So We Signed the Paris Agreement. Now What?

"I'm on the front line of the suffering" from climate change, Assaad Razzouk told me at the United Nations headquarters in New York City on Friday.

Razzouk, the sharp-eyed CEO of Sindicatum, a sustainable energy developer based in Singapore, had just finished excoriating Wall Street for sticking its head in the sand with regards to the costly impact of climate change.

But the venue—an anonymous press conference room deep in the bowels of the institutional labyrinth that is the UN headquarters—stood in stark contrast to the grandiosity on the other side of the building, as scores of world leaders, dignitaries, and assorted A-listers celebrated Earth Day by standing in front of each other in a cathedral-like space and pledging to not let the world burn.

This is where we stand in the race to limit the catastrophic effects of climate change: World leaders have finally signed a historic climate agreement. Now all we have to do is fundamentally reshape the global economy.

WHO'S PAYING FOR THE CLIMATE?

On Friday, representatives from 175 nations signed the Paris Agreement, which outlines voluntary carbon emissions and climate targets. It's doubtlessly a momentous step in the climate conversation: After decades of the climate-conscious pinning their hopes on a series of stepping-stone treaties that sound like Robert Ludlum novels—the Kyoto Protocol, the Copenhagen Accord, the Bali Action Plan, and so forth—the Paris Agreement is notable because it marks the first time the vast majority of the world's nations have all signed a document saying that we must limit "global average temperature to well below 2 °C above pre-industrial levels" with a goal of keeping it below 1.5 ºC, or face disastrous consequences.

Our planet cannot be saved unless we leave fossil fuels in the ground said UN Climate ActionApril 22, 2016

I went to check out the conversation surrounding the UN signature event, which itself was enough of a scrum that I didn't even attempt to attend; I'm disappointed I missed Leonardo DiCaprio's remarks. I was, however, invited to a "high-level luncheon" where I had the surreal experience of eating sea bass one table over from Zimbabwean dictator Robert Mugabe, who earlier had frowned, back turned, as New York City Mayor Bill de Blasio made jokes about hosting the world's elite. This is the diplomatic circus as usual: handshakes, grand pronouncements from one powerful person to a room full of other powerful people, early afternoon wine.

While the lasting image of the event is that of 175 world leaders giving brief remarks and signing a page, the discussion in small conferences and hallways around the UN revolved less around the symbolism of the event and more on what underpins both the climate problem and its solution: money.

"For the countries at the forefront of climate change, the current view is that COP21 and COP22 are thought of on Wall Street as an HBO miniseries," said Razzouk, suggesting that two major climate conferences hadn't quite made waves in the investment community. "There's a tremendous investment gap between the aspirational goals from a record number of countries around the world and the equity funds deployed and the cost of building clean energy infrastructure worldwide."

Razzouk's remarks represent that of a vocal business contingent pushing for more investment in sustainable infrastructure in the markets that are transforming the fastest, before they get locked into dirty, carbon-intensive business as usual. While their collective view has always been central to pragmatic climate discussions, it's notable that the people stating the obvious—if we're going to build regardless, we should build sustainably—were doing so in a small press room during one of the biggest climate moments of the year.

For as powerful a message it is for the world to agree on how much warming is dangerous, it's clear that actually doing something about that warming means reworking how the world does business. But what's fuzzier is how and when that will happen. In short, the Paris Agreement will never work if the business and finance sectors don't get on board.

CLIMATE INACTION

"It is a victory for a multitude of reasons, a victory for all of us," Ban said in remarks to the luncheon attendees. "Now we must move from climate aspirations to implementation and action. That's why we are here today."

Naturally, public officials thus focused on pitching the Paris Agreement as an opportunity. Later, standing in front of dozens of eminently powerful people poking at salads in the UN's Delegate Dining Room, former Vice President Al Gore stood at a dais and joked about keeping his remarks short so we could all get on to lunch. He followed by admitting, as UN Secretary-General Ban Ki-moon and France President Françoise Hollande also did, that governments need to do more to support and fund a shift towards a carbon-neutral economy. At some point later on, the 92-year-old Mugabe toasted his table.

The Paris Agreement will only be put into place once at least 55 nations representing 55 percent of global carbon emissions ratify it; 15 mostly small island nations have done so already, while the US and China, which total around 38 percent of global carbon emissions, have pledged to do so this year. (While President Obama could ratify the agreement by executive order, congressional Republicans have already grumbled about fighting the treaty. Should a Republican win the presidency at the end of this year, US involvement in the Paris Agreement could potentially be reversed. China, meanwhile, has pledged to ratify the agreement, at least according to the state-run Xinhua news service.)

Now comes the task of waiting for those nations to actually ratify the agreement, which requires local politicking and discussion as nations decide what their contribution to carbon reduction will be. And even then, turning the Paris Agreement into meaningful climate action means not only weaning the world's largest economies off fossil fuel-based infrastructure and investment, but also preventing the world's developing economies from doing the same.

