions over the years, I’ve seen the evolution of these events as markets have boomed and crashed. In good times, they resembled exuberant trade shows, while at other times they were more contemplative and forward-looking in nature. But throughout, these events have had the resiliency to review past and current trends while incorporating new elements, actors, and characteristics of emissions markets as they develop. This evolutionary resilience helps keep the events both relevant and of great value to participants.

Around 400 people attended the three-day event, which was hosted by the United Nations Economic Commission for Latin America and Caribbean (ECLAC) and supported by the International Emissions Trading Association, the Latin American Organization for Energy (OLADE), multilateral development banks, and a variety of other UN organizations. Most of the topics discussed were relevant for the upcoming Conference of the Parties (COP) in Paris, and included:

  • Climate-enabling technology transfer updates
  • Advances and expectations in the run-up to the Paris talks
  • Updates on the aviation, transportation, renewable energy, and energy efficiency sectors
  • Evolution and status of various climate finance initiatives
  • The development of domestic emissions markets

Here are my most important take-aways from the event:

  1. Cautious optimism, perhaps a certain bullishness, surrounds the Paris climate talks.

This cautious optimism is not novel—it is a pre-condition for any actor in this space over the last few years. But it has an element of bullishness that I believe reflects the recognition of two important elements. 

The first is that a significantly positive step—a “win” of some sort—is required in Paris. The Paris talks are seen as providing the best chance to decidedly turn the page and move beyond the largely failed Copenhagen meetings of 2009, which are considered a low point in climate change negotiations and which had a profound impact on the actors involved at the time. The lack of a comprehensive framework agreement on emissions reductions led to a significant setback for markets and private sector engagement, presented a reality check on the limits to political will, and highlighted the vast remaining differences within the negotiating parties themselves.

The Cancun COP, a year later, helped to methodically shift the dynamics and tone from the perceived loss at Copenhagen to one of rebuilding and strengthening the fundamentals of a possible eventual agreement. Subsequent COPs built on that platform and have brought the process to Paris, where prospects of a broader favorable result seem to be in place. In particular, the “flexible approach” anticipated in the text of the Paris framework agreement provides the opportunity for an important step forward. With the vast majority of parties considering that a broad framework agreement is possible, there appears to be both the political will and commitment to a higher-level goal, providing the backing to dive into the relevant details that will provide more specific guidance over the coming years.

The second, and in my view perhaps more significant, element behind the bullishness is the momentum that continues to build among various other actors, from local and regional governments to the increasingly interested private sector. These parties traditionally have not been engaged in the discussions at the COPs, but they are increasingly relevant. This shift, which follows the significant boost received at the Lima talks in 2014, has continued to strengthen in the run-up to Paris and is seen as bolstering conditions that could result in the success of the new framework agreement.

  1. The dynamics of emission markets are increasingly shaped by the impact and growth of national and subnational markets rather than by the expected global markets.

It may be an unpopular statement, but the Clean Development Mechanism, which allows developed countries to reduce their emissions by paying for reductions made in developing countries, is much less active than it used to be, leading some to consider it increasingly less relevant. There are only a few remaining buyers of international offsets that are acceptable for compliance purposes in their home jurisdictions. Due to this lack of demand, an oversupplied market has begun to turn to and experiment with emerging domestic emission markets in Latin America and elsewhere. China, for example, is establishing domestic subnational emission reduction markets as part of its efforts to reduce emissions from its productive sectors and to provide a local market for emission reductions (see the World Bank’s latest State and Trends of the Carbon Market).

  1. The increased weight, scope, and breadth of climate finance in the discussions is having a significant impact on expectations.

Arguably, any discussion of climate finance must begin with a reference to the Green Climate Fund and the $100 billion annual investment pledge from developed countries to help developing countries transition toward low-carbon development (funding that has not yet fully materialized). Fortunately, the discussion doesn’t end there. Also taking an interest in climate finance are multilateral development banks like the Inter-American Development Bank and the Development Bank of Latin America (CAF), bilateral development banks (such as Germany’s KfW, the Netherlands Development Finance Company, and the Japan Bank for International Cooperation), and other newer but important actors in climate and sustainability.

Investment funds, regional and national banks, and green and climate bonds also are intensifying their participation in the negotiations—and often from their own perspective, focused on business interests and propositions. Important results of this engagement include appreciable growth in renewable energy and energy efficiency markets, more focus on rural production value chains, and the creation of results-oriented financial channels.

  1. The climate discourse—once segmented between adaptation, mitigation, and resilience to changing historical climate patterns—has become more permeable and transversal, as the linkages among these concepts, as well as impacts, have become more evident.

This shift in discourse is broadening and amplifying the discussion. The interrelated facets of climate-compatible development are better appreciated and incorporated in most of the policy discussions, decisions, and initiatives that are under way or under consideration, as well as in sector-specific engagement such as aviation, climate finance, etc. This comprehensive, or integral, view leads to a more complete discussion of sustainable development at the intersection of economic growth, emerging markets, climate resilience, poverty reduction, and low-emission economies.

The LACF event in Santiago crystallized this final—and perhaps most significant—point: The transversal, comprehensive approach to the issues, highlighting their relevance from a collection of seemingly disparate perspectives and convergence of interests, strengthens the conditions of success for the broad and forward-looking agreement expected in Paris.

So while it is important to focus on the momentum and expectation of a Paris agreement, the key underlying trend is the breadth and scope of the non-negotiating actors that are strengthening this momentum. These actors already are having an impact on the process, and they will take the lead locally in implementing it, working with their local governments, communities, productive activities, and business operations. So, pay close attention to the COP and its results, but more importantly, participate in this broader movement that is taking action and adding to the momentum going forward.

Jorge Barrigh is a Senior Fellow in Energy & Climate Finance at the Worldwatch Institute and is on the Board of Directors of the Latin America and Caribbean Council On Renewable Energy (LAC-CORE). He has 20 years of experience in renewable energy, green and climate finance, innovation and entrepreneurship, and climate/sustainability. He is an independent consultant based in New Hope, Pennsylvania and has worked with clients in the private and public sector in the Americas. 


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