The sentiment of leaders and spectators at the signing ceremony and surrounding events on Friday was aspirational, for it's clear that until it's formally put into effect, the Paris Agreement is largely symbolic. And even if ratified, it only requires binding nations to set their own non-binding carbon targets, which sounds like the usual climate politics plugging away, even as the world's developing economies race to close the wealth gap with richer nations—a race that threatens to further spur climate change unless those economies are supported in doing something developed nations did not have to do: grow with carbon output in mind.

THE LONG COST OF CARBON

Even with US oil production expected to fall along with its use of coal, and China pushing to reduce its own dependence on coal, staying "well below" a 2ºC increase by 2100 means not only drastically reducing carbon emissions from current peak producers, but also preventing developing economies from becoming significant producers of their own.

"Let us bear in mind that there is a stark injustice to climate change which affects more significantly and more immediately the countries and communities that are least responsible for emissions," Mary Robinson, one of the world's most powerful voices for climate justice, said.

According to the leaders on hand Friday, slowing climate change means the two things that have traditionally been the hardest for markets to rally behind: setting a uniform price on carbon—preferably $100 per metric tonne, according to UN Global Compact executive director Lise Kingo—as well as unlocking significant public and private investment for sustainable infrastructure development worldwide.

The Paris Agreement is "a clear signal to markets that we need 100 percent participation from businesses and the investment communities," Kingo said at a press conference.

Many developing nations not only face outsized exposure to the deleterious effects—food security, natural disasters, weather shifts—of climate change, but they also are now working to grow without being able to rely on significant investment support from wealthier nations while also being urged to avoid the cheap fossil fuel-based infrastructure the world's leading nations built themselves upon. (That the finance world has ignored the monetary risks of climate change is hardly a new idea; last year the World Bank warned that the "carbon bubble" could tank the world economy.)

"Some of the countries here are building 2440 coal fired plants today. Seventy-five percent of these are in India, China, Indonesia, and the Philippines," Razzouk said. (The US, meanwhile, still gets two-thirds of its energy from fossil fuels.) "Again, some of the countries most likely to suffer first and hardest from climate change. This type of behavior, which basically cheerleads every aspect of the energy system, really needs to change."

WHO IS SAVING WHO?

But even if the Paris Agreement makes it through ratification intact, there's no guarantee that it will serve as a carrot to corporations and banks in the US and Europe, who heretofore have not appropriately valued the risk of climate change or the opportunity of sustainable development worldwide, according to multiple speakers on Friday.

.UN Climate ActionApril 22, 2016

"We are on the brink of an enormous climate wealth, but the proponents of this climate wealth are invariably small and poor," Razzouk said. "If you're small and poor, you need technical innovation and you need a cost of capital that allows you to compete. Hopefully all of these agreements, the Paris Agreement, the work done by the UN global compact, will crystallize a picture primarily for Wall Street, which at the end of the day is $150 trillion of capital that needs to go to the right places but is still primarily in the wrong places."

Even if weaning ourselves off carbon means massive and dramatic shifts in how the world does its business, it does not mean that people can't get rich off the carbon economy. Both Razzouk and Anne Stausboll, the CEO of CALPers, the massive Californian investment fund that has had a major influence in the carbon divestment movement and climate financing, said that sustainable infrastructure development will be worth at least a trillion dollars a year for years to come.

Is that enough to attract a significant response to climate change? That's a question the Paris Agreement has raised, to its credit, but cannot answer. There is certainly momentum around the agreement: Heather Coleman, who leads climate policy for Oxfam America, said that "developed countries committed to putting forward $140 billion" for sustainable infrastructure development, while Stausboll said that "this week, more than 100 companies here in the US signed a statement in support of the agreement and quick follow-on action." And, again, there has been a slow-but-steady shift in the world's leading economies towards more emphasis on sustainability and better addressing the massive financial risk that climate change poses.

Yet even then, the fate of the climate—and, well, the current state of the world, if we want to stop kidding ourselves for a second—rests on ratification of the Paris Agreement by nations that traditionally have eschewed climate concern for quick growth, and even then the agreement must be a gateway to implementing global and local economic change. It's easy to get caught up in the pomp of diplomacy when you find yourself on an escalator accidentally squeezed in between the tens of thousands of dollars of suits that make up a dignitary's entourage. Then you remember that the task at hand requires entirely rewriting the economic playbook we've all come to rely on.

"We are actually embarking on a new era of development pursuits," said Emmanuel M. de Guzman, the secretary and vice chairperson of the Philippine Climate Change Commission. "It's an enormous challenge to everyone, every stakeholder group. When you got to a rural area, a rural community, they're still using firewood for cooking. They're exposed to indoor pollution, harmful carbon that causes cancer. There's a lot of work to do. Without civil society action, without civil society support at the local level, it's very difficult to achieve what we're trying for."